Required Reading: Ruling the Roost with Relevance

In his new book, Brand Relevance: Making Competitors Irrelevant, marketing guru David Aaker analyzes the most successful brands, from Whole Foods to Prius, from iPod to Kindle. In defining brand preference,  as opposed to brand relevance, Aaker outlines successful strategies to make you better than your competitors in almost every arena. Vice chairman of marketing consultancy Prophet and a professor emeritus of marketing strategy in the Haas School of Business at the University of California at Berkeley, Aaker spoke to editorial assistant Koa Beck about classic economics and the importance of creating subcategories.

CRM magazine: Why was the U.S. computer industry such an important example in conveying brand relevance?

David Aaker: I could have picked almost any industry. I originally thought of the Japanese beer industry, which is packaged goods, but I wanted a B2B durable as a nice contrast so people did not think it only happened in packaged goods. You can find a similar formula anywhere.

The computer industry is a good example because when these new subcategories were formed, you generally had one or two companies that were the dominant brands. Some of the other categories were a little messier, but it was so vivid in the computer industry.

CRM: In defining “brand relevance,” you encourage creating new categories or subcategories to create a competitive arena. Why do that through subcategories?

Aaker: You can engage with “brand preference” competition in which you’re going up against a stack of established competitors, categories, and subcategories. That approach just doesn’t ever really move the needle at all. Market share is very stable in almost all categories, and it doesn’t matter what you do; it just stays there. Pick any category and the market share is just stable for decades. All this churning doesn’t affect it, but when you introduce a new subcategory, like GoGurt or hybrid cars or network computers, then things really change big time and there are huge differences in sales.

CRM: What about developing subcategories changes the space so much? Why does it position major changes in sales and profits?

Aaker: You just really have to create must-haves. You have to create a must-have that will define a competitive set. That must-have doesn’t have to provide a functional benefit or an attribute. It could be a personality or a value or a program, but it has to be something that others don’t have and that some people value enough to the point that they won’t go with another brand that doesn’t have it.

CRM: In your book, you stress the need to develop barriers to these new categories, and you cite classic economics as your reasoning.

Aaker: It’s Econ 101. If you have a monopoly, you can enjoy healthy sales and profits. That’s the general idea. Let’s create a monopoly situation or as close to a monopoly as we can. We want to become a dominant brand and define a market so that we are the dominant brand. That’s the goal. I’m not an economist, but that does come from the very basic economic principle.

CRM: In chapter one, you write that “a brand is not necessarily relevant or irrelevant.” Can you say a little bit more about that please?

Aaker: There are situations where you are the only dominant brand. That was the case with Apple’s iPod for several years, and Enterprise rental cars for 35 years, and Chrysler’s minivan for 16 years. But, in most cases, the definition of a subcategory is a little fuzzy and, therefore, the extent at which you can dominate it is a little fuzzy. You have a situation in the minivan era where there were some who thought Ford and Toyota had a competitor during that time frame—and they were minuscule competitors.

The point is that the definition for relevance is fuzzy. People might say Chrysler is the brand that I’m going to consider, but some of them maybe will think of some other brand. When you measure relevance, you can have a scale that says this is the only brand that I’ll consider or, in some circumstances, I might do a different brand. The line and the barrier and the wall are not always so clear.

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Editorial Assistant Koa Beck can be reached at kbeck@destinationcrm.com.

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