Dave Aaker: Brand Strategies For Market Leadership with The Father of Modern Branding | E187
Dave Aaker: Brand Strategies For Market Leadership with The Father of Modern Branding | E187
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[00:00:31] Hala Taha: You're listening to YAP, Young and Profiting Podcast, a place where you can listen, learn and profit. Welcome to the show. I'm your host, Hala Taha. And on Young and Profiting podcast, we investigate a new topic each week and interview some of the brightest minds in the world. My goal is to turn their wisdom into actionable advice that you can use in your everyday life, no matter your age, profession or industry. There's no fluff on [00:01:00] this podcast and that's on purpose. I'm here to uncover value from my guests by doing the proper research and asking the right questions. If you're new to the show, we've chatted with the likes of ex FBI agents, real estate moguls, self-made billionaires, CEOs, and best selling authors.
[00:01:17] Our subject matter ranges from enhancing productivity, how to gain influence, the art of entrepreneurship, and more. If you're smart and like to continually improve yourself, hit the subscribe button because you'll love it here at Young and Profiting Podcast. Today on YAP we're chatting with branding expert David Aaker.
[00:01:37] Building a strong brand is vital. It's what attracts your customers and keeps them coming back. But with so much competition, sometimes it may seem impossible to stand out and make an impact. So when I decided to release an episode about strengthening your brand to gain market leadership, I knew there was no one better to talk to than the father of modern branding himself, [00:02:00] David Aaker.
[00:02:01] David has received several awards for his contributions to the science of marketing, and he is the author of 17 books, including his latest Owning Game-Changing Subcategories. David also serves as the Vice Chairman of Profit, a marketing and branding consulting firm. In this episode of YAP, we'll hear how his Aaker brand equity model has helped companies create strategies that increase their brand equity for over 20 years now.
[00:02:27] We'll gain an understanding as to why the only way to grow your business with rare exception is to find and own game changing subcategories. And lastly, we'll get the 411 scoop on how to build a loyal customer base and create barriers for competition. Now let's get right into my conversation with branding expert David Aaker.
[00:02:47] Welcome to the show, Dave. Happy to have you on.
[00:02:50] Dave Aaker: Good to be here.
[00:02:51] Hala Taha: So you're known as the father of Modern Branding and you've written over 17 books on the subject. You're also the Vice Chairman of Profit, a [00:03:00] Global Growth Consultancy, and good branding is crucial to business success. And so I can't wait to break down your branding secrets in this episode, as well as your Aaker brand vision model.
[00:03:09] And also super excited to cover your philosophy on Owning Game-Changing Subcategories. So to warm things up, I'd love for you to share how you first got interested in the topic of branding.
[00:03:21] Dave Aaker: See, this goes back a long time from now, 30 years or so, but there was a time when everything was coming together in the late eighties.
[00:03:30] It was this sort of BCG model of strategy, which was gross share matrix that just said you try to expand market share, you'll get a cost advantage and you'll. And that led people to do all sorts of dumb things, like to do price promotions and destroy brands and so on. And I actually did a econometric study.
[00:03:53] I'm a, I start off as a statistician. I did a study that showed that if you increase market share, you in [00:04:00] fact don't increased profitabilities if you analyze the data, right? Because what they were do is looking at cross-sectional data, which shows that large market share companies made more money than small ones.
[00:04:12] But that doesn't mean that if you increase market share, anything good will happen. And then what also happened during that time is the scanner data came out, which meant that for the first time, you could really tell exactly what people bought in the grocery store or the drugstore. And not only that, but you could set up a whole town where you could tap into their television, says to know exactly what they watched.
[00:04:37] So now you could run experiments that would show compare zero ads to two ads, to four ads, compare this kind of ad to that kind of an ad. And so finally science came to marketing and everybody was so happy because now you could apply science to everything else. Now you could apply it to market. What happened was that when you did these experiments, the only thing that [00:05:00] paid off was sites out sent out promotions or price promotions.
[00:05:04] So they taught the consumer two several things. One, that's that only important variable is price. And two, if, if it's not on sale today, just wait two weeks, it'll go on sale. And so people were realizing this hadn't working, and we've gotta go back to basics. We've gotta somehow get our brand.
[00:05:23] And so the concept of brand equity was then introduced at the same time I was, I wrote a book and I taught business strategy and I came to believe that companies were too focused on short term financials and they needed to build assets. And I had background in market research. I wrote a book on market research and on advertising and on strategy.
[00:05:43] And so I was well kept equipped to focus in on branding. That's what I did. I was really at the right time at the right place, So I wrote my first book on how do you define and understand brand equity? [00:06:00] And nobody had done that before. And I also told not only what it was, but why it was so valuable to not only the firm but the customer.
[00:06:09] And I define it as being a visibility of awareness and visibility. I and then brand image was a second dimension, and the third dimension was brand loyalty. And nobody else had defined brand equity that way. They had always excluded brand loyalty, and that changed just everything. When you put that in the mix, no longer can brands be run by middle management, by the advertising agency.
[00:06:36] They're now strategic. Because it's all tied up with the customer loyalty, which is without question, a long term asset. And so that was pretty anyway, so that hit really at the right time.
[00:06:49] Hala Taha: Yeah, it was revolutionary. You put out your Aaker brand equity model in 1996 and people are still using it today.
[00:06:56] It's still in textbooks and things like that till this [00:07:00] day. So it was very revolutionary. So basically you took everybody out of this mindframe that the only way to increase your brand was to get more market share and to lower prices and things like that, and you turned it on its head with your new Aaker model.
[00:07:15] So let's talk about that a bit. It's, there's a few different pillars. Brand loyalty, brand awareness, perceived quality, brand associations and proprietary assets. Could you take us through all of these different components in your Aaker model?
[00:07:29] Dave Aaker: First of all, my first book Managing Brand Equity. Define brand equity and showed why it was important.
[00:07:35] And then people said,. Okay, I'll buy into that. How do I manage it? And I wrote a second book called Building Strong Brands, and that's where the Aaker model appears. It's on how do you manage brands. And the essence of the Aaker model was that the people that were running brands in those days were at agencies and lower level marketing manager.
[00:07:58] And the ad [00:08:00] agencies wanted to have a single phrase to represent, what the brand stands for because they wanted to create an advertising campaign and that's what they needed. And so a brand was a single thought. And not only that, but they often, most of the agencies had a little box, maybe six boxes, eight boxes, seven boxes.
[00:08:19] And if you wanted a brand strategy. You filled in the box. There'd be a box for personality. A box for brand attributes. Box for benefits and so on. And so I basically said two things. One, a brand is not a three word phrase. A brand is multidimensional. It has eight to 12 seven dimensions, and that's especially true with business to service brands.
[00:08:45] The second thing I said is there's no predefined boxes because every situation is different. And so what you have to do is. Is to basically say, What do you want your brand to stand for? And never mind [00:09:00] any prior boxes. What are your boxes? What makes sense for you? And then you take these 10 or 12 things and you prioritize them into a core group and an extended group.
[00:09:12] And that's really the essence of the what's sometimes called is the Aaker model.
[00:09:17] Hala Taha: Let's hold that thought and take a quick break with our sponsor.
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[00:12:54] I'd love go through some of these points because I don't think everybody who listens to the [00:13:00] podcast is a marketer. And I think it would be really helpful. For example, let's I'll tee you off. Brand loyalty. Can you explain what brand loyalty is?
[00:13:10] Dave Aaker: Brand loyalty is really in essence future you're buying when you buy a brand because a brand has a following.
[00:13:16] It is. A business base generating a potential profit flow. And that's what makes it really valuable. It's the core of it. It's the the customer loyalty base. And of course there's levels of them. There's the people that buy you and they don't think much about it, but there's no reason to change.
[00:13:34] There's the people that really like it. And the people that are passionate about it and are really involved in your product. And it's part of their identity. It's part of their lifestyle. It's part of them. It defines them. So you want to have as large a group, especially near the top of that pyramid as you can, because that represents a terrific barrier to competitors [00:14:00] because you've got the most attractive customers and they can't access them.
[00:14:03] Or it'd be extremely expensive to do. And each of those customers have a lifetime value, and that's really what your asset is based on.
[00:14:13] Hala Taha: Okay. And then another component of your Aaker model is brand awareness. So what do you think my listeners need to know about that?
[00:14:21] Dave Aaker: I've expanded or redefined awareness because I've gotten real interest in what I call brand relevance.
[00:14:27] And that's tied into the subcategory stuff because it says when you create a some new innovation. You may you win, not because you're better, it's because the other people are not relevant. To be relevant requires awareness and credibility, or visibility and credibility. So it's not enough just to have people know your brand, can be known and be what's called in the what I call being in the graveyard. Means that everybody knows your brand, but they don't even ever think about it when they wanna buy or use something.
[00:14:57] So it requires [00:15:00] awareness, but also credibility. Which means you're an option. Doesn't mean I'm gonna buy you, but you're in my consideration set. That's the first dimension of brand equity.
[00:15:10] Hala Taha: That's really interesting that you say relevancy, cuz I think that's really key. There's lots of brands out there. Like I can think of like copier brands and things that, like everybody knows the xerox but nobody's buying Xerox, because they haven't adapted.
[00:15:24] So would you say that relevancy is really all about adapting to your customer needs?
[00:15:28] Dave Aaker: You lose relevance for a couple of reasons. One is you lose relevance because you're not making what they're buying anymore. You're making, an suv and they're start. They're buying electric cars and so they could love your SUV and they would never buy another SUV, another kind of SUV.
[00:15:48] And they and anybody that asked you. They would recommend your brand, but they're not buying SUVs. They're buying an electric car. It doesn't matter how much they like your SUV. So [00:16:00] that's one way to lose relevance. Another way to lose relevance is just to lose energy. To have a sort of your, just your bland, you're taken for granted. You're grandfather's product and it's, you're fine, but there's no energy there.
[00:16:17] There's no reason to think about or talk about your brand. There's one other way you lose relevance. And that is if you create a reason not to buy, it might be because you had a terrific product. The mistake you make a cola and you had some contaminated water, or maybe you took a political view that was unpopular by some people and they created a reason not to buy.
[00:16:42] So those are the three ways you become less.
[00:16:46] Hala Taha: Yeah, in 2022, they call that being canceled. We have a cancel culture. So your brand could lose relevancy by being canceled. That's so true. Let's talk about perceived quality. So from my understanding, this refers to the public's understanding [00:17:00] of your perceived quality of your products and services.
[00:17:03] What do you think we need to know about that one?
[00:17:05] Dave Aaker: Brand images, all the perceptions people have of you. When somebody mentions your name, what comes to mind? That's the brand image. A brand image can be, an attribute of the offering, like perceived quality. And what lies behind perceived quality is a really important factor, which is called trust.
[00:17:24] But it also can be a personality. It can be values. It can be your willingness to take on social programs. It can be an application and how that links into your lifestyle. It can be a wide variety of things, but at the end of the day, what you want, something that maybe gives self expressive benefits. It tells people who you are, or it gives social benefits. It provides a link to other people, or it provides emotional benefits.
[00:17:54] It makes you feel something and earn price functional benefits. It ties you to using [00:18:00] the brand.
[00:18:02] Hala Taha: Okay, cool. So let's move on to your latest book. I think it came out in 2020. It's called Owning Game-Changing Subcategories, Uncommon Growth in the Digital Age. An essential thesis of your book is that the only way to grow your business or with where exception at least, is to find and own a game-changing subcategories.
[00:18:21] So first of all, let's define what is a game changing subcategory in your own words.
[00:18:27] Dave Aaker: It's an offering that contain. Some must haves. That's something that customers will insist on. It's either a a new or an improved offering or advance to an old offering. That it just creates a must have. You really must have that.
[00:18:47] So the electric car is certainly in that category. Prius, when they came out with the first sub com. It wasn't the first contact, incidentally, it was the second. Honda was the first, but [00:19:00] Prius was the first to get it right. But they went 12 years with no competition and they had what's a must have. It was several must haves as this usually the case.
[00:19:09] There was a design of the car, there was a functionality. There was the all the modifications and improvements they added each year, but, I started off studying beer in Japan. I've been to Japan a lot, and I looked at 30 years of beer data and only four times did the market share trajectory change. Even though there was enormous market spend in each of those years.
[00:19:32] Four times. And each time there was a new subcategory developed. Like he's super dry. And I looked at two dozen other categories and it's always the same computers and banks and so on. When you see further of growth. It's almost always driven by a new subcategory.
[00:19:50] Hala Taha: I'd love to really go deep on this because I really want my listeners to understand this. And I think the best way would be to go through some examples of businesses dominating. Their [00:20:00] own industries who won this way by having their own game changing subcategories.
[00:20:04] So why don't we give some examples like, how about Airbnb, Etsy, Warby Parker, do you wanna talk about any of those.
[00:20:10] Dave Aaker: Those are all good examples. Etsy was I talk in the book about how to compete against Amazon, and there's about seven ways to do it, and they all involve creating must haves that Amazon doesn't have.
[00:20:24] And Etsy is a classic example. It talks about a passion for craft and making crafts and appreciating crafts and using craft built stuff and that passion. Amazon has no passion for anything. Amazon is an amazing at delivering functional benefits. They can give you a, they sell everything under the earth and all kinds of models and all sizes, and they'll build it to you fast, but they have no passion.
[00:20:53] And so you have Casper that sells mattress and they're really passionate about sleep. I think Amazon [00:21:00] sells mattress. They don't care about sleep. They just wanna functionally get you a mattress. That's one of the must-haves that Etsy has is a real passion and an authentic involvement in that industry that really appeals to people that make crafts and value crafts.
[00:21:17] Hala Taha: Usually when people are starting in business and they're interested in gaining market share, they tend to wanna be the best in an existing category as opposed to just creating a new category altogether. What do you think is wrong with that thinking?
[00:21:33] Dave Aaker: It just doesn't work. There's almost no people that grew their business that way.
[00:21:40] Almost none. It's really extraordinary. Actually, one of the probably. Most robust truths in marketing that's been demonstrated by dozens and dozens of really good studies is that, you know what the predictor of a success of a new product is, the single most [00:22:00] important thing.
[00:22:00] Hala Taha: What's that?
[00:22:01] Dave Aaker: How different it is and study after study rediscovers that having something that's really different is the most thing not only does it give the, potentially give you something that you wanna buy, it gives you something that people can talk about too. It gives you visibility. Why would you read an ad about something that says I'm better than, Gillette the owner of something.
[00:22:26] Instead of somebody saying, I've got something completely different. And and there's a definite correlation between being different and creating new must have defined subcategories.
[00:22:38] Hala Taha: Okay. So having must haves really represent features or programs that other brands lack. And you also say that brands need parody must-haves to counteract that reasoning that customers have for not buying their products.
[00:22:53] So there's haves and then there's parody must haves. Can you explain that to us?
[00:22:57] Dave Aaker: Let's say Dollar Shave Club, they came up with some [00:23:00] razors that they sold through e-commerce. If they did a four minute video, then you should go on the, I encourage you to go on the internet and look at it. It's very funny.
[00:23:10] It's this feisty honor dog that's making fun of Gillette, making fun of the buying process. You have to go to a lock cabinet and perhaps get arrested for buying this razor, and then you can't figure out which racer you want. And so they have a system where they'll just send you blades every month and they'll give you a simple razor.
[00:23:29] They got 18,000 subscribers in two days. They sold their company in four years for a billion dollars to Unilever. Wow. But anyway, they had a problem at which Warby Parker had, which Casper mattress has is what makes you, This is probably junk. You're selling at a low price. I can't taste it. I can't feel it.
[00:23:53] There's no drugstore guy that's going to gimme a reassurance that it's. And [00:24:00] that's the problem. How do you reassure people that it is actually a good product and that's a reason not to buy? So one of the challenges that Dollar Shave Club was, is to convince people it was actually a good product.
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[00:25:59] Yeah, so [00:26:00] basically they're, they have their must-haves, which is like their real differentiators that make them stand out and that their customers obsessed with the fact. There's certain things like you can get it online and it's inexpensive, but the parody must haves is that it has to be at least the same quality as what they'd get in the drug store for that higher price razor.
[00:26:21] Is that right?
[00:26:22] Dave Aaker: Yeah.
[00:26:22] Hala Taha: Got it. Okay, cool. So how do we go about finding the right subcategory? What is the way that like a business can explore and create and define their own subcategory?
[00:26:35] Dave Aaker: Generally, it comes from one of two general direct. It either comes from the market, understanding the market and knowing that there's some kind of a need.
[00:26:46] So if you're talking to customers and you, so on you, you find out what they're doing and the problems they're having and if maybe they can't enunciated me a need, you can probably figure out the need just by hearing what they're [00:27:00] doing and groaning about. And that also goes to understanding the market in a macro way, looking at not only your product class, but other product class.
[00:27:10] And looking at in general, what are they trying to get from using this product. So you're not just tied into let's make it a little better situation. And the other way is from your technology, your product, and you have a new technology. We, one of the great boons for the new subcategories
[00:27:32] why they're more frequent and more important than ever before is because of technology. There's the internet of things. There's artificial intelligence, and all this stuff has combined to make offerings and subcategories possible that weren't possible very long ago.
[00:27:50] Hala Taha: That's really interesting. One of the things that you talk about in your book is that you advise that in order to be successful at this, organizations need to also create [00:28:00] barriers for their competition that will inhibit their ability to become relevant options.
[00:28:04] So what are some of the common barrier strategies that you can name off?
[00:28:08] Dave Aaker: More generally, let me take a step back. There are dozens and dozens of books on disruptive innovation and they're, a lot of 'em are really good at really innovation. We were talking before the, we started about the Blue Ocean Book.
[00:28:23] That's one of 'em, but, and there's Christiansen's books on disruptive innovation and Porter, and there's really good people doing great stuff. And this has been extremely influential. But if you look at all those books, including Blue Ocean, They do two things. One, they always talk about categories and how often can you create a new category?
[00:28:44] Not very often, but you can create subcategories quite often. So subcategories is actually more relevant, but more important, you look at all those books. They don't mention branding, they just don't mention, you look in the index under B, they don't mention branding. [00:29:00] It's as if disruptive innovation can come and take over a marketplace without branding.
[00:29:06] In my research, and my belief is that branding is so important in disruptive innovation. You have to do four things to be successful. One, you have to create yourself as an exemplar brand, a brand that represents the subcategory. Second, you've gotta position the subcategory. You've got you position a brand, you've gotta position the subcategory.
[00:29:27] You've gotta tell people what kind of dimensions should they be thinking about when they think about some use experience or some buying experience, but really are they after? And you how to keep that in mind. And the third thing is that you gotta scale. You gotta scale really fast because you gotta own that market.
[00:29:48] And if you don't scale fast, somebody will come in. The fourth thing you have to do is to create barriers. And one of 'em is just, you own the best customers cuz you've scaled so fast. That's a [00:30:00] barrier. The positioning creates a barrier because you position the subcategory in a certain way that's going to be easier for you to fulfill because you own the Prius design or you own the hybrid transmission of Toyota so anyway those are some of the barriers that you can create and they're and another one you can continuously innovate and just be a moving target. But anyway, those barriers are brand barriers. All those things require branding and it's, to me, it's puzzling and unconscionable that all those books virtually ignore branding.
[00:30:41] Hala Taha: Yeah, it's so true. They do ignore branding. I just interviewed Gabor Burt on Blue Ocean Strategy, and I don't think we talked about branding in that conversation. We talked about lots of great stuff, but to your point. Don't really talk about branding. So let's talk about the digital revolution. How has this made the subcategory growth that you talk [00:31:00] about more wider, shorter, and frequently traveled?
[00:31:03] How did the digital age really change all this? Or how did it impact it?
[00:31:09] Dave Aaker: First of all the whole idea of disruptive innovation and new subcategories have been around forever. And they're always the force behind spurts of growth. But it's really quite amazing the last 10 or 20 years. The incidents of these have multiplied maybe by an order of magnitude.
[00:31:31] As I said it's all this technology. The internet of things, for example, have permitted amazing new categories to develop. That didn't exist before, because now you can embed these chips in cars and clothing. People and you can do so many things you couldn't do before. You can do the same things you did before, but so much better.
[00:31:54] And then there's artificial intelligence and the ability to [00:32:00] have a more pleasant interaction with some voice from the sky. That's not frustrating. And somebody that can do that first and do it better and do it well. Might must have in some category. And then of course the high speed internet and all that surrounds it have and then eCommerce.
[00:32:19] Of course, we just didn't have eCommerce not too long ago and we didn't have social media. So now you can, it used to take nine months in an ad agency in $20 million to introduce a new subcategory, and it would take three years to force yourself into retail stores that weren't interest in carrying your stuff.
[00:32:40] But no, in two days, Dollar Shave Club was in the marketplace.
[00:32:44] Hala Taha: It's so true. Like the easiest way to create a subcategory is just take something that's brick and mortar and put it online, and then you have a subcategory, right?
[00:32:53] Dave Aaker: Yeah.
[00:32:54] Hala Taha: All right, so my last question before we wrap this up is really talking about higher purpose.
[00:32:59] You say [00:33:00] that more and more organizations are elevating a higher purpose that's driven by things like environmental or social programs. Can you explain why having a higher purpose is becoming more important than ever?
[00:33:12] Dave Aaker: Yeah. That's the subject of my book I've just finished and it'll be out in the fall.
[00:33:16] It's there's five reasons. First of all, there's been a battle between the sort of Milton Friedman view of the world, that all you have to do is satisfy shareholders and you're successful, and that's increasingly lost favor. You have to worry about all stakeholders, including the community and the society needs and the planet.
[00:33:39] Second of all, there's these problems that we have, especially the problems associated with global warming and environmental pollution, and the issues around inequality are so now pronounced. They're so scary, they're so visible. They're face that people [00:34:00] are really petrified and motivated to do something.
[00:34:04] The third thing is that firms are well-suited to help. They can't do it all by themselves. There's gotta be a government involved, but they're well-suited to help. The firms, unlike the government, are very agile. They're often tuned to the local needs and local partners. They're part of the local community.
[00:34:22] Even global firms have offices everywhere. And they have these incredible skills and assets. They know how to do stuff that might be relevant and if they don't, you know how to do stuff. They know how to communicate stuff that can be part of the solution. And they have a lot of resources and they have a lot of customers they can leverage, and they have a lot of relationships they can leverage, so they're really well suited to help.
[00:34:48] Another factor is that Lot of firms need a little lift. They need an energy lift. They need an image lift. They're boring, they're [00:35:00] bland, they're functional. Their purpose is not exciting. It's not inspiring. It's not uplifting, and it's some of this is just what they make, but others is their perceived attitude they can benefit from or maybe desperately.
[00:35:14] The kind of burst of energy and the kind of image lift that associations with a program can mean. And one of my beliefs is that it's not just to do stuff. You gotta have a signature program or programs that are focused. That are branded, that are managed to have real impact and that become visible, and because most program.
[00:35:42] We have ad hoc grants. They have volunteering, they have energy reduction goals, but they're like everybody else. They don't stand out. People don't view them as people that are committed or firms that are committed.
[00:35:56] Hala Taha: It's so interesting. I interview two people a week [00:36:00] and it seems every year there's like a new theme that everyone's kind of of talking about.
[00:36:04] And this year, almost every interview I have brings up this idea. Business purpose, conscious business, conscious leadership. Having something aside from profits as your business goal impacting, the environment or society in a positive way. And that's like a huge theme this year across all of my interviews.
[00:36:23] So it's just so interesting how almost everybody I speak to has some layer of this in their perspective.
[00:36:29] Dave Aaker: There was one fifth dimension I didn't mention, and that is employees really insist. And so do investors and consumers and others, but employees. Really, this is employer employees choose firms and they choose to stay with firms, because of a feeling that this firm has some heart and social responsibility.
[00:36:52] Hala Taha: It's no longer just about that paycheck. It's about how I impacting the world and do I feel fulfilled, and if so, then I'll stay. If [00:37:00] not, I'll go become an entrepreneur. I'll go do my own thing, or a freelancer, whatever it is. So I think that's all really important points. So let's wrap this up with two questions that I ask all my guests.
[00:37:11] The first one is, what is one actionable thing that my listeners can do today to become more profitable tomorrow?
[00:37:17] Dave Aaker: I think that that there's really important to be, have meaning in your life out of purpose in your life. And I think, you have to take stock and ask yourself whether you have meaning. And if not, How can you get it and what direction will give you satisfaction in a sense that what you're doing is worthwhile?
[00:37:37] Hala Taha: And what is your secret to profiting in life?
[00:37:40] Dave Aaker: I've been really fortunate. I've I've fallen into this branding thing and I've been at it now for three decades. So I've been really lucky that I really love what I do and there's so much vitality and interest and so forth in the subject matter that I don't get tired of it.
[00:37:57] And so if anybody can [00:38:00] stumble onto something like that, then I think they're very lucky. But I have a friend that talks about his advice, and which I think has some merit is you shouldn't do what you like to do, or what you wanna do. Instead you should do what you're good at and what people value. And if you do what you're good at and what people value, you'll probably end up liking it.
[00:38:25] But even if you don't, you are gonna have a lot of options.
[00:38:30] Hala Taha: Yeah, I love that advice, Dave. Where can everybody go learn about you and everything that you do?
[00:38:35] Dave Aaker: The prophet.com, P R O P H E T. Has my website and you also get there by davidaaker.com my blog, but most of what I know and so on are in my books.
[00:38:47] If my kind of role is to look at different problem areas and to put a branding lens on it. Like I did with disruptive innovation and with higher purpose [00:39:00] programs and which I've done in other areas.
[00:39:03] Hala Taha: Awesome. Thank you so much.
[00:39:05] Dave Aaker: Thanks for having me.
[00:39:06] Hala Taha: Great conversation.
[00:39:07] There you go. YAP fam. Another episode in the books with the legendary expert. This time around, the father of modern branding, David Aaker. Before we say goodbye, I did wanna spend some time on some key ideas. There's two that I specifically wanna touch on that's brand equity and game changing subcategories. So let's start with brand equity.
[00:39:26] This is a perceived value of your brand in the market, and this is a pretty new idea in business. Surprisingly, it gained traction first in the late eighties, and David was a pioneer in this space. And his tools, like the Aaker brand equity model, are still used today over 20 years later. To build brand equity, a company must first start building brand awareness to achieve brand recognition.
[00:39:49] Then they deliver a high quality product, and then they create a positive experience for the customer to established brand preference. With strong brand equity, a business has an easier time retaining [00:40:00] customers, charging a premium for products, and also launching new products. So let's dig into this a little bit.
[00:40:05] Let's talk about loyalty first. When customers like your brand, they are loyal. That means repeat business and making sales without having to constantly convince new customers, to buy your products or without having to spend thousands on advertising. After all Young and Profiteers it costs five times more to acquire a new customer than it does to retain an existing one.
[00:40:27] So you always wanna try to retain your customers and have a loyal customer base rather than churn, and having them churn one after another and having to always get new customers and remember. It theoretically costs the same amount for businesses with and without brand equity to bring a product to market.
[00:40:46] But a business with brand equity can charge much more for the same products and gain higher profit margins. So let's take a real example that we all know about to put this into practice and make it stick. Let's use [00:41:00] Tylenol since it has incredible brand equity. So a study at the University of Chicago showed that even though Tylenol is physically homogeneous, meaning identical with generic brands of acetaminophen.
[00:41:13] Consumers without any expert knowledge end up choosing Tylenol almost 30% more than its less expensive generic counterpart. That means people are choosing Tylenol even though it's the exact same of something cheaper, and that's the power of brand equity. Brand equity is also super valuable for product launches as well.
[00:41:35] A business with brand equity has a much easier time expanding its product line than a business without brand equity, because people are more likely to purchase. Unfamiliar product from a familiar brand. So let's take Tylenol again. They've launched many successful products under the Tylenol brand like Tylenol, Extra Strength and Tylenol, cold and flu.
[00:41:54] Companies with brand equity like Tylenol will sell their products under a single brand name. [00:42:00] While companies without brand equity will sell their products under multiple brand names. This is because once a company has established brand equity. The success of one branded product can translate to other product.
[00:42:12] Under that same brand name, and so companies will often put out multiple brand names until one sticks and gains brand equity. And then they'll launch multiple products under that brand name. The moral of the story, Young and Profiteers, is that if you prioritize shaping how customers think and feel about your brand. You're gonna set your business up for long term success.
[00:42:34] Okay, so we've got brand equity down. Now let's dig into the subcategory concept for a little bit. You guys know that I'm a real marketing nerd, so apologies if this outro is a little longer than usual. I just wanted to give you guys some concrete examples and make sure that the main takeaways really stick for you.
[00:42:52] Traditional views of disruptive innovation say that you need to invent a whole new subcategory to be successful. But David argues [00:43:00] that massive growth occurs more often these days by creating something new within an existing category. And this has to do as much with innovative branding strategies as it has to do with innovative products within an existing category.
[00:43:12] Let's use Chobani this time as the example. Chobani won yogurt and gained market share from yo plate and danon by marketing Greek varieties as healthier, than the thin sugary competition. Chobani essentially created the Greek subcategory of yogurt. Instead of my brand is better than your brand approach.
[00:43:31] Based on marginal improvements or being the cheaper option. Chobani entered the market with multiple new benefits. This is what David refers to. Must haves for Giovanni, there must haves were that it was thicker and creamier than traditional yogurt. It was more filling. They had the same calories as other yogurts, but twice as much protein and half the carbs and sugar.
[00:43:52] It appealed to people with high protein diets and those who were trying to lose weight. They also created a new packaged design. Their cup was [00:44:00] shorter and fatter, and that provided a symbol of a new subcategory. That helped customers recognize which option was Greek on the supermarket. So take a page from the Chobani playbook.
[00:44:11] YAP fam. Develop offerings that are so innovative that to create subcategories making competitors or relevant because they lack a must have feature or benefit. That's all for now, Young and Profiteers if you wanna learn more about this and read more examples. I highly recommend you go grab David's Game Changing Subcategory book.
[00:44:29] Thank you so much for tuning into another episode of Young and Profiting podcast. If you guys learned anything from this episode. Give your feedback, drop us a five star review on Apple or your favorite podcast platform. We're actually getting a ton of Apple reviews lately. They're so much fun. I'm actually gonna go hop on over to check out my reviews and give a couple of you guys a shout out here.
[00:44:50] Especially if you're listening all the way to the end. You're probably. Some of my most diehard listeners, the type of listeners that drop us an Apple Podcast review, and we've been [00:45:00] getting so many lately. I think I get 10 a day these days, which is a lot for a podcast. It takes a lot for people to actually write a review.
[00:45:07] It means they really love your show. Let's start off with some recent reviews. So this one is from Kevin Wascom from the United States of America, and he says it's like a free MBA, amazing content from top level business leaders, giving insights that can take you to the next level in management of people and business in general.
[00:45:27] Thank you so much, Kevin for your awesome five star Apple Podcast review. iamfiercesir, from the United States says, Expert questions for experts. Hala dives deep into the expert lines of work, and you really get great information from each podcast. I feel like I'm learning something new every day from our content.
[00:45:44] I just listened to number 186. Your customers love your customers with Fred Reichheld yesterday, and I enjoyed the idea of creating entrepreneurship within a company. Using your ability to innovate new ideas and approaches. It's what can push the company. Much further into the [00:46:00] future. I loved that episode.
[00:46:02] Love your customers with Fred Reichheld. He created the NPS survey. I agree. Amazing episode. Thank you so much. Iamfiercesir, for your amazing review and thank you for listening to this podcast and thank you to my YAP team. I couldn't do this without you guys. Love you so much. This is your host, the podcast princess herself, Hala Taha, signing off.
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