S06.EP15 - What Smart Brands Do Differently with David Aaker

0:00Brand equity is brand relevance, brand image, and brand loyalty. It used to be you just wanted visibility, brand awareness, but what my work has shown is that you need more than awareness, you need relevance. And relevance means you need to have visibility with respect to what you're now building.

0:22Hello and welcome to Just Branding, the only podcast dedicated to helping designers and entrepreneurs grow brands. Here are your hosts, Jacob Cass and Matt Davies.

1:01structure, support, and serious momentum, head over to joinbba.com and get on the waitlist. That's joinbba.com. Now let's get into the show. Welcome back to Just Branding. Today, we're honored to welcome back a true legend in the field, David Arca, for his second appearance on Just Branding. Often called the father of modern branding, David is the vice chairman of Profit, the creator of the Arca brand vision model, and the author of 18, yes, 18 books that have profoundly influenced the way we build, manage, and think about brands. He's back with a powerful new edition of Arca on Branding, a curated, updated collection of his most important frameworks, tools, and thinking adapted for today's complex brand landscape.

1:53In this episode, we're going to discuss what's changed in branding, what's still misunderstood, and what brand leaders must focus on today to stay relevant and differentiated in 2025 and beyond. So let's get into it. Welcome back to the show, Dave. Yeah, thanks for having me. Awesome. We have a lot to cover. So Matt is here too. We're going to have some fun. We're going to tuck into your book, obviously. So I'm curious, like what motivated you to update this latest edition? Well, in 2014, I had something like five or six branding books, and people would basically come to me and say, I'm not going to read all these, which pages should I read?

2:37And I decided I need to write an Akron branding book that would sort of summarize the pages they should read. But now that it's 11 years later, and I've written three books since then on stories and disruptive innovation and branding and social programs and branding, and the world has changed as well. And the communication environment is so hostile now. And so a lot of things in branding is changing. The basic concept haven't, but brand building has seen a lot of changes. So I decided it was time to revisit branding. Plus, it was kind of a good excuse to take stock and to figure out what's important now.

3:22And for me, writing a book is really kind of a fun learning experience. Well, what's changed then? So since you've written those books, what has changed and what stayed true about branding since you first wrote the first one? Well, I think that I characterize it in terms of four or five challenges. One challenge is that the little history back in the late 80s, early 90s, several things happened. One of the main things that happened was the BCG gross share matrix, which was dominating strategic thinking in those days. and based on a flawed but empirical analysis that if you increase market share, you'd increase profitability.

4:11And so that was the strategic thing. You find areas of growth that you can capture large market share in, and that's the route to a winning strategy. Well, it tended to give people an excuse to buy market share. And they would do that by basically damaging or destroying brands. And other things happened too. That version of big data and analytics was scanner data driven, and they encouraged short-term thinking. So the world then said, okay, this isn't working. We're not getting growth. We're not getting profits. We're losing profit, and we need something different. And then came brand equity. And so everybody kind of jumped on the bag line that that's a way to do it.

5:01You build brand assets and that will fuel growth. And that changed everything, really. And it changed how people viewed marketing. It changed who did marketing. It changed what marketing did. So marketing was now at a seat at executive table. There was a CMO of marketing or the VP of marketing. And they started dealing with strategy, with market segmentation, with consumer insights, the consumer journey. And so they touched everything in the organization, really. And so they really became a strategic partner. So that really has a movement that grew very fast, and it's grown maybe a little slower, but steadily ever since.

5:47It's now quite established. And so now you see sort of cracks in the cement barricade. And it's never gone away, this idea that we need to get sales and profits and leads quickly. That's always been there. And it's always been enticing, compelling even. But it's been held at bay. And now it's kind of breaking out because, curiously, they gave it a new brand name. They call it demand marketing or sometimes performance marketing. Now, who could oppose creating demand or improving performance? So it's a great brand tool. It's like the Republican Party, you know, where you think they know how to do it right.

6:30And so one of the things that I wanted to do was to explain that branding has more depth and complexity than just a communication function to create awareness and image. So I created a concert called the Five Bs. And I did that in hopes that I could provide a way for people to get their hands around the complexities of marketing. So the first B is brand equity. And the message there, it is about building assets. It's not about just creating awareness and image. And it's not a communication function. It's everything. And brand equity has to be managed strategically. It has to make sure that people don't do things to damage the brand.

7:22We have programs to build sales and leads, of course, but we'll make sure those programs leverage the brand and not damage the brand. David, before you go on, sorry to intrude, can I just ask you to give us a definition of equity? Because some people on the podcast may not have fully got their arms around that concept. So it'd be super helpful just to get a bit of a definition from you on that one, if possible. God, Matt is really cool. He really knows how to ask questions. That's a great lead-in because the three Bs that follow are what is brand equity. Brilliant. Brand equity is brand relevance, brand image, and brand loyalty.

8:03But they've changed over time. Now, it used to be you just wanted visibility, brand awareness. But what my work has shown is that you need more than awareness. You need relevance. and relevance means you need to have visibility with respect to what you're now building. So if you've gone from hybrid to electric cars, you've got to have a visibility in electric cars. It doesn't help if they know your name. I mean, if Donald Duck make a red old cars, that doesn't make him having one leg on the stool of brand equity. And so you have to have also credibility. You have to have a feeling that there's no reason not to buy this brand.

8:44I mean, they could do it. I mean, maybe somebody will do it better. That's an issue for another day, but at least they'll be credible. At least I can consider them. And that's the new brand awareness. It's now brand relevance. And the second thing is brand image. And I think image, too often people ask you, you know, what is your brand about? And they'll tell you what they do. It's so important that it be differentiated. That ought to be number one. I mean, how do you differentiate it from other people? And that's the essence of the image you need to attract. And of course, you also would like to make it, you have to have something that will resonate with them, that's important to them.

9:26You have to have something that's intriguing, that they're interested in. But more than ever, it has to be differentiated. And that leads into another challenge I'll talk about in a minute. But the third thing is brand loyalty. And actually, when I defined brand equity way back in 92 or something, when I wrote my first book, Managing Brand Equity, I defined it as including brand loyalty. And heretofore, it was really about image and awareness. And brand loyalty was an output that you would drive brand loyalty. And I said, no, no, it has to be part of brand equity because you're buying a brand, you're really buying a loyal customer base.

10:08And also, that's the basic equity of a brand. So anyway, that's really what drove the change in marketing. Because once you include brand loyalty, then everything changed is no longer just a communication function. And that allows brand to do a whole bunch of things. And the fifth P is brand portfolio. Because I'm really amazed at, I'm not amazed, but I think the reality is that if most people build a brand, they think of a brand. I want to build a Jaguar brand, or I want to build the GE brand or the Citicorp brand. But that's never the case. And all strong brands need to realize that, that if you're going to have a strong brand, you got to have some partner brands.

10:57You just can't do it by yourself. And you need endorser brands. You need cool brands. You need sub-brands to really position your brand so it differentiates and resonates. And then you have what I call silver bullet brands. And when I go into an organization, and I don't do this much, but when I do, I ask them, what is your secret sauce? What are you proud of? What makes you special? And almost always, they can very articulately spend two or three or four minutes articulating what it is about their company that's special. and then I ask why don't you brand it because if you don't brand it it's really hard to communicate it to others if you don't brand it it's really hard to make to manage it to give it priority so I did I developed what I call the silver bullet brands and and they're branded features branded benefits branded processes branded programs but they do one of three things They either become a branded differentiator, and that's something that differentiates your product from others, or it becomes a branded energizer.

12:13It's a way to give yourself energy that if you make bar soap, you can't do it any other way. And three, it's a branded source of credibility. And that goes back to relevance again. You need to have credibility, and that's usually based on some branded program or branded offering or something. So I'm saying if you really want to get into branding, it's not about awareness and image. It's not a communication task. You've got to consider it's all about brand equity. It's about being relevant, not just aware. It's about an image that gets you real differentiation. It's not just a mission doing what you do.

12:50And finally, you've got to still employ other brands to get there. Love that. Love that. I've got a follow-up question. Can I, Jacob? I know you've got some questions planned. Go for it, Matt. I want to derail us ever so slightly. Was there anything... So you've selected these five, right? So we've got equity, relevance, image, loyalty, and portfolio. And all of them makes an awful lot of sense. What made you frame it around those five? And were there any outliers that you kind of considered but thought, frankly, they're good, but they're not quite good enough for those five? What was the criteria that made you select those five as the core ones?

13:30Yeah, I just wanted to understand why there's a lot of other things. We could have put in brand research. We could have put in a lot of things. But I really wanted to explain what branding was. It's breadth and depth and what you had to, the way you had to look at branding. I wanted them to pause and realize that, no, no, you've got to have relevance. You've got to be credible. No, no, it's not just an image. You've got to be differentiated. And it's not just brand loyalty, but you have to manage that brand loyalty. You have to build it and keep it and make sure that you're understanding the customer.

14:11And finally, and this is really brand new. I mean, I've never heard of anybody say that branding has to include a brand portfolio strategy. This is true. this is true you're unique on that you've got a whole book on portfolio architecture i did good knowledge man good knowledge well it's an excellent there's not a lot written don't you wonder man why nobody else has written a book on brand loyalty and there must be because it's hard 50 people that have written a book on branding well the the architecture it's painful yeah it's hard it's painful it's painful and and it's difficult because you know every organization i well i don't know if you'd agree with this but from my experience as a consultant every organization is different every um category is different and so when it comes to portfolio management it's very it's very tricky isn't it like it's very hard it's a very difficult subject so your book i think is probably the only one that i'm fully aware of that is a robust um analysis on how to kind of tackle that subject so you know that that that's why it come to my mind when you were mentioning like right at the end there of your of your five b's the portfolio thing i think that is quite an interesting insight that you've included there and this idea that you can't do it alone i think is really really interesting um yeah i i'd be loved i'd love to it's true isn't it matt isn't it i mean i i mean i i defy you to find a brand that's that's it doesn't uh have an important partnership with some other brand yeah that's successful i'd love to talk into that in a little bit but i know i'm i'm derailing basically my job in this episode david is to completely derail jacob right episode or the whole podcast basically life um he's got a whole planned kind of thing and i i just jumped in so what i'm going to do is defer to my uh excellent notorious co-host to keep us on track but i might jump in in a minute uh as we go through go for david's actually the other co-host because he's jumped ahead and answered my questions already because we were going to tuck into the 5B's framework and you went straight into that.

16:19So you've done my job, David. But I'd love to kind of tuck in a little bit further into some of those subjects as we move along. One of them is brand relevance, which is a big portion of this. You said brand preference isn't enough anymore. So when we talk about brand relevance, could you just explain that a little bit further? Yeah, the brand relevance is sort of the key to participating in the market, to be a player, but it's also the key to winning. And with people, I don't think realize that. Anyway, my book on branding and disruptive innovation, which is summarized in a couple of chapters in Anker and Branding, is basically takes the position that, first of all, the only way to grow is with disruptive innovation.

17:08I mean, I've looked at a whole bunch of categories, and if you see a spurt in growth, it's always because of some disruptive innovation. And in fact, I think the most robust finding in all of marketing research studies over the last century is that we can predict the success of new products. I mean, there's been study after study. And it's always the same. It's how different they are. That's what predicts their success. And there's all kinds of anecdotes. But anyway, you have to have disruptive innovation in order to grow. And all these people that are spending all this money fighting the brand preference, my brand is better than your brand thing, they just don't generate growth.

17:58There's rare, rare exceptions. So you need disruptive innovation. So if you look at the disruptive innovation literature, there's all kinds of wonderful books. The Blue Ocean Strategy has sold 2 million copies. And basically, it just says, be different, right? And the problem with that is that none of these books mention branding. The Blue Ocean Strategy has a half a page on branding. It talks about first mover advantage for a half a page. That's it. And it's not really about branding. It's just saying, you know, it's better if you're first. And then the other books, the Christensen book doesn't mention branding.

18:36It's not even in the index, I don't believe, and on and on. And so the point of my book and the chapters here is to correct that and to introduce the thought that branding enables disruptive innovation to succeed. It enables it. Without branding, it's not going to work. So it does it in two ways. First of all, the disruptor has to become the exemplar brand for the new, what I call, subcategory. It's usually a subcategory, unlike the Blue Ocean book, which only talks about whole new categories. Most of the time, disruptive innovation creates a new subcategory. You want to be the exemplar brand.

19:17And then you use that status to manage the position of the disruption of the new subcategory. So a subcategory is formed when you have some must-haves, some things that customers must have that don't now exist or at least don't exist as well as you're doing it. So customers are going to insist on those must-haves and they will find your offering relevant. And those that don't have the must-haves irrelevant, or at least a lesser relevance. So that's the job of branding, to position the subcategory. What that means is you make sure that these must-haves are elevated in visibility and importance to people making the brand choice or using the brand.

20:09And that's a branding problem, pure and simple. And the second thing is you have to build barriers. The biggest barrier you can do is to create a huge loyal customer base. You scale the brand as fast as you can. So that means you've got to get relevance. You've got to get visibility. You've got to explain what this must have and why it's going to be good for you. So that becomes one barrier. If you can own the must-haves, it's going to be hard for competitors to come in. If you can own the customers, the customers that are most profitable, the ones that are inclined to your new innovation, they're going to have a tough time coming in.

20:56And then the third thing you need to do is brand the innovation. You recreate branded differentiators. If you're Uniqlo developing to be a technological leader in fabrics, you brand them. You call them heat tech. You call them airism. And then others can duplicate you or pretend to duplicate you, but if they don't have that brand, they're not going to be authentic. So you brand it. And so you have these cluster of branding tasks that allows you to position and control and manage the subcategory, keep it a moving target, make it harder for customers to become relevant. And secondly, you build barriers.

21:38If you're building a brand and want to do it right, this is for you. Join the Brand Builders Alliance for expert coaching, live masterclasses, and a crew of brand builders who've got your back. Get on the waitlist now at joinbba.com. Now back to the show. You did it again, David. You answered many of my questions ahead of time, But just to summarize, you're creating a new subcategory. You're taking the must-haves, then innovating, adding something new or differentiated to that product or service. You're growing fast and scaling, and then you're branding the innovation to make it unique and ownable.

22:14Is that right? Yeah. Okay. It all starts to become the exemplar brand, and there's a lot of branding to that as well. You have to become the thought leader. that's a branding job. You have to passion, you have to make a commitment. And it really helps to be the market leader as well. And again, that comes back to scaling fast. Thank you, David. We're going to jump into your nine brand building actions that actually work. Could you highlight a few? You mentioned signature stories and energizers before. Yeah, I try to stay away from things that people are familiar with people and try to think of some things maybe some hadn't thought of, at least at first.

23:02So one is to get a branded energizer. You know, everybody needs energy. And most brands are pretty boring and pretty taken for granted. And there's just no way to get energy. So what you have to do is find something with energy and attach it to your brand. It could be a sponsorship, it could be some kind of a program, or it could be an offering partnership. But anyway, you need to find sources of energy and attach it to your brand. Another is the whole idea of brand communities. Brand community is the ultimate in loyalty because you have these active members that are sharing with other members a passion for some sort of interest or activity or belief, and they get a lot of energy and self-expressive benefits from that.

23:54And if that can be attached to a brand or driven by a brand or managed by a brand, the brand will be part of them. So the brand is no longer going to be telling them things as a manufacturer. It's going to be chatting to a fellow member of the community. Of course, the classic example is Harley Davidson. But it's now more feasible for people to have communities because of the internet and websites and so on and Zoom. You can do things that you really couldn't do before. And so the challenge is see if there's any way you can elevate your offering as being part of a community. Like Sephora has a beauty-oriented community and gives beauty tips and loves people talk to each other, share pictures, and so on.

24:47So anyway, that's one. It's really one of my favorite topics. I think that it's difficult to pull off, but if you can do it, the payoff is just huge. And, of course, you don't necessarily have to have a self-generated community. You know, like Thrivent, the financial services company has partnered with Habitat for Humanity. And Thrivent has done really an interesting thing. They have 2 million customers. They divide them by zip code into Thrivent communities. And each of these communities goes out and do a social good locally and also participates in habitat teams that go to Africa and so forth and build homes.

25:39But the point is, I mean, Thrivent is a financial services company. I mean, I don't know if that's as boring as it gets. I mean, there's more boring things, but it's pretty hard to think we're going to get together and talk about interest rates and bonds or anything like that. But they've got their people together and had that kind of a community. Let's see. What's another one? Well, the signature stories. Yeah, signature stories is another thing people don't think about it and if they do, they don't do anything about it. And my daughter, Jennifer, was teaching a course on signature stories at Stanford, not at signatures.

26:22She was teaching stories and stories. And so I got really interested in it. And we spent a year and a half trying to figure out what was not a story. And you ask me, what's your brand story? And they'll give you five bullet points. And everything's a story. So it didn't have any context. So I defined something called a signature story. to get around that. And that's one that's not a set of facts or descriptions. It's actually a narrative with a beginning and an end and a plot. And it can be a story of a founder or of a major decision for a CEO or a customer story or an employee story. But it really needs to be a story that represents the brand.

27:09And then you got to figure out a way to tell it and make it visible. And it turns out those aren't so easy to do, but when you can pull it off, it's amazing. One of my favorite stories I use is in 1986, there was a middle manager at a failing appliance manufacturer in China that was elevated to CEO and said, see if you can save this company. It's just floundering. And a few weeks later, a customer came in with a defective appliance, and he said, no problem. We went to the warehouse and found that 20 % of them were already defective. So he took them to the factory floor, and they got a sledgehammer and destroyed them all.

27:54And he said, from now on, we're going to build quality goods. Well, that company is now the largest manufacturer of appliances in the world. It's high air. And one of their pillars is quality. and they don't have to go around saying, we are really good at quality. We have fine quality assurance people. We design for quality. And, you know, who listens to that? And who believes that? All they have to say is, remember the sledgehammer? You know, that's part of our culture and our values. Thank you. And the other one you touched on before was the silver bullet brand. Yes, that's the idea I spoke of a second ago.

28:35And the idea is that so many people have sort of differential advantages, points of differentiation, points of energy, or reasons why they can deliver. And if they had only branded, then they could communicate it. If it's not branded, it's really hard to communicate. It is. It's just hard. So I developed a long time ago these ideas of a branded differentiator and added to that the branded energizer and the branded source of differentiation. They call it silver bullet brands because silver bullets kind of metaphor for something that is unknown or under known. And it really makes a difference. So, David, I had a quick question to add.

29:24You know, you've sort of hinted at this, that branding is like a long-term strategic initiative, right? So in today's day and age, we get a lot of short-term thinking that you've touched on, a lot of ROI-driven marketing to build leads, to build sales, kind of very data-driven in that response. and I'm sure Jacob and I know I come across this a lot in my work working directly with leadership teams where that becomes like the core thing particularly from private equity particularly when people have to answer to the money guys above them the finance. What's your sort of response to that because these ideas are fantastic I'm fully behind them I know Jacob is as well but what are you kind of how is your kind of typical response if you were to face somebody that says, yeah, but what's my ROI, for example, on building a signature story or building a, you know, a silver bullet brand?

30:27Like, how do we quantify that in terms of finance? What do you sort of, what's your sort of catalog response to a kind of a very short term thinker who might challenge you in relation to that sort of thing? Well, that's a great question, man. It's a difficult one. I wrote that chapter two in the book is all about that because I get the question a lot. And it is true. If we're going to fend off the short-termism, we have to answer that question. And the holy grail is you put a number on the brand and then you manage to that number. And that's when it's really been an illusion that you can do that.

31:07You can't do that. It's an intangible. Nobody asks you, what's the value of your people? What's the value of your process of managing or your culture? Nobody asks that. It's an intangible and you can't. Now, Interbrand does as good a job as anybody. And what they do is they say, here's the business value, discounted cash flows or the stock value or whatever. And then they subtract the tangible assets and say, this is the intangibles. Here's your six or eight major intangibles. And brand is one of them. How much of this is due to the brand? Well, the problem with that question is if you removed any one of those eight, you'd go to zero.