Aaker on Branding: 20 Principles That Drive Success

This is incredible. I mean, all these people and this thing, I tell Rich just a few minutes ago there was a time in which you could come to this thing and find a parking place. It's really exciting to have such a vibrant alumni community. Is this speaker system working? Okay, okay. So I've been working in branding now for 25 years. I got some five books and dozen articles and I blog every week.

Davidacor.com and I've done that almost 200 times.

So I had occasion just to sit back about a year and a half or two years ago and say, well, of all this stuff, what's really the.

Most important, the most useful, the most influential?

And so I picked out three or four dozen things and packaged them into these 20 principles. And so that's what this book is. It's a 200 page book that for those that are overwhelmed with these 2,300.

Pages that I had before.

And then for purposes of today, I picked out what I thought were really.

The six big ideas about branding.

And so that's what I'm going to talk about. And the first one is. Brand is an asset.

You know, let me take you back.

To May of 1931 in Cincinnati. It was a summer day almost in Cincinnati and a guy named Neil McElroy was working in advertising for Kama Soap. And he was kind of under the shadow of Ivory and he was quite frustrated.

So we sat down and wrote a.

Three page memo dictating what there should be a position called a Brand Guy.

And there was no sexist problems in those days.

There should be a position called a brand guy. And he outlined exactly what that person should do. And it was all about managing and controlling the advertising and the promotion and.

The distribution of a brand.

And that was brand management. And that spread throughout the world. And for 70, 80 years that, that.

Was really an important part of the.

Management of any business.

Neil McElroy went on to be the CEO of Procter and Gamble, turned that.

Company from a soap company to a.

Diversified packaged goods company. He later became the Secretary of Defense under Eisenhower. And I read once that in the last 75 years, only under the leadership of Eisenhower and Neil McElroy did we went through a period of eight years with no wars.

That was Neil McIlroy.

But probably his greatest accomplishment was that.

Three page memo he wrote.

And I'll tell you something else about that the CEO had dictated. Nobody can write a memo over one page.

That tells you something, doesn't it, about the system and change.

Well, Fast forward to 25 years ago, 1988, I was sitting in August in a conference at Austin, Texas entitled Brand Equity, Its Definition, Measurement and Management. And the people sitting in that conference really kind of realized that something special was going on. Because at that time, maybe at that.

Conference.

The whole philosophy of what branding is, what marketing is, changed. So marketing heretofore stimulated by Neil McElroy was tactical. It was about advertising. In fact, it was delegated to the advertising manager, sometimes outsourced to the advertising agency. Well, that's really changed because at around about that time, people began to realize that brand is an asset. It drives business strategy and performance. It even has a brand name called Brand Equity. And it changed completely who did marketing, what marketing did and how marketing was measured.

It was really phenomenal.

So instead of having marketing being done by middle level executives, the advertising manager, now it was a cmo. And marketing got a seat at the table. They weren't there before with the cio, the COO and the CEO.

And now there's a CMO got a.

Seat at the table.

And what they did was completely different. Instead of tactical things, they involved with strategy. And so marketing has always had market research and customer insights, but it was.

Directed at tactical questions. Now it's dealt at strategic questions.

So you have people that get their consumer insights to make choices about new growth platforms. So when Procter and Gamble come out with Tide Pods and Downey single REITs, these came out of marketing's ability to generate customer assets or insights. And they were strategic for the company. You have segmentation. And heretofore segmentation was a tactical device.

But now it's a strategic device.

You have McDonald's and they have morning day parts, they have the health conscious.

Consumer and so on.

All these segments that are driving strategy.

Now, not tactics and the value proposition, which is a key to strategy after all. And now it's being driven by marketing insights. So when Hyundai has this great brand growth in the last decade or so, it was driven a lot by the necessity to, to crack not only the quality perception but also the styling perception.

And that's driven by marketing.

And you look at General Electric, when Imolt came in and said we got.

To grow internally and we have to.

To do that, we're going to need.

A lot of new businesses.

So let's let require every business to create three sort of breakthrough innovation ideas. And he created $4 billion worth of business in just three or four years doing this. And marketing ran the program, marketing did, Beth Comstock did the CMO of ge.

It's Amazing.

If you look back in the last century, you can see some things that have really transformed marketing. Things like mass marketing, the marketing concept, the concept of segmentation, they all changed, fundamentally changed marketing. But I think we have to add.

Brand as an asset to that list because it has really changed marketing.

The second idea is the brand vision. As Yogi Berra once said, if you don't know where you're going, you might not get there. You need a vision and.

You need.

To know where to go.

And here is the vision.

One side comment before we go any further. How many play golf in here? Well, it turns out that there's two kinds of golfers. One that play by the rules.

That's about half the population.

That's true.

Half the population are sticklers for the.

Rules and they're not always fun to play with. The other half are out there for fun. And some of that group occasionally do do overs and do over means when you have a bad shot, then you do it over. Now these people are not without principles. You have to have a good reason for it. Like somebody's talking or you inadvertently pulled out a wrong club. You thought it was a six, but it was a nine. So there has to be a good reason. But anyway, they allow a few do overs. Well, I developed this model of how you develop a brand vision. I called it the brand identity model.

It was introduced in the book Building.

Strong Brands and it was elaborated in the book Brand Leadership. And I really grew to not like the brand brand identity. And so I changed it to brand vision. It's more forward looking, it's got more energy, it's not tied to some design vocabulary that some people like to use. And so I did a do over. Here is the Hawes brand vision. I helped structure the process that led to this, but it was done by.

Rich Lyons, who is a brilliant, brilliant dean.

We are blessed.

He's without question the best dean in the world.

But anyway, this is the Haas brand vision. Let me make some observations about it. First of all, it's not just a three word phrase. Some people are sort of obsessed with trying to get a single thought to represent your brand. Brands are more complicated than that. Even simple packaged goods brands are more complicated than that. And so you see, there are four dimensions. We call these the core vision elements. And there's a central thought which we call brand essence. And even the core elements have three bullet points under them which sort of provide the slant of the hall school to students. Always just students always isn't enough either. The other thing Second thing is that this is not a fill in the box model. You see a lot of brand vision models that look something like this. And that means if you want to know your brand vision, you fill in each box. What are the attributes, what are the functional benefits, what's the target market? And if any of these boxes don't apply to you, you still have to.

Fill in the box. You've got to put something in there.

And if you have something really important you want that brand to stand for, but there's no box, then you're pretty much screwed. I do a lot of work in Japan, and there's a company in Japan that had a model that was designed for packaged goods and there was no box for organizational values or anything. And you put it into a B2B or a service setting. It didn't make any sense, but they're stuck with it. So anyway, that's not the kind of model this is. We just say, what do you want your brand to stand for?

And it doesn't have to have a box.

The third thing is that this is a model that's evolved. When Rich started working on it maybe six, seven years ago or so, it wasn't exactly like this. It evolved because his thinking evolved as he would try to enunciate it over time. It would evolve as he developed programs. And some things that differentiated us and inspired us changed. And actually in the full model, we usually have an extended vision, which is less important element. And that confidence without attitude used to reside there, but it got elevated to.

Be a core identity.

So it changed over time. Another thing is that it really affected everything. It affected the courses we taught here, content of them. It affected the people we hired to teach the courses. It affected our research programs. It affected the way we communicate, our research programs. It affected the way we position the.

School, school for the alumni.

It affected admissions. Two years ago, we started putting these elements into the admission process to try to get people that buy into them. One more thing is it has a personality. Rich told me, he mentioned this morning the fact that it had a personality. I think he didn't know that until I told him the other day that confidence without attitude is a personality characteristic. Turns out it's highly differentiated. I can tell you firsthand that the other seven or eight top schools in the country would kill to have students and faculty that didn't have an attitude. Highly differentiating and very powerful. And it affects the relationship people have.

With the school and so on.

And one more thing, and this is in, you know, really nice Follow on to Annie's. The talk about Annie is that it has a higher purpose. And it turns out that higher purpose.

Is really important in branding now.

And most brands want to have a higher purpose because they want brands that inspire not only customers, but employees. So people build in a higher purpose.

And beyond yourself is a higher purpose.

And it's very Berkeley.

I mean, it's very Hawes Berkeley. There's a tradition of that.

And the challenge is for those 80 or 90% of the brands of the world that have a higher purpose, one.

Challenge is to do something of substance.

The other is to get credit for it.

And it's not easy to get credit for it.

So Laura Tyson's new operation is going.

To help us get credit for it.

Because it'll be a way to package.

Some of the things we've done anyway.

There's the old story about the guy walking along a construction site and asking this fellow what he's doing, this bricklayer. And he said, I'm making a living for my family. And then he talked to the next bricklayer, who was a little happier. We said, what are you doing? He said, I am the best bricklayer in town and I'm laying the best wall that's possible.

It's perfect.

My goal is perfection.

And he went to the third bricklayer, who was humming a tune and said, what are you doing? He said, I'm building a cathedral. So which of those companies would you know? What company represented by any of those three would you like to work for or would you like to buy from?

Would you like to have a relationship with? It's a lot more inspiring to build a cathedral.

Subcategory competition. I really believe that in the future the world is going to be a.

Lot less about brand competition and more about subcategory competition.

And that was kind of the theme.

Of my last book, which is called Brand Relevance.

And it came, or the start of it came, from a data set I got in Japan. I've done a lot of work in.

Japan, maybe made 35, 40 trips over there.

And I got a hold of beer data. 40 years. During those 40 years, the market share trajectory changed four times. Three of those times, a new subcategory was formed. The Sahi Super, Die, Karen Ichiban and the hapaschu category. The fourth time, two categories, namely Lager and Superdry, were simultaneously repositioned. 40 years. And all the dynamics in the marketplace.

Can be explained by subcategory formation and competition.

It's amazing.

You look at computers, it's the Same thing.

You look at where spurts of growth appeared somewhere it was advent of minicomputers, the servers, the Dell, you know, build to your own specs idea. And of course the Apple has done.

It four times in the last 10 years.

But you look at anything, you look.

At banking, you look at water, you look at do you pick any different category? And the same thing is true. The only time growth appears with rare exceptions is when there's a new category.

Formed or somehow changed or repositioned.

And so you really, I think, have.

To think in terms of subcategory competition, not brand competition.

Let me.

Note that competition is completely different in those two contexts. Completely different. In what I call brand preference competition, the innovation is incremental, a little bit better each year. The categories regard it as fixed.

And we're dealing with my brand is.

Better than your brand marketing. You win when your brand is preferred.

And the other brand is not.

And the result usually is no growth at all. Usually profit erosion and it's so not fun. The other way to compete is what I call brand relevance competition. Where there's a different kind of innovation, it's either substantial or even transformational innovation that develops what I call must haves.

A must have is something that the.

Some segments in the market must have. If a brand doesn't have a must.

Have.

It won't be considered. Not only will it not be preferred, it won't even be considered.

So we're talking about creating and managing.

Subcategories where my brand is relevant and winning is when your brand is not.

Even considered, not considered. It's not that it's not preferred, it's not even considered. It doesn't have the visibility and credibility.

To be even considered because it doesn't.

Have a must have that we've established.

That people need to buy and it's really the only source of growth. Let's look at a couple of examples. Marriott spent six weeks trying to figure out how businessmen used the lobby. And they developed a different kind of lobby and a different kind of hotel room that was sort of supportive of the way executives use hotels. And so that became a must have.

For some business travelers.

Siebel in 1995 packaged a whole bunch of consumer touching programs into something they called CRM, Consumer Relationship Management. So their customers started to buy systems of computer programs. So if you were making one of these component systems, even though it might have been the best possible system in the world and you were the best supplier and the best service backup and on and on, the most innovative.

Not relevant.

Because you're not making what they're now buying. So you're not relevant.

It can be segment based. The energy bar came out in 1981.

By one of our alumni actually.

And it was for men.

I mean it was chewy and it was, it was so male and why should a woman try to eat that stuff? And so Luna came out with a thing that had different components, duh, and a different texture and a different taste and a different size and a different name and packaging personality and created a whole new subcategory which is energy bars for women. And you can augment the market the offering like Geek Squad does for Best Buy. So you have some customer base that get frustrated by installing and servicing entertainment.

Systems and computer systems. Then you can now go to Best Buy and have the Geek square behind.

You and you can change motivations. Pampers went into China 1998 with a kind of a cheap product that didn't go anywhere. And in 2006 they got a terrific product designed for the Chinese market. It was called Pampers Cloth, like and dry and at least that's the translation. But it was a terrific product and it was priced right and it was distributed and it didn't sell at all. So they did some research and they learned that customers really aren't bothered by convenience or dryness, but they are concerned about the quality of sleep of their baby because they think that will affect his ability to learn and so on later on. So they did a study with a Beijing children's hospital and they put Pampers on some babies and they found that they went to sleep faster, they slept 30 minutes more and they had 50% less distraction.

And then they.

Supported all this with this big sleep something program in which they. Oh yeah, Golden Sleep program it was. And in which they invited people to send in pictures of their babies sleeping. Can you imagine anything better? So they have a whole bunch of these pictures and they took thousands of them and put them in a huge mural in Shanghai, won the Guinness Book of Record for the mural that has.

The most pictures in it.

And it was Quite amazing. In 2006 the disposable diaper business was practically non existent. Five years later they sold 3 billion of them. And Pampers is the exemplar of the.

Category and the beneficiary of most of that growth.

Branded differentiators. So you have to be differentiated, right?

A brand has to, as a very.

Base point, has to be differentiated.

So how do you do that? Well, what you usually do is you get some innovation that Gives you something that differentiates you.

And.

The problem with that is that competitors will copy the innovation or they will appear to copy it, which is even worse. And so the perceptions get muddled and you don't really get the differentiation you need. So what can you do? Well, you can brand it.

You can brand the differentiation.

Rasche Glaser. Anybody have Rasche Glaser? Yeah, he did a study once, a really wonderful study, that showed that branded differentiators really matter. He showed half the subjects a garment.

Without.

Branded component, and the other half did have a branded component. And the ones that saw the branded component, they thought the garment was worth more money. They'd be willing to pay more money for it, even though they had no.

Idea what that branded component was.

Remember intel inside? People paid at one point in time, paid 10% more from the computer with intel inside, even though they had no.

Clue what intel inside meant.

So it really matters. Take Weston's Heavenly Bed. When they put that into a hotel, when Weston did.

Everything went up.

Perceptions of quality, of styling, of cleanliness.

And occupancy went up.

It was a, a much better bed. But people had been having beds in hotels forever and now suddenly it was.

A point of differentiation.

And it was branded.

So all the other hotel chains in the world were scrambling to come up.

With their own bed.

Bread. Did I say bread? But anyway, there's only one Heavenly Bed owned by Westin. Harley Davidson has the photo center and the ride planner. And these branded differentiators are something that sort of really personify their brand, their.

Passion for bikes on the road.

So these are not just engineers trying.

To make bikes, but they're more than that.

Uniqlo is a phenomenon.

Mr. Fuego mentioned Whole Foods. They're a 12 and a half billion dollar business. Uniqlo is now a 12 and a half million business.

They're one of the top brands in Japan.

Soon they'll be one of the top brands in the States. Some of the stores are phenomenal.

And one of the reasons is there's.

A lot of reasons, as is true.

In most success stories, but.

And one of them is their branded differentiators.

They have something called the Heattech. And this is a clothing that you.

Can'T get anywhere else that gets you.

Warm and keeps you warm and at.

The same time, it's silky smooth and it doesn't deform in any way. It's incredible. And they put that on T shirts.

And other garments, he tech.

And so.

It'S a branded differentiator for Uniqlone. One of the reasons they're successful.

You look at the branded programs and how Lester center is a branded differentiator for the Haas School and the Berkeley.

Entrepreneurs Forum is a branded differentiator for the Lester Center.

It's a, it's a way for them to get some energy and to get a point of difference. So if you're evaluating the entrepreneur's form.

For.

In the context of budgeting and.

So on and resource allocation, you got.

To realize that it's not just a.

Standalone event entity with a series of events.

It's got a role to play in.

The total picture because it affects the.

Perceptions of the Lester center and ultimately affects the perceptions of the business school.

The problem with this branded differentiator concept is that people use it as an excuse to put a brand on anything.

And the problem is there are innovation.

Champions in any organization that sort of.

Inflate the value and importance of their innovation. So they brand it.

So we end up with over branding.

More brands than we can support, more.

Brands than the customer can understand. So we have to really be tough about asking, is it worth branding?

Is it a significant advance?

Do the customers really care?

And will it merit investment over time?

But if it passes those tests, you.

Can have an asset that matters.

Customer sweet spots. Well, this is kind of what we.

Want a brand to do.

We want it to be visible, we.

Want it to have energy, we want.

It to be light, we want it to create a relationship beyond transactions.

And most of all, we want it to be a social media player. It is really pathetic to hear people just so want to be a social media player.

They so want to unlock the digital thing. But then you look at what they do. Marketing is about supporting the offering in the firm. Their website is all about the offering and its use, the attributes and benefits.

Why my brand's better than your brand.

So you take a brand like Avon, which sells door to door cosmetics, skincare, jewelry. So you think that brand taking that marketing tact is going to create any of those things?

Probably not.

I mean, the plain flat, cold reality.

Is customers don't care about your products. They just don't care very much.

And I know you care and you would like them to care, but they don't care.

So it's not going to do any.

Of those things and it's not going.

To make you a social media player.

They're not going to talk to their.

Friends on Twitter about your skin care items.

So there's an alternative. You can look at the customer sweet spot things they do care about their Activities, their interests, their passions.

And you could find a way to have a shared interest in which you are an active partner. So let's take the Avon Walk for Breast cancer.

It raised 640 million for breast cancer since 1992.

So it's been in existence over 20 years.

It's educated 100 million women about testing for breast cancer. And it's incredibly involving. Talk about energy and involvement.

One dimension of energy is involvement.

And.

They have eight major runs in the United States and each of those get like 1,000 women. But for every thousand women it gets probably there's 5,000 that considered running. There's 50,000 that supported those in one way or another. And there's hundreds of thousands that relate to this thing, even if they don't.

Know anybody that's involved with it.

It's an incredible source of energy.

It's an incredible source of visibility.

The Avon name is right out there.

You know who the Avon name, what it stands for.

And it makes Avon a social media.

Player because people are going to this Avon site to learn about the races, to register for races, to, to follow.

Up on races, to exchange commentaries and experiences.

You look at Pampers, I mean, people just aren't interested.

In diapers.

I mean, they're just not.

It's right up there, just below insurance as to some product that they don't want to talk about.

But they are interested in baby care.

So Pampers has a go to site, gets 600,000 visitors a month. And it talks about all things involved in babies, pregnancy, new baby, baby development.

Toddler, preschooler, me, my family. And in each of those, there's a lot of substance.

Under baby development there's something like 57 white papers, there's 25 play and learn.

Activities you can do for your children.

And there's a way to communicate with.

Each other and with experts and so on.

So it's really a go to place for almost any question you might have.

About having a baby or raising a baby.

And so that's a customer sweet spot. And it's a shared interest that Pampers.

Has become an active partner in.

Now, sometimes it doesn't make any sense or it may be not even feasible.

To develop this shared interest event or activity.

And so maybe you should partner with.

Somebody that already has one, like Home.

Depot does with Habitat for Humanity.

So a lot of their customers are.

Really interested in Habitat for Humanity and its mission. And so what Home Depot has done is they provide materials, they provide people to actually build these homes, and they provide signage in the stores to Promote it. So they developed a real active partnership.

Invisible partnership over a long time period.

And they didn't have to go and create Habitat for Humanity.

It was already there and it already had credibility.

Silo coordination.

By silos I mean the fact that.

Most organizations are decentralized. In fact, almost every company I walk into, they say we're different, we're decentralized.

They have product silos, they have country silos and they have functional silos.

And these silos really create enormous problems.

For branding people because.

You want to.

Have silo spanning offerings.

I mean Walmart wants to buy from Procter and Gamble.

They don't want to buy from Pampers and Tide and on and on.

And also you need silo spanning programs. You need to scale programs these days and you can't scale.

If these silos are all marching to their own drum and using their own budget, there'd be brand confusion.

Toshiba In Japan has 100 different product.

Silos and they're in 170 countries.

And there was a guy that was running an effort to get their hands.

Around this at Toshiba once told me.

He was able to reduce the number.

Of logos from 11 to 7.

But that was all he could do.

And he gave up.

And good ideas are not leveraged.

So if you have a good idea.

Here and there buried in some silo, it stays there.

There's no mechanism to get it out. And you have incredible resource misallocation because the money belongs to the big silos and.

It stays there.

And so all these embryonic business areas don't get funded. And so there has to be. I mean the silos are there for a good reason. I mean we learned back in the days of Alfred Sloan and General Motors.

Back in the 20s and 30s, we.

Learned that decentralization works. There's autonomy, you're close to the market and there's accountability and so on. So it's a system that works. So you have to tread carefully. But sometimes the only choice is to.

Really break down some of those silos.

There was a time in the 90s.

In which IBM was on the brink of bankruptcy. It was so silo driven, they were.

Going to break the company into six.

Seven different countries companies, all with different products. And Lou Gerstner, who's one of the great CEOs of our time, came in.

And did some market research and learned.

That customers wanted IBM to deliver Total System solutions. So we said, I'm not going to sign those papers, we're not going to break up the company.

We're going to be one company, we're.

Going to deliver system solutions and it's.

Going to be driven by the IBM brand.

He changed the budget behind.

The brand.

From 10 to 50%.

They had almost a billion dollar budget. Can you imagine the pain when 400 million got taken out of the silos marketing budget?

And he changed the number of agencies.

From 70 to 1 and it had a single message. He once wrote an email about this strategy and the guy that was running.

IBM Europe filtered things like that and.

He didn't pass it on.

He was fired two weeks later.

Because Gerstner wanted only people who were on.

Board to his way of thinking.

So anyway, here's a case where you have a really strong, capable CEO that's walked into a crisis situation. And it's pretty hard to say that.

Any strategy isn't worked because the current one was bankrupt.

But usually that's not the case.

Usually what happens when people come in and try to make dramatic changes?

There's a flame out and one or two years later they are gone.

So I did a study which reported in a book called Spanning Silos in which I talked to 50 CMOs and I asked them what are the silo problems and what are you doing about it that works. And the summary of my findings was that the Central Marketing group can do a lot to enhance communication and cooperation in place of competition and isolation.

And anything you can do along those lines will alleviate the silo problem. It's all about cooperation and communication and a lot of those problems go away. So it turns out that there's a lot of non threatening roles at work.

You can be a facilitator. Just one example, Nestle for example, has.

An interest center where they have a.

Whole bunch of talent and information that.

Comes in along a subject matter that spans silos. They have one for Hispanics, they have.

One for mom and kids, they have one for Walmart.

So this is a way for people.

That are interested in one of those.

Subject matters to interact and to come together. You can be a service supplier.

The Central Marketing group at BP developed a segmentation process and they did a segmentation study for one of the business units. And it was so good, so helpful.

And so impactful that all the other.

Business units were kind of standing in.

Line waiting for that to happen.

And you can be a strategic partner or consultant.

And so you can have some expertise.

In some area like segmentation or like value propositions.

And you can help the silo people.

Develop their brand strategy.

Now notice all those things are strategic because when you get involved with talking.

To somebody that's interested in an important.

Market like the Hispanic market, you really have a seat at the silos strategy table.

And similarly, when you do a segmentation study and trying to start to interpret.

It, you get involved in silo discussions.

And certainly you do that as a consultant as well.

So that's a way for people to do it.

So those are our six ideas. Brand as an asset, Brand vision, Subcategory.

Competition and its role in the future. Branded differentiators, customer sweet spots and silo coordination.

If I had to do six more.

I would pick these.

Brand energy. Every brand needs energy.

We have some marvelous research done by.

The BAV database developed by Young and.

Rubicon, which we've learned that brand equities decline all over the world except for.

Those brands with energy. It's really important to maintain energy in your brand.

The idea of stories. Stories are the new hot topic in.

Marketing because you know, duh, people remember.

Stories, they don't remember facts.

And I've done some work with what.

I call signature stories and those are.

Stories that represent a brand higher purpose.

But it's just extraordinary how many people are interested in having a higher purpose and how few brands get credit for it.

And I think that's an important subject for the next decade.

Digital strategies, really everybody wants to get digital right? And I have a chapter on digital.

In my book where I explain there's four very different ways that digital can work.

Internal branding. If you don't get the people inside.

The organization on board, it's not going to happen. And brand Portfolio Strategies talked a little.

Bit about the link between a branded.

Differentiator and a master brand. But there's a lot of other things in the portfolio have to worry about.

Not the least of which is setting.

Priorities, you know, which are going to be your strategic brands. And let's recognize we can't support more than we can support.

Anyway, that's it. Great to be here.

Thanks for supporting Berkeley Hawes. Rich also gives me credit for changing the name to Berkeley Hawes because sometime.

In a distant past I told him.

That Berkeley's a bigger brand than Hawes.

So I. So I appreciate that.

That's his recall of history.

Anyway, nice to be here and I.

Guess we have some time for some questions.

Okay. Hi, Dave Crawford.

So a big focus of Berkeley is smaller tech driven entrepreneurial organizations and I have worked in a bunch of those and often you're dealing with a high propensity of technical people who don't understand the value of Brands. So what are your recommendations for talking about return on investment for brand investment in a smaller tech company as opposed to a big consumer brands company?

Well, return on investment is tough for any company.

I remember once I was at Hewlett Packard and they had this pretty printer and that was their big product back then.

It still is an important product.

But they had a series of ads.

Where they had Dalmatians in them.

You remember that?

Dalmatians.

Well, they put up these ads and they were really impactful ads. And great symbol.

And a symbol does so many things. Somebody from Wall Street Journal just asked me about symbols and why we have fewer than we used to.

But anyway, the engineers that ran those.

Businesses, they sold us and get rid of the Dalmatians.

And so the next quarter the Dalmatians.

Were smaller and fewer and the next.

Quarter they were smaller and fewer and the next quarter they went away. Because these engineers wanted you to put in the ad specifications.

Right.

Because their customers are rational and they are only interested in specifications and that's.

Got to be front and center in the ads. It is really painful working with those guys.

Yeah.

So I know what you mean.

You know, nobody asks the, the talent department who's hiring people, what's the ROI.

Of this next hire?

Nobody asked the quality control manager what's the ROI of upping the quality? Because these assets, people and quality, they understand that's necessary for strategy. Right. But brand, they want to know, what's the roi? So it's a little bit of a remnant of the Neil McElroy days where.

Brand was tactical and its goal was to create sales.

And in the early 80s, we got this incredible data.

It was scanner data.

They started scanning then. So we had data on exactly what people bought and we could run experiments. And we ran hundreds and hundreds of these experiments where we put ads in one home and another type or no ad, or say four times the amount in this home and zero in this home or in some experimental design like that. And we knew exactly what these people bought. And you know what happened? The people, when we ran an ad with some cents off or half off or, or some sale, sales spiked. So you know what people did? They put all their money into promotion and they took it out of image advertising.

They destroy brands.

The craft brand was so destroyed, it.

Took them three years to bring it back.

But if you measure roi, it was amazing roi. And if you'd measured the ROI on an image ad, it was zero, practically. And so I worry about big data now. I worry a little bit about we're going to have a repeat of that time because sales is something, it's in the database you can measure. And there are sophisticated people doing that with sophisticated models, but they're communicating with people that aren't sophisticated that really want to have an ROI explanation so they.

Can drive their business just like they make decisions in manufacturing.

So it's a, I mean the reality is you've got to have a conceptual model of your strategy and you have to say what is this brand asset going to needs to do in order to fulfill that strategy? You know, what kind of relevance do you have? That means visibility and credibility. So let's measure visibility and credibility.

What kind of, what are the differentiating.

And inspiring image elements? Associations. We need to marry them. What's the role of brand loyalty? We need to measure that and then we have to where we can link that to roi and that sometimes can.

Be done, especially loyalty.

So we have to make sure we interject those variables into any effort to measure roi. And we have to be really careful.

About straightforward, trivial use of short term sales.

Hi, you had mentioned about brand leadership and I also. Brand leadership.

Leadership. Leadership.

So I also read somewhere that in terms of building a brand you also need to focus on building the category leadership. So I'm wondering what are your thoughts on building the category leadership or the brand leadership? Which one has more long lasting impact?

Well, you want to be a category or subcategory leader. You want to be the exemplar of the category because then you can manage its image and its ability to compete with other subcategories and you're going to be relevant. If you're the exemplar or the leader, you're going to be relevant automatically. I mean you're going to be visible and credible because you're the guy that's doing this.

Your pamper is telling people what disposable diapers are in China.

So that's, that's the goal.

But to be a subcategory leader you.

Have to almost by necessity have to be a sales leader. Also it's pretty hard for somebody that.

Is not the sales leader to do that.

So.

I don't really know what brand.

Leader would mean exactly.

I guess it could mean that you.

Are perceived as to be preferred on.

Some dimension that people use to evaluate brands.

But then you're in the my brand's better than your brand world and that's, I think you really want to try to be in my subcategory is better.

Than your subcategory world.

Well, David, that was an outstanding presentation. I'm looking forward to reading your book and getting more insight. I worked for IBM. I started in 1958, and in those days it was the International Business Machines Corporation. That's what the printed business card said. And I remember very well how several customers said, you mean IBM? And I said, that's the same company. Yes, thank you. And I retired in 1992, and John Akers was going out and Lou Gerstner coming in. Lou Gerstner spent almost a year before he would announce to anyone what the new direction of IBM was. He spent a year in everybody's offices in every country analyzing. And again he announced to the rest of us at that point, the IBM brand is worth so much.

Well, that's one thing you can do to skeptics at the C Suite table.

You can, you can estimate the value of your brand.

And those estimates are quite crude, but.

Sometimes they are helpful to sort of support this brand as an asset thing.

The way you estimate them, you estimate.

First the value of the business. Like you say Ford Focus in United.

States, you take its projected profit and discount it back.

And that's the value of that business.

And then you say, what part of.

That value is intangible assets? And what is tangible? And of the intangible assets, what percentage.

Would you allocate to the brand? Very crude, but it gives you a number.

And then you add up that number for all the countries Ford focuses in.

And then you add up for all the Ford products and you get a.

Number for Ford brand.

And for some brands, that can be 60, 70% of the value of the business.

Brands like Burberry, for example. Brands like Coca Cola, the brand is that important.

Now, for some brands like Toyota, it's down to 15%. But 15% of Toyota's market cap is.

Still a huge number.

So anyway, you can also go through.

That exercise and maybe that's what Gerstner did.

Yeah, so you talked a lot. This is jan Larsen from MBA 99. You talked a lot about sub brands or subcategories for a kind of bigger company with a lot of sub brands. How do you think about best practices around consistency of the overall brand? And you mentioned IBM as one example. And what are some other examples of best practices, how they manage that?

I haven't talked about sub brands today, but in the book Brand Portfolio Strategy.

That I wrote, I talk about that extensively.

The basic issue is if you have a master brand and you want to make it a master brand like Toshiba.

Is impressive in a Lot of ways.

But if you're in the camera business or something, it doesn't necessarily carry the balls. You need a sub brand. And so that says that this brand is in this business and in this business it has a whole bunch of brand equity and associations. And so the sub brand allows the.

Master brand to operate in some other.

Business areas when you really can't not use it.

I mean, you can't start from scratch. And so it's, I have what's called.

The brand relationship spectrum. So if you go into a new business, you have to, you know, one strategy is a master brand strategy with a descriptor. But if you need a little distance.

Then you use a sub brand. If you need more distance, use an endorsed brand. And if you need the maximum distance, you have a totally new brand. And so yeah, it's brand portfolio strategy is really complicated. It's just usually a mess. And.

It'S a mess usually because the strategy's not clear. And it's only when we try to develop a brand portfolio strategy that people.

It becomes obvious that the strategy's not clear. So we often have to then nail down the business strategy to get that right.

Yeah.

Dr. Aker, you talked about using big data potentially as a detrimental strategy of directions. Maybe if I flip the question around.

That if you had the power of.

Big data, what would you use it for?

Well, at the Cumberland with profit, we use it a lot for segmentation.

It's really good at understanding the marketplace.

At a granular level and identifying segments.

That are, that are underserved and have special needs or special wants.

So I think that's a good use for it. And I also think using it to allocate money by ROI measures is fine. And you know, we have some friends.

That we have got people at our.

Company, Mike Hanson's at ucla, there's some very sophisticated people that can build models that are not naive. The challenge is to get them to.

Communicate the assumptions to the people they're building models for.

You were talking about how the goal of a brand is to become a subcategory leader. And I was wondering, if the subcategory is declining, wouldn't your brand be facing the brunt of the downside as well? Wouldn't that be a concern?

Well, that's really an interesting question.

I have another book called Three Threats to Brand Relevance.

So the question is, why is the subcategory declining? Is it because that there's another subcategory that has created some must haves and that in this subcategory can't deal with it. So you have some choices, which I.

Outline in that book.

One choice is you can just fight back. So if you're McDonald's and there's a subcategory of healthy eating and then you can. Or if you're In N Out Burger, has anybody been in N Out Burger? It's the world's most unhealthy.

So you know how In N Out.

Burger is responding to the emergence of healthy eating and the decline of places like that? They're fighting back. They're saying, you know, you should come here anyway. You know, first of all, there's going to be people that couldn't care less about healthy eating. They can come regularly. And even those that are maybe come to our place once a month and, you know, for once a month you can live it up and the rest of the time, you know, live like a monk. So one option is to fight back, the other is to be, to develop some parity. And if your subcategory is, you know, like you're in the McDonald's fast food hamburger business and Starbucks is killing you because that's where people go into coffee and your coffee's not good enough. So maybe you come out with McCafe where it's not as good as Starbucks, but it's close enough that people don't say no anymore. And maybe you can then stop the decline of your category or maybe you can actually leapfrog them and do something even better than they're doing and therefore get your subcategory to grow again. So the point is that you can look at this as subcategory competition. And there are situations where you've got to just face facts and we either.

Have to milk or exit.

It's just not worth fighting because they've got such a compelling story and they're doing such a good job. We just won't fight. We just either milk our brand if it can generate some cash flow over.

Time without much implementation put, or we close down.

Sometimes the exit decision is the best.

Hi Dr. Aker, glad to see you. First time in 20 years visiting here from Tokyo, Japan. And I was actually having a discussion with my brother who works for Nissan's marketing departments, and he said that number one challenge that the Nissan's executives faced with is the brand image amongst the consumers. For example, he's located in Japan, so his main competitors are Toyota and Honda. And he says that executives recognize that Nissan brand recognition is not as good, well or well received as their competitors. What are the things that they can look in to enhance or improve the brand image amongst consumers.

Well, you have to do something that breaks through the clutter. Now, Nissan has had several, five or 10 years ago, had some wonderful new products, didn't they? Were they the ones that came out with a Cube? Is that Nissan? Yeah, Nissan came out with the Cube, which was one of the great new products in the automobile industry. So during that time, that year or the year after, they got a lot of publicity, a lot of press. And so that's certainly one way is to. Is the best way is to have.

Some sort of a product breakthrough.

But, you know, if you make insurance.

Or frankfurters, you can't do that.

So what I like to see people.

Do is look for sources of energy.

Branded energy sources, and link up to them.

And so then that's the way to.

Get visibility and all sorts of things.

So, like, I've been connected with an insurance company for some time and gotten them to. Instead of talking about their insurance products, their big clients are teachers.

That's half their business.

And so they have this program where they will take a teacher's lounge and refurbish it. And they do this for a number.

Of lounges each month.

And so that program has got a lot of energy and it creates liking.

And all that sort of thing.

And it's much more powerful than just.

Talking about insurance, which people tend to buy on price, and. And it's hard to convince them otherwise.