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Brand Preference vs. Brand Relevance—Two Ways to Compete
My book Brand Relevance: Making Competitors Irrelevant discusses two ways to compete. The first, to win the brand preference competition by making a brand preferred over other brands in an established category or subcategory, is tough and expensive. The second, to win the brand relevance competition by creating new categories or subcategories for which competitors are irrelevant, is a route to growth and profitability.
The first and most commonly used route to winning focuses on generating brand preference among the choices considered by customers, on beating the competition. The brand preference strategy involves incremental innovation to make the brand ever more attractive or reliable or the offering less costly. Faster, cheaper, better is the mantra. Resources are expended on communicating more effectively with more clever advertising, more impactful promotions, more visible sponsorships, and more engaging social media programs but such efforts rarely break out of the clutter.
The problem is that incremental innovation and investments in marketing rarely change the market share structure. Customers are just not inclined or motivated to change brand loyalties in established markets. Brands are perceived to be similar at least with respect to the delivery of functional benefits, and often these perceptions are accurate. As a result, a brand preference strategy is usually a recipe for stressed margins, unsatisfactory profitability, and, ultimately, a decline into irrelevance. It is so not fun.
The second route to competitive success is to change what people buy by creating new categories or subcategories that alter the way that existing customers look at the purchase decision and use experience. Winning under the brand relevance model, now very different, is based on being selected because competitors were not relevant rather than not preferred, a qualitatively different reason. Some or all competitor brands are not visible and credible with respect to the new category or subcategory. The result can be a market in which there is no competition at all for an extended time or one in which the competition is reduced or weakened, the ticket to ongoing financial success.
The brand relevance strategy involves transformational or substantial innovation to create offerings so innovative that new categories or subcategories are created. It involves an organizational ability to sense changes in the marketplace and its customers, an ability to commit to a new concept and bring it to market, and a willingness to take risks by going outside the comfort zone represented by the existing target market, value proposition, and business model.
The payoff of operating with no or little competition is huge. It is econ 101. Consider the Chrysler minivan introduced as the Plymouth Voyager and Dodge Caravan in 1982 which sold 200,000 during the first year and 12.5 million to date. For 16 years Chrysler had no viable competitor in part because it continuously innovated behind the product but also because competitors had other priorities.
Brand relevance competition, when it works, is more profitable and more fun.
Posted March 11, 2011 / Permalink
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Comments
David, this presents brands with the same problem that they have always faced e.g. Ansoff and choices. There is only a finite segmentation of a category after which returns diminish. Brands now need to refine their 'relevance' using customer input/data and defining new experiences that seek to build the relationship. In this way brands will change from being a product into a service as well.
David--
I agree relevance trumps preference. But many brands are simply not in the position to create their own categories or subcategories, because their products aren't suitably innovative. For them, the fight for market share is simply a fact of life.
Gary, good points. Just aiming at too small niches with little prospect of growth will create a subcategory but one that will not be worthwhile. Expanding the offering to include more of the total experience is more likely to create defensible subcategories that are worthwhile. Dave
Bob, it is true the brand pref competition cannot be eliminated. But if it can be reduced a bit even from 95% to 90% the result can be dramatic. The reason I include subcategories is that their incidence is much more frequent maybe ten times as much as categories. It is hard to find categories that do not have breakthrough subcategories with some regularity. Dave
Raif, thanks for the generous comment. I was indeed hoping to stimulate a paradigm shift to change thinking from incremental innovation to creating and then managing categories and subcategories. Dave
I'm not sure I agree with the point that categories are not "suitably innovative." I never thought I'd see banks designed like urban coffee shops. Or an airline that is actually satellite tv with wings. There's opportunities to innovate in every category...once you decide to re-imagine the business you're actually in and solve unarticulated customer needs.
Hi David,
Am reading your new book and this lead me to think of a very good example - iPhone. Although they were never in the mobile phone category, they managed to develop brand relevance by positioning and promoting themselves in the "smart phone" category. With a strong first mover advantage, they made Nokia almost irrelevant. I think the CEO of Nokia recently acknowledge this in a recent post in the Wall Street Journal. Interestingly, guys like HTC were actually pioneers in the smart phone category, but this really never took off until iPhone started to promote this category. I think the same goes for iPad which is now a leader in the "tablet" PC category.
In short, your concept on brand relevance nailed these current market phenomenon right on the spot.
Lau, indeed Apple also did it with iTunes and the Apple store and that was just in the last ten years. The remarkable ability of Apple to create new categories is told in the Brand Relevance book. The how question is fascinating. The answer is multi-dimensional but includes timing, a flare for design, the Apple brand, the apps, and Jobs.
David Murphy, I totally agree. I have always included the term subcategory as well as category to emphasize that innovation within a category can make competitiors irrelevant. Also, augmenting the offering with a service is a way that many mature products can create new categories or subcategories.
Your argument is persuasive, powerful and ultimately, logical. I have just finished reading the book and it is one of those works that create a paradigm shift in approach.The last book that had this effect on me was David Lewis's The Soul of the New Consumer and I have been recommending your work to all brand enthusiasts I know. You have created a subcategory in brand thought and achieved relevance and this breaks through the clutter of books on the subject,
— Added by Ralf Ritter on March 12, 2011