“Father of Modern Branding” David Aaker has launched his 17th book, Owning Game-Changing Subcategories: Uncommon Growth in the Digital Age. We sat down with Vice Chairman David Aaker and Senior Partner Benoit Garbe in Asia, to discuss their perspectives on the ideas and principles outlined in Aaker’s book.
Q: What inspired you to write this new book? What is the premise of the book?
DA: I wanted to introduce brand into the arena of strategic innovation and market disruption. Many existing books ignore branding, but it is a key element to successful development of a growth subcategory.
I observed in many categories— from Japanese beers to automobiles to computers— bursts of growth were almost always explained by subcategories formed or reframed by “must haves” that offer new or superior customer experiences or brand relationships. The book’s big idea is the assertion that the only way to grow (with rare exceptions) is to create, position and own a new “must-have” defined subcategory.
Digital is enabling subcategories and their exemplar brands to grow on steroids. The book touches on the prominent role that digital plays, as it is a true accelerator for the growth of subcategories.
About two decades ago, famous author and management consultant Peter Drucker argued in an interview that innovation should not be the goal. Rather, an organization should aspire to be a change leader. I wanted the book to inspire and equip anyone who wants to be a change leader.
Q: What is the biggest takeaway you hope readers to gain by reading your book?
DA: There are four takeaways.
- First, real growth comes from relevant subcategory creation, not from “my brand is better than your brand” strategy; competing on differentiation only is no longer enough.
- Second, to grow you need to become the exemplar brand of the subcategory, to position, scale, and build barriers. Unlike other innovation strategy books, this book recognizes the role of brand building that makes a new subcategory come to life, and win the day.
- Third, brand communities are an important way for customers to become involved in the subcategory and bond with the brand and others who share a common interest and/or activity. Brand communities can be built around B2B products, like what GE has done with its thought leadership platform GE Reports, or even at companies with ‘commoditized’ products or services, which connect via a social program or cause, like what we have seen with Dove’s self-esteem initiatives.
- Fourth, digital has put subcategory creation on steroids, with the rapid acceleration of e-commerce, social media, live streaming, O2O and Internet of Things (IoT).
BG: A successful subcategory must change how customers experience the category or must create a new type of relationship between the consumers and the brand. Game changer brands that have created a category of their own have become an engine of accelerated growth, as seen in Chinese brands like Hema Fresh, Pinduoduo, Meituan and DJI, as well as strong global brands like Tesla and Airbnb.
Q: The book talks about the importance of building “must-haves.” What does that mean?
DA: The first step, of course, is to identify or create “must-haves” – elements of an offering for which customers will have a high affinity. The existence of a set of “must-haves” (there are nearly always more than one) will create a basis for a core loyal customer group — the cornerstone of a growth platform.
A “must-have” does not have to be functional – it can be a personality, an attitude or a higher purpose. Airbnb has created entrepreneurial hosts, as opposed to owner/managers, who are in it for more than just a financial transaction. They join the platform because they are passionate about their role as a host. It is an attitude, a job guide, an objective and a “must-have.”
BG: For brands in Asia, this is no exception. Alipay pioneered mobile payment in China and quickly made it a “must-have” through partnerships with offline retail channels, leap-frogging China’s cashless society. Moreover, it has continued to build barriers to maintain its leadership in the subcategory. Two ingenious examples are the wealth management feature Yu’ebao, which later evolved to the launch of Ant Financial, as well as the in-app game Ant Forest. Yu’ebao is a functional benefit that incentivizes customers to be loyal, while Ant Forest encourages app usage while offering a higher purpose through gamification.
Q: What is an exemplar brand and why is it important to become one?
DA: An exemplar brand is one that represents the subcategory, becomes its most visible and credible option, and has the authority to become a market winner.
Most importantly, the exemplar brand must continuously develop and evolve “must-haves” that will frame the way people perceive the subcategory, create visibility and credibility, and therefore nurture the growth of a core customer base. Also, the exemplar brand must build barriers to competitors so that they will struggle to be relevant.
BG: Tesla has created its own subcategory, building an enthusiastic customer base through a set of “must-haves” that includes its cutting-edge battery technology, “quickest acceleration”, an exclusive O2O showroom-like retail experience and the AI-powered in-car systems. Not to mention, it has developed a deeper meaning through its aspirational vision (“I am doing something for the planet”) and presumed status through limited wait-listed orders and high price tag.
In China, HeyTea created a new set of “must-haves” with its unique personality, retail experience, product offerings, as well as its WeChat mini-program HeyTea Go. All contributed to making HeyTea an exemplar brand of the subcategory it created, which fueled its exponential growth.
Q: What is the importance of brand communities?
DA: A major contribution of digital to subcategory growth is brand communities —groups of people that bond because of shared interest or passion in something connected to a brand.
Brand communities help exemplar brands and their subcategories in many ways. They create or enhance brand relationships, add energy, visibility and involvement, provide credibility and build barriers to competitors.
BG: Social media platforms like Bilibili, RED and TikTok built their subcategories through powerful communities. Earlier in April 2020, Weibo announced the launch of mini stores, creating its own e-commerce loop and offering additional resources for brands to offer seamless social commerce experience. This could be a game-changer.
The rapid acceleration of livestreaming is another example of the integration of commerce and community experiences. Livestreaming events hosted by brands (OPPO, Peacebird, P&G, Volkswagen and many more) or the recent phenomena of hosting livestreaming with (offline) sales staff indicate the growing importance and the potential of communities to drive growth.
Last but not least, I also want to highlight Nike, which gained high praises for its actions during the COVID-19 crisis in China and now globally. With a resounding “must-have” brand purpose, Nike has built a strong brand community of sports lovers who share the same passion and aspirations. Nike has accelerated the integration of all of its digital platforms to connect and engage with its communities. It rapidly launched its virtual workout classes via their Nike Training Club app, growing its active app users by 80 percent, which translated to a 30 percent growth in digital sales. Nike has subsequently applied its China playbook to other Asian and Western markets.
Q: What is the impact of COVID-19 on strategies and branding in the future?
DA: I think there will be several things to look for in the post COVID-19 world. Some basic needs of people have been exposed and they will be key drivers of the future. The need for social contact will be satisfied in part with brand communities. As more and more business is conducted online, the need for greater cyber safety will be addressed by software protections. The need for empathy for the less fortunate will inspire those to lead organizations with a higher purpose. The need for personal meaning will elevate authenticity and trust.
In projecting whether changes in habits that we see during this crisis will persist or there will be a return to “normal,” I would observe the following. It is not only these new behaviors that must be considered, but also how they evolve. All disruptions tend to evolve over time, changing to become more effective. Many of the new habits, like the use of virtual meetings and social distancing, will persist. However, there will be innovations and new ways of accomplishing the task. It is not static.
BG: As a result of COVID-19, digital transformation will continue to accelerate, fueling more subcategories growth. Communities will also become increasingly important as consumers continue to seek a sense of belonging and connection. However, many subcategory leaders that were built on the idea of communities – think exemplar brands like WeWork, Airbnb, Grab or HeyTea – will need to consider the growing importance of safety and hygiene in their business operations, and the experience and proposition they deliver. Failing to do so could challenge their exemplar brand status and give opportunities to new subcategory leaders.
Q: David, what are your closing thoughts and advice?
DA: In regular times, and even more so in challenging times such as today, those brands that disrupt the market place by creating new subcategories anchored on a set of “must-haves” with strong digital and consumers communities and effective exemplar brands are the ones that will continue to achieve uncommon growth. In the future, the successful brands, will often be those that are agile and flexible, are employing digital effectively and are truly empathetic and purpose-led while finding ways to connect with customers in meaningful ways.
Owning Game-Changing Subcategories: Uncommon Growth in the Digital Age is available on Amazon. Contact us to discuss how your company can create game-changing subcategories, or if you’d like to connect with David or Benoit.