I’m Guy Kawasaki, and this is Remarkable People. This episode’s remarkable guest is David Aaker.
David is the godfather of branding like Bob Cialdini is the godfather of influence. And like Bob, his work has shaped my concept of secular evangelism.
He is a professor emeritus of the Haas School of Business of UC Berkley, the vice-chairman of a marketing and branding firm called Prophet, and an executive advisor to the Japanese marketing and ad agency, Dentsu.
He has written 17 books. He has been evangelizing branding and storytelling long before almost anyone else. His latest book is called Owning Game-Changing Subcategories: Uncommon Growth in the Digital Age.
If you’re interested in storytelling, branding, and marketing and how they apply to innovation and product introductions, you’ll gain a great deal of insight from this episode.
For example, do you know why facts and descriptions just don’t cut it anymore? Keep listening to find out.
I’m Guy Kawasaki, and this is Remarkable People, and now here is David Aaker.
This week’s question is:
Do you know why facts and descriptions just don’t cut it in #marketing anymore? Keep listening to find out. #remarkablepeople Click To Tweet
Use the #remarkablepeople hashtag to join the conversation!
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Guy Kawasaki:
I'm Guy Kawasaki, and this is Remarkable People. This episode's remarkable guest is David Aaker.
David is the godfather of branding like Bob Cialdini is the godfather of influence, and like Bob, his work has shaped my concept of secular evangelism. He is professor emeritus of the Haas School of Business of UC Berkeley, the vice chairman of a marketing and branding firm called Prophet, and an executive advisor to the Japanese marketing and ad agency, Dentsu.
He has written seventeen books. He has been evangelizing storytelling and branding long before almost anyone else. His latest book is called Owning Game-Changing Subcategories: Uncommon Growth in the Digital Age. If you're interested in storytelling, branding, and marketing, and how they apply to innovation and product introductions, you'll get a great deal of insight from this episode.
For example, do you know why facts and descriptions just don't cut it anymore? Keep listening to find out.
I'm Guy Kawasaki, and this is Remarkable People. And now, here's David Aaker.Guy Kawasaki:
The name of the podcast is a Remarkable People and I interview Remarkable People. You subscribe, so you know what I'm doing, and I had Bob Cialdini, who I consider the father of influence, and I now have you who I consider the father of branding.
David Aaker:
Thank you for that. Yeah.
Guy Kawasaki:
I'd like to start with stories. Why are stories so effective?
David Aaker:
The plain card, harsh reality is that facts and descriptions of offering, and descriptions of programs, descriptions of firms and brands get no traction. They don't get seen. They don't get read. They don't get remembered. They don't change perceptions. They don't basically do anything, and actually, if they do force their way through, what they precipitate is counter-arguing. Skepticism.
So what you do in this day and age where the whole game is content, the whole digital social game is content, so the answer is stories. Stories get noticed. They get read or seen. They get remembered and they change the perceptions and opinions because there's no counter-arguing. You don't counter-argue with a story. A story is just a story.
But having said all that, there are several challenges. One, to get people to understand and buy in to that, and of course there's hundreds of studies in psychology to prove that, but even if they buy in, then take the next step.
This is especially true for non-profits and B2B firms that are underfunded in terms of the communication sector, and they don't have good people, they don't have an understanding of how to do it because it's not enough to do stories. You don't just check off the box. B2B companies, like my own company, has seventy stories, but none of them are very good because they're shallow.
You got to have stories that “wow,” that knock the socks off, that really do involve the people will want to share, and then the third thing is you've got to figure out a way to communicate them well. You've got to have professional video. You got to have professional writers. You've got to do it well.
Guy Kawasaki:
What's an example you look at it and you say, “That is a great story. They just they're doing that so well”?
David Aaker:
Go to the website, UC health, which is a regional health care company in Colorado, and they do an amazing job. They've got a professional staff that creates stories, and you listen to some of those stories, you cry.
The story that a woman had a heart attack on the slopes in Colorado and was sent to the hospital and her heart was destroyed and she needed a transplant, and then the doctor came in and said, “We have a match.”
They've got dozens and dozens of those, but my favorite example is Lifeways Soap, because they wanted to promote a program of theirs, Help a Child Reach Five, and they incidentally wanted to provide the energy and visibility and likability for their brand, LifeBuoy, and they had this hand-washing program.
They put it into three villages. They had three short videos, three minutes each. They got forty-two million views. This is a bar of soap! Forty-two million views that cost them almost nothing. So anyway, those are the two case studies I like.
Guy Kawasaki:
I am a believer in the power of stories. When I make a speech, I have ten key points that everyone has a story with it. So I'm a believer. So why don't companies and people use stories more? What are we, you and I, missing?
David Aaker:
There's three challenges. The first challenge is getting to buy into the fact that facts and program descriptions don't work and stories do. Second, you have to get them to find really good stories that have that wall factor that pop out that you are compelled to share. And third, you have to have a professional way to present those stories, and that just gets into communication, ABC, that you did so well with back in the day, and it takes a professional, it takes talent, and anybody can write it down and check off the story box.
Guy Kawasaki:
Let me be a devil's advocate for a second. I agree that stories are very effective, and as you say, it's difficult to argue against the story, but this also means that stories are not necessarily statistically valid. So a person could tell a story and it could be the only instance of this story. Someone took a drug and it cured coronavirus. This is a story. That doesn't mean that it's a legitimate drug, it's statistically valid, et cetera, et cetera.
So what's the ethics of using stories and how do people resist a compelling story because it may not be valid.
David Aaker:
There's two issues here. One issue is how do you keep these really effective things out of hat in the hands of bad people?
Guy Kawasaki:
Right.
David Aaker:
That's a really important issue that we're wrestling with. Facebook is wrestling with it not too well, and our whole industry is wrestling with it, and it's kind of beyond my pay grade.
Guy Kawasaki:
If not you, David, who's going to have the answer?!
David Aaker:
Facebook has got to somehow do it and they're not doing it very well, or they don't seem to be in as effective as they could, but they have to take it on, and there has to be policy from the government that compels them to take it on, and checks to make sure they do.
So there's a political force, and probably, more immediate, more important, there has to be a motivation and an ability to put the resources in place for those companies that are really controlling that, but if you have some charlatan selling snake oil over the internet, that has to come from the government. They have to be able to police that.
Then, of course, an uninformed citizen, really, somebody that will ask questions and questions. So maybe we can encourage people and teach them how to be critical. But, boy, that's a tough sled because it requires effort, and why should they take the effort?
So the second, though, issue, is if you have a story that makes an honest point but that might be perceived as being sort of slippery. So what you have to do is evaluate your stories as to whether they're perceived as the audience as being phony or being a selling effort. If that comes to the mind, “This guy selling me,” or “This guy has got phony stuff out there,” then you've got a problem.
Guy Kawasaki:
What about a case that I could be legitimately criticized for? So let's say I give a speech and I tell a Steve Jobs story. That Steve Jobs once ripped someone in front of the whole group and that motivated that person to do better, to try harder, et cetera, et cetera. So people hear these great Steve Jobs story, how he was demanding, he was difficult and they take that story and say, "I'll be like Steve Jobs. I'll be difficult. I'll rip people in public." Just because Steve Jobs could pull it off, doesn't mean you can.
So how do people separate that kind of inspirational story from what they should do?
David Aaker:
The plain flat reality is there's a lot of styles at work, and this old theory, why were you being Mr. Nice guy is not the only style that works. I once wrote a blog several years ago, trying to explain Steve Jobs success and I compared him to Bobby Knight, and Bobby Knight is a bigger a-hole than Steve Jobs. He would torture his players and the thing was the players, except for people that left the program, they loved him at the end of the day.
Why is that? I noticed several common themes with Bobby Knight and Steve Jobs. One, they're detailed. I mean, with Bobby Knight, you had to make the pick the right way, and you did twenty-five times until you learned the right way, and if you ever did it the wrong way, he would yell at you.
Steve Jobs was so detail-oriented, same way, and both of them didn't care about winning. They really just wanted to-- Bobby Knight wanted his team to play up to their potential and whether they won or not was incidental. Steve jobs never cared about sales or profits. You just want to make insanely great products.
The third thing is that both of them got their people to live up to their potential. So what the people said at the end, the ones that survived, they said, “I never would have been able to do this without Steve Jobs pushing me.” Bobby Knight's players would say, “He got me to my potential and beyond. And I really appreciate that.”
Guy Kawasaki:
I actually completely and utterly agree that Steve Jobs pushed me beyond what I thought I could accomplish and maybe there's a little bit of PTSD, but I would not trade those days for anything. I think over the course of one's life, you look back and you say, “The teachers and the bosses who taught you the most were the most difficult ones, not the easy ones,” but that's going down a rat hole.
So switching gears a little bit, let's talk about branding, because you are the godfather of branding.
Walk me through the sequence because it seems to me that it's very difficult to separate what comes first. Did the company succeed? And then they formulated a brand? Or at the inception of a company, they decided, “This company would stand for this, this is our brand,” and they made the product to fit that? So which came first?
David Aaker:
Almost all great strategies did not come out of the box. They evolved and I tell this story in my subcategory book about Airbnb, and how these were these two guys sitting in an apartment in South of Market, three-bedroom apartment, couldn't make their rent and they said, “We got three air mattresses, let's rent them out.” They made $1,200 because of the sold-out design conference that was in town.
Then here we are twelve years later, they got 150 million guests. They got seven million hosts, there were worth thirty-five- billion dollars, and the six years in, they got Chip Conley to develop all these coasted activities, the hospitality guru. Two years after that, they got the experience thing that they introduced.
So they’ve evolved. Every year, they've changed and evolved and improved and added must-haves and so on. And I think every strategy is like that, and branding is really an enabler, because it helps you identify what is your core of your brand? What is going to be compatible? What's going to build on it or what enhance it and what's going to detract from it.
And then branding, tactically, helps you figure out how to communicate and involve people, and of course, today, it's not a matter of developing an advertising program and a media plan. It's social and its websites, and it's not about getting into retail. It's e-commerce. So the world's different and the tools are different, but the branding concepts are the same.
Guy Kawasaki:
If you were to meet with two guys in a garage, two gals in a garage, a guy and a gal in the garage who are creating a category or subcategory --we'll get to that topic later-- do you tell them, “Just focus on making a prototype, focus on shipping, focus on getting customers,” or should they be sitting there thinking about, “This is what our brand should stand for”?
David Aaker:
In terms of functional benefits, that's going to evolve, and most of the great brands evolve over time. But in terms of the organizational aspects of a branding, I think the really great brands that have charged out of things have had some really good ideas, right? Or policies and values, right, at the onset. Look at salesforce.com with their one-one-one, for example. That was out of the box.
Even Airbnb, they had their customers, these first customers, these three guys that rented air mattresses. They gave them BART tickets. They give them maps, and so they really were concerned about the experience of the customer, and so that was really important.
And Chesky, the brilliant, brilliant CEO is-- he would interview hundreds of people for every slot. He'd get the right people in there that had the right culture and values.
Guy Kawasaki:
Do you think that, ultimately, the company creates and controls the brand? Or customers decide and the company has to basically react or accept what the market has determined the brand stands for?
David Aaker:
Wow, that's a good question, and of course-- in the digital world, people argue that, in fact, the brand is at the mercy of the customer, but it's not as simple as that. One of my favorite topics is the idea of a brand community, and a brand community, like they have at salesforce.com, thy have it at Sephora, they have at Harley Davidson.
A brand community is really often digitally-enabled, and that's something that, really, it incredibly cements the brand and puts texture and a foundation and a structure around it, and that's ongoing and it's really a permanent— that's something that you could argue is brand-enabled if not brand-driven, and then the people come in and join, and pretty soon, they have a lot to say and a lot of control, but the brand set it up.
Guy Kawasaki:
So Volvo basically stands for safety, but I will say that, I think, in the last couple of years, Volvo has broadened its appeal from pure safety to now beauty and maybe even coolness. Do you have that perception of Volvo or do you think I'm imagining?
David Aaker:
Probably and even more striking example was Hyundai. That was very functional, very cheap, very inferior, and then they got the Genesis, they got a designer that came in, and they really have changed their image, so has Volvo.
But one thing that you got to keep in mind, that people have to understand, is that's not important, that a hundred percent of the world think Honda and Volvo are now cool and well-designed. That's not their market. What has to happen is fifteen percent of the world have to think they're cool. That's all that is necessary and that's all they want.
I was at a panel once at Davos, and Phil Knight was on the panel and somebody in the audience asked him, “How can you get away with this outrageous sexist advertising?” And he said to this woman, he said, not in these words, but in so many words, he said, “I don't care what you think. You are irrelevant. I am talking to my base and they liked this stuff.” And that's what he said about the last football thing here, the guy that kneels?
Guy Kawasaki:
Yes. Colin Kaepernick.
David Aaker:
Colin Kaepernick. That came out of the box, and they said, “This is a disaster. This is terrible. Why are you alienating forty percent of the company?” It's because they don't care about that forty percent, and it really resonated, it turned out to be a very successful, smart move, and people were wrong.
Guy Kawasaki:
Do you think that a Steve Jobs, and Elon Musk, and Eve Shanard, do you think they give any thought about their personal brand or they just do what the hell they want to do and their brand follows after for better, or for worse? Are they're sitting there thinking about their personal brands?
David Aaker:
There's two answers. One is, it's hard to think that Musk and Jobs thought about anything except selling products or getting people to Mars. They're really exceptions to the rule, but I think that most people, most normal executives, they don't think in terms of branding, they don't use that word, but they think in terms of their reputation.
I think they like people to have the right perception of them, an honest profession of them, a correct perception of them, and then they probably want to be liked, and they're probably more concerned with their employees than they're with the general public. But it's still, without using the word branding, I think that they often do.
Guy Kawasaki:
Okay. Now, what are your current thoughts on naming a company after yourself?
David Aaker:
Oh, I remember there was a friend of my daughter, Jennifer, that was starting a placement company, temporary placement for women executives, and they were in there for two hours and I came in and I said, "You guys are wasting your time. You're going to call it for Sally's last name, because it's ownable, it's a nice name, it's easy to spell and that's going to be your name at the end of the day." And of course I was right.
Well, the nice thing about it is that it is usually ownable, it's usually-- and if you have a right name, and if you don't, I guess you could change it to a name that's easy to spell, and easy to remember, easy to say. It's hard to find a name these days.
Guy Kawasaki:
We don't have Musk Motors or the Jobs Computer Company, right?
David Aaker:
Right.
Guy Kawasaki:
And those are two people have arguably the biggest egos in the history of American business. So what's the message here? Consulting firms can be named after people, but not consumer firms?
David Aaker:
Wow. That's a really good question. It's a really good question. What would happen if it would have been Musk Motors instead of Tesla Motors? But, boy, Tesla's named after a person. I guess most people don't even know who Tesla was, but if you do, you really feel kind of good insight.
Guy Kawasaki:
Yes.
David Aaker:
It's quite a heritage, built-in heritage and legacy. It was like, why do they call it General Electric? And, that's a very good question. I don't know what the answer.
Guy Kawasaki:
Okay. Okay. What do you think is harder, innovating or branding?
David Aaker:
You don't brand unless you have something to brand that's worth branding. So there's no point in spending money on a brand unless there's something that is going to have legs, that's going to have a worthwhile business mission, and then you brand it, and so you really have to have something to brand. So I think that comes first.
Guy Kawasaki:
I was hoping, you'd say that because the thought of everybody's sitting around and saying, “Oh, we're going to figure out our brand and then we're going to figure out the product that fits our brand,” is just totally backwards.
David Aaker:
That's insane.
Guy Kawasaki:
Do you believe that customers can tell you how to innovate, can tell a company how to innovate?
David Aaker:
I talk in the sub-category book about two routes to innovation to create what I call “must-haves” that will define a whole new sub-category, and one is customer-driven, where you basically either ask the customer what are the problems and frustrations, or you live with them and sort of discover for yourself whether this covers the limitations they're struggling with and then you solve those.
But there's a whole other route to innovation and that's what I call “offering-driven” or “technology-driven,” and that was the Steve jobs route. He would wait until the technology was just right. He'd be intimate with it and he'd say, “Okay, this will all work,” and so he invented the iPod, even though Sony failed two years prior to that because he had the technology right.
So you had this digital impetus to innovation and a lot of it is technology-driven. You have superior GPS, voice recognition, internet of things, smartphones, and so on, and they all enable some new innovation that wasn't before and so they're doing things and Steve jobs was not waiting for a customer to tell him. He would say, "We can now do this and I think customers would like it and I'm not even going to do any market testing."
There's some ideas that you don't need to test. If you're a T-Mobile and you've shot down this horrible, horrible interaction with a customer and pricing system, you don't have to test that. You know if you can pull it off, it's going to work. So there's those two avenues toward innovation, in my opinion.
Guy Kawasaki:
I'd like you to express what's your opinion about some brands. Now, I have a very deep liberal bias, but I'm going to try to not let that show. But what is your analysis of the Trump brand?
David Aaker:
That's really interesting. I think the analogy with cults aren't too far off. People have a substantial-- a number of people bought into him and so they filter out all information that's incompatible with what they are hearing him say. So it's an enormously powerful brand. He's very skilled at the ability and enhancing it.
I heard today, in the middle of this coronavirus, saying that his reputation is going up. What happens is people distort information or they ignore information and they look for information that will-- all of that with the goal of supporting what they already believe. So it's kind of a cult brand.
I don't know in the commercial world what's a good example. Maybe Harley Davidson, or Etsy or something, but it's very, really, remarkably strong and no modern information will seem to change it.
Guy Kawasaki:
If Joe Biden called you up and said, "Dave, I need some help branding myself." What would your advice be?
David Aaker:
I think you have to change the conversation. Attacking him on his terms just isn't going to reach those people. So I think you have to change the conversation somehow, and that's, of course, not easy to do and I don't know whether it should be changed to climate change or healthcare or something.
When the Democrats have been most successful against Trump, they've changed the conversation. They're usually about healthcare. So that would be my advice.
Guy Kawasaki:
If they should change the conversation to healthcare, this is the perfect storm for them unless the coronavirus affects and/or is seriously abated and the economy comes back in the fall, then they're doomed. Right?
David Aaker:
Not necessarily. I think that there's a lot of people that fear for their vulnerability if they don't have insurance or if they're immersed in a healthcare system that can't even create masks and ventilators and oxygen machines than enough beds, they then should realize that there's a-- I think there's plenty to talk about in that direction.
Guy Kawasaki:
Okay. One last political question.
I see a lot of reports and pictures of Tim Cook and Donald Trump. Tim cook showing Donald Trump the "new factory" in Texas that Donald Trump brought back, and do you think that the Apple brand is so powerful that people won't look at that and say, “Apple, of all companies, one of the most valuable companies in the world, if they can't stand up to Trump, and if they're sucking up to Trump, what is this world coming to?” I as an Apple fan feel that way. Am I imagining this? Is there a downside with aligning with someone like Trump?
David Aaker:
Well, you look at the Republican Senate, for example, and there's a lot of good people there. There's a lot of smart people there and they can't oppose Trump and it's because he has so much power over such a large segment of America. If they oppose him, they will end up accomplishing nothing and they will disappear. I mean, there'll be blown off the face of the earth.
So they argue that, “Well, if I stay alive, I can do some good things and so I'll do what it takes to stay alive,” and I don't know if that's Apple's viewpoint or not, but the decision to stand up to Trump is not as a simple for somebody standing in the sidelines might think. I mean, these senators are good people, smart people, principled people, and they can't stand up to Trump and there's a reason.
Guy Kawasaki:
Enough about politics. Back to tech.
How is it different today, in branding, from the period where it was pre-social media, pre-internet? What does the godfather of branding say that social media has done, and can do, and cannot do, and how to use it optimally for branding?
David Aaker:
Well, if you look at-- it's just what's changed in twenty years. It's just phenomenal.
You look at the technology, the number of iPhone users have gone up by a factor of four. The number of internet users has gone way up there. The GPS quality, the voice recognition quality, the internet of things. All that has really changed what can be done in industry after industry.
And then second, you have e-commerce. It wasn't too many years ago where if you wanted to put on a new product, you had to either create a Salesforce, if you're in the B2B area, or you had to somehow get into storefronts if you were in the B2C area, or even create storefronts that took years and millions, and now you have e-commerce.
Airbnb was up and running in seven days with no money, zero money, and then there you look at, again, two decades ago, you had to have an advertising campaign, the media budget to communicate. Now, you go on social media and-- Dollar Shave Club was up and running with their first ninety-second video which cost them $4,700, and they got 12,000 new subscribers in forty-eight hours.
I mean it's just a completely different world, and these websites are such a powerful vehicle. It didn't exist before, and then my favorite topic, brand communities that's enabled by the online communities social and the existence of websites, and so you can create these communities that have this high-level of involvement and you have a way to package your communication.
Look at the Patagonia, for example. They can talk about their values, and they have a picture of a mountain in the website. They don't only bring together a bunch of facts in a coherent way, but they can provide them an emotional overtone. They can introduce stories.
Look at the brand community of the eighties. Harley Davidson. Just think at what they had to do to communicate and get people together and to gather. Boy, that Harley Davidson community now is online. You can immediately extend the breadth and the depth of it.
Guy Kawasaki:
Although, you could make the case with Harley Davidson that they had the brand, they had the community, but life has passed them by. People are not buying motorcycles anymore. Well, millennials aren't buying cars at all, much less a motorcycle. So has life past Harley Davidson by even with the brand in the community?
David Aaker:
That gets back to my concept I’ve been dealing with for a long time called relevance, and that means you're credible and visible with respect to a category. And so what you have to observe in terms of market dynamics, you have to observe these categories that are becoming less important because the numbers are not there anymore.
You take, for example, a Chrysler minivan. Amazing story. Started in 1983. They went fifteen years with no competition. Fifteen years. They made twelve million of these that saved the company until finally Toyota came and Honda came in under the Odyssey in 1998 or something. So they went all that time with no competition, and even today, they have, I don't know, forty or fifty percent of that segment, but now that segment has gone down because of SUV's and so the minivan total business is lower.
So when that happens to you, you have to realize that you can be as relevant as possible in the minivan area, and you're the most visible and the most credible and if they're going to buy an SUV, it doesn't matter. So you have to be relevant to the SUV market or you have to create another growth platform market like Tesla did, or like Prius did. So that's the game. It's the old lifecycle story. When your lifecycle goes down, you got to create a new, what I call sub-categories, that will generate growth.
Guy Kawasaki:
We're going into the topic of sub-categories and perhaps brand extension. But what could Harley do?
David Aaker:
They can either create or join a growth sub-category. And I don't know, within motorcycles, there probably some bright spots. The question is how they have a large enough market to be worthwhile. But I think that's in general what you do. But it's very hard.
Guy Kawasaki:
Yes.
David Aaker:
I mean there's all kinds of carcasses lying around of failed companies that weren't able to do this and the one reason I think that Steve Jobs is one of the best CEOs of our generation is because he did that six times. Six times. He created and presided over a sub-category that was fading and he created another one. He did it again. He did it six times. It was the most phenomenal executive accomplishment that I can find anywhere.
Guy Kawasaki:
Yeah, I totally and utterly agree that you're lucky if once in your lifetime you strike lightning. But you have to say Steve Jobs' Apple I, Apple II, Macintosh iOS, Apple Store.
David Aaker:
iPod, iPad, iPhone.
Guy Kawasaki:
Nobody hits ten home runs in a row.
David Aaker:
Nope. It's just phenomenal.
Guy Kawasaki:
Yeah.
David Aaker:
And so it's easy to say, “Okay, life cycles go on. We're going to jump on some other…” They would create some other one, but it's not easy to do. If you don't have that energy and if you don't have that strategic flare, you're going to be history.
Guy Kawasaki:
Is there an element of luck in there?
David Aaker:
Oh yes. I talk about the six things that Airbnb did to be successful. The entrepreneurial host concept, they had the support of the hosts, they have the Airbnb experiences, they had the guest host evaluation. All of that was really important, and they scaled really fast. They were able to scale fast. That was important, but two things they had.
First, they had a brilliant CEOs, brilliant top of management, and you just can't underestimate that, and they handle some huge problems that others couldn't have. And the second thing, they had luck. Because they were introduced in 2007, 2008 was a big recession. So, therefore, you had all people with rooms that needed money to rent them out. And second, you had whole people that want to travel and they didn't want to spend a lot of money and they wanted to have a good experience. So they were very lucky. They were at the right place at the right time.
Guy Kawasaki:
You could make the case that they're now in the perfect storm of bad luck, because the last thing you would want to do, today, is let some stranger into your house who might have coronavirus. You may need the money but at some level.
David Aaker:
They have lot of advantages. First of all, I haven't looked at their balance sheet, but it's probably okay because they were able to raise money and they-- if they hadn't, they should have-- but the second thing is that they're in a nice position because they don't have a huge amount of fixed cost. The companies that have a lot of fixed costs are the ones who are most vulnerable.
So they can scale down pretty easily and I wouldn't worry about Airbnb that much. I think, short-term, they're going to have these problems, and even medium-term, they're going to have to figure out a way to sanitize each place before the customer goes in there and have a program to do that, and so they have to do some initiatives along that line. But I think that their basic idea, their basic brand, is going to carry them through.
Guy Kawasaki:
At least they don't own all those rooms and houses, right? That's not on their balance sheet, which is-
David Aaker:
Exactly.
Guy Kawasaki:
Those things are depreciating at a horrendous pace right now.
Last topic, probably the one you wanted to talk about the most. Tell me about the concept of a sub-category.
David Aaker:
This book of mine talks about, basically, disruption, growth strategies, innovation, and you probably, as much as anybody, know the literature in that area. Everybody says, right, “You have to have something new and different and better.” I think I've introduced three things that are different into that literature.
The first is the concept of a sub-category and the idea is that the only way to grow with almost no exceptions is you have to create a game-changing sub-category that changes the customer experience or creates a new brand relationship that's really meaningful.
I think that works out a couple of levels. First of all, if you look at some of the books, they talk about, you have to have transformational innovation, you have to create a whole new category, and what I'm saying is that that doesn't happen very often, but sub-categories happen all the time, and so if you really want to be strategically agile, you need to think in terms of a sub-categories.
But a sub-cat is also to say that what's needed is something different than “My brand is better than your brand” competition. That doesn't create growth. It just doesn't. It never does.
So what you need to do is conceptualize. What you have to do is change what they're buying. Change what they're buying. You have to create these must-have that they will insist on. They're inhibited from buying options that don't have these must haves so that means you have to have a real change in customer experience or a real change in the brand relationship that is meaningful, that really will change what they buy.
The second thing is the idea that these other books never introduced branding. You look at their index and there's nothing under B for branding. They ignored it completely, and what I observed, and I believe, is that if you're going to be successful with a new innovation, you have to create an exemplary brand-- a brand that stands for that sub-category. Sometimes there are two, but usually one.
Then you have to use that brand to position the sub-category, that means to dial up these must-haves that are defining it. Two, you have to scale a sub-category because these days, you just have to scale this idea of a pricing high at the outset to recover some money, you can't do that. You’ve got to scale. You have to go into debt. You have to forego profits.
Third, you have to build barriers and that could be an installed customer base. It could be a branded innovation. It could be a stream of innovations like Airbnb to become a moving target, but you have to build barriers. It's all Michael Porter stuff. You have to create monopolies in some form.
The third thing is the reality that digital has put this whole sub-category dynamics on steroids. The frequency, the speed, and the impact of these sub-categories are now so much more than they were ten or twenty years ago.
Guy Kawasaki:
A few seconds ago, you said something that, “You have to create an exemplary brand,” but isn't the first step to create an exemplary product or service?
David Aaker:
I didn't say exemplary, I said exemplar. That means the brand the represents the sub-category. So Airbnb represents this new way of staying on a trip. So it's exemplary, it's the example brand.
So if you say, “I want to do something like Airbnb.” What do you mean? You want to go to Airbnb or something just like Airbnb?
Guy Kawasaki:
But what I'm trying to get is the concept of creating a sub-category. I understand that intellectually, but it isn't step one to actually create a product or service that is the example?
David Aaker:
Oh, yes, but then you make that brand become the exemplary brand by the thought leader, the innovator, the one that tells you why. Like salesforce.com was the exemplary brand for application software cloud computing. It took on the job of convincing people that cloud computing was good because no investment, continuous upgrade, and secure stuff, and they took on that job.
Guy Kawasaki:
It seems—and I'm wrapping up here-- It seems, in this whole interview, it's not like you're waxing nostalgic for the good old days of Madison Avenue. You seem very excited about social media and the internet and the internet of things and all that as far as tools for branding.
David Aaker:
I don't know if I'm excited about it, I'm just-- that's the reality, and so we have to live in that reality, and we're not in the days of Madison Avenue anymore, and we're not in the days of the retail chains have all the clout and so we have to adapt. It's all about being agile and adapting.
Guy Kawasaki:
Okay. Any closing words? Any last pieces of wisdom?
David Aaker:
What I would really like to see was somebody interviewing you and see that because I'd like to know what you think about all these issues that are floating around.
Guy Kawasaki:
Well, maybe I’ll have an episode where I interview myself!
David Aaker:
Yeah, that would be a good one.
Guy Kawasaki:
No closing statement here?
David Aaker:
Oh, gosh. I don't know. I think that, with respect to my book, I just come back to the-- If you want to create growth platforms, you think in sub-categories, changing customer experience or brand relationships, and you think about creating the exemplar brand and then positioning, scaling, and building barriers around those subcategories, and you leverage digital, allow digital to enable you to do all this, and especially, I think people should take a look at brand communities and their potential.
Guy Kawasaki:
A careful listener to what you said would see that this is a game-changer. In a sense, you're saying that it's not a brave new world. You're not going to create a category, or at least that's very unlikely, and so you have to put yourself in the right frame of reference to build a sub-category or create a sub-category, which is different than being a me-too, to be the next Airbnb that's slightly better. I think your horizon is, or your vision, is grander than “Let's just be a fast copy.”
David Aaker:
There's two ways to compete. One, you can become relevant by being acceptable and all the dimensions that Airbnb has created. That's one option. But the other is, indeed, to take the Airbnb model and add a new must-have and create your whole new sub-category. That's a preferred thing to do.
The challenge there is that your sub-categories, as people do that, get too small and so they don't have enough market potential to be viable. We've run into that strategic line before-- how many times do we extend Jell-O to the point where each unit is too small to support itself? But you sometimes do it anyway, because that prevents a competitor from having a way in.
And so Airbnb might create some must-have that they don't really need, but that prevents a competitor from coming in. So that's sort of using your status to play defense.
Guy Kawasaki:
Do you think Airbnb could extend their brand and so they now do Carbnb like Turo has? That Airbnb’s could step back and say, “Well, we're not just places to stay, we're about letting anybody rent anything they own”?
David Aaker:
Oh, then you get into brand extensions. My daughter told me never to say this but I wrote a book on that. But anyway, there's a-- you run into that quandary, though.
When you fragment too much, do you end up with enough of a worthwhile thing? And Procter & Gamble analyze all their new products and the main reason that they failed was not because they weren't good or they didn't create a following, it's the following wasn't big enough, and so that's always the strategic question and the challenge is to know whether you can build this if you scale it fast, far enough, so that it'll be really worth something, and of course, as you scale it, you create this customer base that's like a marvelous barrier to competitors at the same time.
Guy Kawasaki:
Okay. I think I got it. I got plenty.
David Aaker:
Okay. Well, thanks, Guy.
Guy Kawasaki:
Thank-
David Aaker:
Thanks for having me. I find it hard to work into the conversation— “I'm going to be on Guy Kawasaki's Podcast!”
Guy Kawasaki:
Well, I'll tell you the flip side of that story. Since I started this podcast, every day I get contacted by a person or a PR person for the person saying, "We listened to Jane Goodall, and Margaret Atwood, and Steve Wozniak, and Andrew Yang, and I think that my client, or I, should be on your podcast. My name is Joe Blow, and I've started blow consulting. I'm doing a couple million dollars now, and I really think I'm having an impact like Margaret Atwood, and Jane Goodall, and Steve Wozniak, and Andrew Yang."
Using every ounce of self-control, I send them back an email that says, "Well, I'm just not familiar with your work. Can you tell me how you have impacted the world and dented the universe like Margaret Atwood, Andrew Yang, Steve Wozniak,” and you know what? They never respond after that.
So I'm telling you this story because I have developed this algorithm that anybody who asked to be on Remarkable People is probably not someone you want on Remarkable People, except for you. You are the only exception that I have made to that rule because you are the godfather of-
David Aaker:
I tried to do it in a humorous way, because then it wouldn't be so embarrassing. Jennifer's writing a book on humor in business. So she's gotten me to couch everything in humor if I can.
Guy Kawasaki:
Well, she has taught you well.Guy Kawasaki:
David's books and writings have been instrumental in my understanding of branding and marketing. I hope you learned enough about storytelling, branding, and marketing that you can create an exemplary brand, too. Here are the key lessons that I came away with.
One, you do stories, not facts. Products create brands, not vice-versa. Companies don't need to convince the entire market, just fifteen percent. Companies do need to create subcategories, or they will die.
And now you also know what it takes to be a guest on Remarkable People, that is, denting the universe as much as a Jane Goodall, Stephen Wolfram, Margaret Atwood, or David Aaker.I'm Guy Kawasaki, and this is Remarkable People. My thanks to Jeff C. and Peg Fitzpatrick who always helped me dent the universe.
Until next time, be healthy, be safe, wash your hands, maintain a good physical distance, and take care. Mahalo and Aloha.
This is Remarkable People.
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I love this podcast and your style. The way you explored branding, influence and then brought in Gary V and Woz has been a delightful learning experience for me with many key points taken.
I am very grateful for you sharing this with the world and looking forward to you interviewing more people. One such guest could be Tim Ferriss. A man who has made a significant dent in the world and someone that I think you could pull a lot of value from.