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Beyond Brand Preference: The Revolutionary Power of Relevance
In a business landscape where brands fight tooth and nail for tiny market share gains, David Aaker's groundbreaking work offers a radical alternative. What if instead of competing for customer preference within existing categories, you could create entirely new competitive spaces where other brands simply don't matter? This revolutionary approach-focusing on brand relevance rather than preference-has transformed industries and created some of the most valuable companies in the world. From Apple's iPod to Toyota's Prius, the most successful brands don't just win comparisons-they change what customers buy altogether.
Celebrated as one of the "top five most important marketing books of all time" by the American Marketing Association, Aaker's work has influenced corporate strategy at companies like Procter & Gamble, IBM, and Amazon. Even Warren Buffett has cited the relevance concept as key to sustainable competitive advantage. The book's insights have become especially crucial in today's rapidly evolving marketplace, where digital transformation makes category disruption not just possible but inevitable.
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The Fundamental Shift: From Preference to Relevance
Traditional brand competition focuses on winning preference battles within established categories-being selected over competitors who make similar products. This approach has become increasingly difficult as markets mature and brands appear functionally similar. Customers naturally resist changing brand loyalties, especially when perceived differences are minimal. Even brilliant marketing rarely creates lasting advantage as competitors quickly respond with similar claims.
The brand relevance model offers a fundamentally different approach. Rather than competing within existing categories, companies create new categories or subcategories where competitors are irrelevant because they don't qualify for consideration. When Asahi introduced Super Dry beer in Japan, it wasn't just another option-it created an entirely new subcategory with a sharper, more refreshing taste and Western image. Within a few years, Asahi captured 25% of the market despite previously holding less than 10%.
This approach transforms the customer decision process. Rather than choosing among similar alternatives, customers first decide which category or subcategory to buy, potentially excluding many brands immediately. Only brands perceived as making what people want with credibility remain in consideration. This creates a powerful two-phase model: first, brand relevance (which category to buy and which brands to consider); then, brand preference (selecting among considered brands).
The distinction becomes clearest when offerings are qualitatively different-like hybrids versus conventional cars-rather than merely enhanced. Sustainable differentiation comes from strategic assets (resources like brand equity) or competencies (exceptional capabilities) that create barriers to competitors. These barriers might include protected technology, scale effects, operational advantages, design breakthroughs, or customer loyalty.
Research consistently confirms the financial advantage of this approach. A McKinsey study found new market entrants achieved higher shareholder returns (13% premium initially) than industry averages. Kim and Mauborgne discovered that just 14% of strategic moves creating new categories generated 61% of profits. This pattern appears consistently across financial performance research, new product studies, and stock market reactions to innovation announcements.
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The Psychology Behind Brand Relevance
The power of brand relevance stems from fundamental principles of consumer psychology, particularly how people form and use categories in their decision-making processes. Humans naturally categorize objects based on perceived similarities, using either "attribute matching" (defining characteristics) or the "exemplar" approach (comparing to established examples like Prius for hybrid sedans, Kleenex for tissues, or Google for search engines).
When a brand becomes the category exemplar, it gains significant competitive advantages that extend beyond mere market share. To achieve exemplar status, companies must: advance the category rather than just their brand; establish themselves as thought leaders in defining the category through consistent messaging and education; continue innovating to keep the category dynamic and relevant; and establish early market leadership through sales, share, and mindshare. Tesla exemplifies this approach in electric vehicles, having shaped the entire category's perception from eco-friendly alternatives to premium performance vehicles.
Categorization profoundly impacts consumer perception at both conscious and subconscious levels. Once categorized, people often stop gathering information and let category perceptions dominate individual evaluation - a phenomenon known as cognitive efficiency. This makes recategorizing brands extremely difficult-even when objective specifications contradict it, category membership determines attitudes. For instance, Toyota's luxury brand Lexus spent over a decade overcoming its initial categorization as a Japanese imitator of German luxury cars, despite often superior quality metrics.
Framing plays a crucial role in how categories are defined and perceived in consumers' minds. Like a picture frame showing what's included and excluded, category framing determines which attributes, benefits, applications or users define the category. Frames affect how people perceive offerings, process information, develop attitudes, and make purchase decisions. They often operate unconsciously, making them powerful influencers that, once established, are difficult to change. For example, Red Bull created an entirely new category of "energy drinks" by framing itself as a performance enhancer rather than competing in the established soft drink category.
Experiments consistently demonstrate framing's power in shaping consumer preferences and perceptions. In Dan Ariely's notable beer experiment, people who tasted and preferred vinegar-added beer maintained their preference even after learning about the vinegar - until they were told before tasting. This reveals two key insights: brands defining product categories should make definitions clear so competitors' flaws remain visible, while brands breaking into emerging categories should hide potential objections until after trial. Similar effects have been observed in wine tasting experiments where price framing significantly influenced perceived quality, and in food studies where presentation and labeling altered taste perceptions.
The implications for brand strategy are significant: category creation and management should focus on establishing favorable frames early, as they become increasingly difficult to alter once set. Successful brands like Apple, Netflix, and Amazon have mastered this by creating entirely new category frames rather than competing within existing ones.
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Retail Revolutionaries: Creating New Categories in Physical Spaces
Retailers have unique advantages in creating new categories through product selection, presentation, store ambiance, and customer engagement. Several standout examples demonstrate how retail innovation can transform markets:
Muji, one of Japan's strongest retail brands, paradoxically positions itself as the "no-brand brand." Its name literally means "no-brand quality goods," embodying values of simplicity, nature, moderation, and self-restraint. Muji delivers functional products that are "enough"-satisfying without superfluous features. Ironically, by eliminating self-expressive benefits, Muji actually provides powerful self-expressive benefits for consumers seeking to demonstrate their rationality and rejection of badge brands.
Zappos transformed online shoe retailing by shifting from being primarily about selection to focusing on exceptional service, adopting the tagline "Powered by service." They implemented signature policies including free shipping, a 365-day return policy, and a 24/7 U.S.-based call center with empowered representatives. Unlike most e-commerce companies, Zappos encouraged customers to call and didn't compete on price. The company's true differentiator became its unique culture built around ten core values, particularly "delivering WOW customer service" and "creating fun and a little weirdness."
Whole Foods Market differentiated itself in three key ways: First, as a visibly socially responsible business with tangible programs supporting sustainable fishing, humane animal treatment, renewable energy, and fair trade. Second, by cultivating a passion for food and health that made shopping an adventure with fresh soups, bakery goods, and unique products. Third, by developing expertise in sourcing and presenting organic and natural products with consistent quality.
These retail innovators demonstrate several crucial success factors: A strong vision and culture that connects with core customers provides energy and direction during growth. Vision-driven organizational cultures involving values, programs and leadership create barriers difficult for competitors to copy. Brand equity forms a significant competitive barrier through visibility and deep customer relationships. Successful concepts evolve over time, often starting small and expanding as they gain traction.
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Automotive Innovation: From Minivans to Mobility Revolution
The automobile market has seen numerous innovations creating new business arenas over the last century. Each innovation allowed innovators to achieve above-average profits, sometimes extending for years.
Toyota's Prius succeeded because of Toyota's unwavering commitment, which provided resources for both initial success and continuous improvement that created a moving target for competitors. Toyota's effort was aided by U.S. manufacturers' mindset and Honda's uncharacteristic inability to keep up technologically.
In contrast, GM's Saturn venture showed initial commitment but ultimately failed due to leadership changes, short-term profit focus, and inability to fund multiple brands. Saturn's 1990 launch produced quality cars comparable to Lexus and Infiniti, with an unprecedented dealer experience featuring salaried salespeople, no-haggle pricing, and community events. The company sold its philosophy-"a different kind of company, a different kind of car"-creating remarkable customer loyalty. Yet GM failed to capitalize on this success, making no significant product investment for ten years while instead funding Oldsmobile's failed Aurora model.
The Chrysler minivan story demonstrates the power of timing and commitment. In 1974, Ford engineer Hal Sperlich and President Lee Iacocca proposed building a minivan, but Henry Ford II rejected the idea. Five years later, both men, now at Chrysler, revived the project. The timing was perfect: Chrysler had developed a front-wheel-drive platform for its K-cars, dominated the full-size van market, and was weak in station wagons where Ford and GM were profitable. The Plymouth Voyager and Dodge Caravan launched in November 1983 and sold over 200,000 in the first year. For sixteen years, Chrysler faced no serious competition, maintaining 44% market share by 2009.
More recently, Zipcar revolutionized urban transportation with car sharing instead of car ownership. Recognizing that most urban vehicles sit idle for all but a few hours weekly, Zipcar created a membership club allowing "Zipsters" to access vehicles parked throughout cities. CEO Scott Griffith positioned Zipcar not as a rental service but as a global lifestyle brand representing urban living, freedom, and environmental consciousness.
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Finding New Category Concepts
Creating offerings that drive new categories involves four interrelated tasks: concept generation, concept evaluation, defining and managing new categories, and creating barriers to competition. While this process offers high potential payoffs, it remains difficult, risky, and uncertain.
Substantial innovations typically center on unmet customer needs, which often lead to new categories by addressing underserved markets. Some unmet needs are obvious but lack solutions due to technical challenges, like low-fat foods that maintain taste. Others remain dormant because investment seems too great or demand too small, as was initially the case with Chrysler's minivan. The most valuable opportunities often come from identifying non-obvious unmet needs, as Enterprise, Muji, and Zara did.
When customers cannot articulate their needs, ethnographic research becomes essential. This immersive approach involves directly observing customers in context to understand not just how products are used but why. Companies like Thomson Corporation study customers' behavior before, during, and after using their products, leading to innovations like eliminating data-entry steps. P&G has institutionalized this approach through "Living it," "Shop-alongs," and "Working it" programs, improving both innovation and employee satisfaction.
Innovation often springs from simple observation without formal research. Quicken's founder created financial software after watching his wife's frustration with manual bookkeeping. A twenty-six-year-old recovering from a ski accident designed modern snowshoes after experiencing the awkwardness of traditional ones.
Discovering how customers use products in unintended ways can reveal powerful new business opportunities. Arm & Hammer's transformation began when they discovered customers were using baking soda to freshen refrigerators, expanding from 1% to 57% household penetration in just fourteen months.
Noncustomers represent untapped growth potential. Shimano discovered that while they dominated the high-end cycling market, bike ownership wasn't growing because many Americans found cycling too complicated, expensive and intimidating. Their response was the "coasting" bike with wide seats, simple braking, upright handlebars, and hidden automatic gear shifting-which helped create an entirely new subcategory.
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Evaluating and Implementing Category-Creating Concepts
Organizations inevitably generate more concepts than they can pursue, making disciplined evaluation critical. The evaluation process must answer three fundamental questions: Is there a market? Can we compete and win? Will a market leadership position endure? This framework requires both quantitative analysis and qualitative judgment, as pure data-driven decisions often miss transformative opportunities.
Champions of innovations often develop an almost obsessive optimism, making it difficult to take the perspective of customers who may not share their excitement. Both professional and psychological factors drive this bias-careers become tied to the innovation's success, and the development becomes part of the champion's identity. This leads to filtering information, with supporting data emphasized and contradictory evidence minimized. For example, Kodak's internal champions of digital photography faced strong resistance from executives invested in film technology, illustrating how cognitive biases can blind organizations to disruptive threats.
Conversely, killing a high-potential project can be more costly than approving one that fails. While executives are held accountable for wasting resources, missed opportunities often go unnoticed-like GM's decision to abandon electric cars in the 1990s, allowing Toyota to establish leadership with the Prius. P&G's Tide nearly fell victim to this bias when the project was defunded for five years, surviving only because one scientist continued development under the radar. Similar stories emerged at 3M, where the Post-it Note survived multiple cancellation attempts before becoming a billion-dollar product line.
Avoiding small markets carries significant risk in today's fragmented marketplace. While a niche might be too narrow to support a business on its own, combinations of niches can create substantial opportunities in today's micromarketing environment. Red Bull exemplifies this approach, starting in a tiny energy drink niche before expanding globally. Most significant business areas start small before becoming meaningful-Coca-Cola resisted bottled water for years because the market seemed insignificant relative to their core business, a decision they later regretted as competitors like Dasani and Aquafina captured market share.
Evaluating new concepts requires customer exposure through various methods-group settings, surveys, laboratories, simulated environments, trial experiences, or test markets. An ongoing test-and-learn approach guides refinement of the offering. Companies like Amazon excel at this through their "working backwards" process, starting with customer needs and iterating based on feedback. However, customer feedback isn't definitive-how concepts are presented affects opinions, and respondents struggle to evaluate truly novel products. For instance, when Sony introduced the Walkman, focus groups were skeptical, but the product revolutionized portable music. For innovative offerings, feedback from early adopters or opinion leaders proves most valuable, as demonstrated by Apple's strategy of targeting creative professionals with early Macintosh computers.
Successful implementation often requires protecting nascent innovations from corporate antibodies. This might mean creating separate units, like IBM's autonomous PC division, or establishing different metrics for evaluation. Organizations must also balance the need for quick market entry against product refinement-moving too slowly risks losing first-mover advantage, while launching prematurely can damage brand reputation and market acceptance.
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Defining and Managing the New Category
Creating a new category or subcategory provides a path to brand relevance where competitors fail to qualify or become marginalized. Success depends on influencing the definition and positioning of the new category, then actively managing its evolution through ongoing innovation and marketing.
Managing a category begins with defining its priority aspirational associations-typically one to five key elements that differentiate it from alternatives, appeal to customers, deliver functional and emotional benefits, and drive choice decisions. While a category definition may include multiple dimensions, often one or two unique elements are the true drivers. For example, Westin's Heavenly Bed created a hotel subcategory where the sleeping experience became the distinctive element.
New categories can be defined by combining multiple benefits. P&G's innovations often combine attributes from different business units, like Tide Free for Coldwater HE Liquid that delivers three benefits (cold water washing, high-efficiency, and free of dyes/perfumes). Categories can also be created through innovative functional design without new technology. The Plymouth Voyager minivan provided more internal room and better access than station wagons.
Categories can be defined by aspects of customer-brand relationships beyond functional benefits. Brands can demonstrate interest and involvement in activities meaningful to customers, forming relationships based on common interests. Pampers repositioned from diapers to baby care, creating an information-rich website covering pregnancy through preschool. Categories can also develop distinctive, enduring personalities, often created by exemplar brands. Brands lacking the category personality get excluded from consideration.
Successfully defining a category is just the first step-it must be actively managed to succeed in the marketplace. This requires building visibility, communicating aspirational associations, creating loyalty, and employing innovation to keep the category dynamic. A brand should strive to become the exemplar of the category-the brand that represents it in customers' minds. As an exemplar, the brand naturally develops relevance, credibility and authenticity.
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Creating Barriers to Competition
The key to enduring success in new categories is creating barriers to competitors. When a new category emerges, competitors may initially be irrelevant, but the duration of this advantage depends on the barriers established.
Four types of barriers can protect this advantage: investment barriers making competitor entry unattractive, owning the compelling benefits driving the category, building customer relationships beyond functional benefits, and establishing a strong link between the brand and the category.
The strongest competitive barrier is innovation protected by intellectual property or patents, as seen with P&G's Olestra, Yamaha's Disklavier, and Dreyer's Slow Churned Ice Cream. Even an accumulation of incremental innovations, like those in Toyota's Prius, can create formidable barriers. The sheer size of investment required can deter competitors, as demonstrated by Kirin Ichiban, CNN, and ESPN, which enjoyed years without direct competition.
The capability to execute consistently is often underrated but crucial for sustainable differentiation. Delivering on promises requires organizational commitment, assets, and competencies that form significant barriers. IKEA's design and sourcing capabilities and Zappos' service culture exemplify this.
First-mover advantage can generate early market share that creates scale advantages. Fixed costs spread over larger sales bases result in lower cost structures. Aggressive expansion, though difficult, is crucial-as demonstrated by Asahi Super Dry and Chrysler's minivan making stretch investments that enabled early sales success.
Brand equity often creates the strongest barrier to competition. The first brand to gain traction in a new subcategory has freedom to create associations with less clutter, potentially defining the category in ways that link to their innovations. The ultimate barrier occurs when a brand becomes an exemplar that defines the category itself, like Google, Kleenex, or Xerox.
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Building the Innovative Organization
Creating an organization capable of substantial innovation requires balancing three seemingly contradictory characteristics: selective opportunism, strategic commitment, and centralized resource allocation. Most organizations lack the culture, systems, structure, and people needed to nurture breakthrough ideas to success.
Selective opportunism involves actively but strategically identifying and capturing market opportunities through customer insights, technological developments, or emerging trends. Success in this approach demands an entrepreneurial culture with empowered people who can quickly spot and act on opportunities. The organization must be decentralized, supporting experimentation and investment in emerging prospects.
A selectively opportunistic organization must be externally oriented, with its culture, people and systems focused on gathering and acting on market information rather than simply leveraging existing assets. Breaking silo barriers requires systems and culture that value cross-silo communication and cooperation. Strategies include bringing people together, rotating personnel between silos, using central marketing teams as communication nodes, forming cross-silo teams, and implementing common programs.
At some point, promising concepts deserve strategic commitment despite lingering uncertainties. Google, Walmart's environmental initiatives, Asahi Super Dry, Chrysler's minivan, and Starbucks all succeeded through clear strategic commitment. Yet this commitment must remain dynamic-the portfolio of projects should evolve as prospects change.
Successful execution requires leadership at multiple levels. An internal offering champion must possess passion, strategic vision, and communication skills to inspire their team. Equally critical is CEO support-it's remarkable how many category-creating offerings had CEOs with strong strategic vision and willingness to fund development.
Innovative organizations need disciplined, objective resource allocation processes that drive hard decisions. This ensures the best options receive funding, as resources are always limited. To counter the bias toward existing businesses, firms create internal venture capital funds that provide secure funding for innovation. P&G's Corporate Innovation Fund resembles a venture capital firm specializing in high-risk, high-reward ideas. Led by the CIO and CFO, it provides seed money for potentially disruptive innovations independent from business units.
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The Ongoing Relevance Challenge
As markets evolve, firms risk losing relevance when their category fades or gets redefined, making their brand relevant to fewer customers. A brand can lose relevance when its category or subcategory fades or changes, even if the brand itself remains strong with loyal customers and quality offerings.
When facing category or subcategory relevance threats, brands have four response strategies: stick to your knitting (making incremental improvements while continuing to deliver on the core promise); reposition the brand (modifying the value proposition to make it more relevant); gain parity (creating enough change to prevent customers from classifying the brand as irrelevant); or leapfrog the innovation (creating a superior product that surpasses the brand that created the new subcategory).
Beyond product relevance, brands can lose energy relevance when they become tired, old-fashioned, and bland. Y&R Brand Asset Valuator research shows that while traditional brand equities (trustworthiness, esteem, quality, awareness) have fallen sharply over the years, brands with energy remained healthy and financially strong. Without energy, even familiar and trusted brands can move into the "graveyard"-recognized but not recalled at purchase time.
The best way to energize a business is through innovation, as Apple, Nintendo, and Toyota have done. However, when innovation is elusive or the product category is mature, other approaches become necessary: involve customers through promotions and social networks; go retail with brand-controlled experiences; hold publicity events; or use promotions to attract new customers.
Creating new categories and subcategories offers enormous potential rewards-competition without competitors is more profitable and pleasant than fighting brand preference wars. Even limited periods of competitive advantage generate profit flows, market momentum, and customer bases that pay dividends when competitors eventually become relevant.
However, creating new categories isn't easy. Finding concepts with potential requires insights that may not come naturally to firms focused on improving current strategies. Despite these challenges, being merely responsive to trends or worse, trend-unaware, carries greater risks. The message is to innovate aggressively while recognizing the difficulties and investments required, both in projects and organizational changes.
