A History of Marketing / Episode 4
This week, my guest is David Aaker, the "Father of Modern Branding," a renowned marketing professor, author, and consultant who has revolutionized the way we think about brands. Aaker's work on brand equity helped elevate the role of marketing to serve a more strategic function in organizations.
Aaker is the author of several seminal books, including "Managing Brand Equity" (1991) and "Building Strong Brands" (1996), which introduced the influential Aaker Model. He's also Vice Chairman of Prophet, a global brand consultancy, where he's advised some of the world's most recognizable brands.
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In this conversation, we explore the history of branding, from the early days of brand management at Procter & Gamble to the emergence of brand equity as a central concept in the late 1980s. Dr. Aaker shares his insights on the evolution of marketing, the challenges of building strong brands in today's world, and the enduring power of a strategic brand strategy. We also touch on the disappearance of taglines, the rise of the CMO, and even get some perspective from one of Dr. Aaker's former students, the marketing professor and commentator Scott Galloway.
Now, without further ado, here is my conversation with David Aaker.
David Aaker’s Early Research: From Quantitative Modeling to Brand Strategy
Andrew Mitrak: Well, I'm looking forward to having a conversation about the history and evolution of branding, but before we do that, I want to learn about your background. You earned your Masters in Statistics and you earned a PhD in Business Administration. So how did you go from there to a decades-long career in marketing?
David Aaker: Well, as an undergraduate, I had a course in advertising that was really fascinating to me, to try to understand, “How are you going to change opinions?” And that got me started on marketing. After I graduated from Stanford as a PhD student, I went to Berkeley and started as a kind of a quantitative modeler, a statistician, and then I drifted into advertising and market research and business strategy, and then finally into branding.
Andrew: When did branding become your area of focus professionally?
David: It happened in the late 1980s, actually. Now that's over 30 years ago. All the stars were aligned. For one thing, there was a strategy model, the growth-share matrix by BCG, that was dominating people's strategy, and they thought that they saw empirically that if you increase market share, you'll increase profitability. And they believed that because large market share companies made more money than small ones did. Well, it turns out that if you are a small company and you increase market share, you don't increase profitability. In fact, you make it go down because you've bought market share, you've hurt your brands, and so on. But managers also realized it because they could see the facts: they weren't growing, they weren't making money, and so they needed an alternative.
And at the same time, scanner data came into being. For the first time, you could give people a card, you know exactly what they bought the next day, and so you could go in and attach to their TV sets and manipulate what ads they were seeing, if they saw it once, twice, three times, four times, this kind of content or that kind of content. What they found was the only thing that affected sales was price-off promotions. So that's what everybody rushed to do, and as a result, they destroyed brands. And by the way, they did not increase share, they didn't increase sales, they didn't do anything. Well, what they did is taught the customer price is the most important, and if it's not on sale, wait two weeks. So they really destroyed brands.
And at the same time, I had reached a point where I was kind of all over the map. I was a quantitative researcher on advertising and effects on stock markets, and I had done work on experimental work on warmth and advertising. I had done work on social issues, and I'd written a book on advertising, market research, and business strategy. I'd gotten into business strategy, and when I was there, I got to believe that people weren't managing for the long term. They were so short-term oriented, the short-term financials were so dominant, and I thought that's not right. And I did a study that showed — I asked people, what are your sustainable competitive advantages? I got a list of 44, and number one on the list was perceived quality, number three on the list was brand awareness, and number 10 on the list was customer base. So three out of the top 10 were branding. And I had a background that I could draw on market research, advertising; they all helped me attack the issue, namely, what is brand equity and how do you build it? And so I kind of at that point decided to devote my career to that.
Neil McElroy and the P&G Brand Man
Andrew: I want to go back in history and to kind of plant the seeds of how we eventually got to these ideas of brand equity in the late 1980s, as you mentioned. I watched one of your lectures on YouTube. You were speaking to the Haas School at Berkeley, and you told a story of a pivotal moment that occurred in May of 1931, and this is when a Procter and Gamble employee named Neil McElroy wrote a memo. Could you share the story of who Neil McElroy was and what was so significant about his memo?
David: Marketing burst onto the scene with mass media in the 1920s, and so on. You had Lucky Strike, "Reach for a Lucky instead of a sweet." You know, it was sort of there, and so they needed to manage it. And Procter & Gamble — Neil McElroy was 28 years old, he was a junior manager, he managed Camay soap, and the big soap was Lifebuoy, but he managed Camay soap. And he said, "I would like to hire three" — we called them brand men — "brand men." And he wrote a three-page memo in response to pushback on why he should do that, and that three-page memo that he wrote one Friday in 1931 became the basis of the brand management model for Procter & Gamble. It was very tactical. What they did was they looked at data across grocery stores, and they found how each brand was doing in each store, and they identified areas in which there was weakness. And the brand job of the brand manager was to correct the weakness by adjusting price, by making the distribution more efficient, by doing some special promotions, maybe some in-store displays, but they would find a problem and address the problem.
Everybody that wanted to be in branding, in marketing, wanted to work at Procter & Gamble because then they would take that, and they'd move that system elsewhere. And that went on for really 50 years until brand equity took over in the late '80s. And that Neil McElroy went on to be a CEO of Procter & Gamble and later the Secretary of Defense. I mean, he was really a capable guy.
Andrew: That's amazing. And what's funny is you could actually visit Neil McElroy's Wikipedia page, and you can read the original memo. And of course, part of it's this innovative brand management strategy. Part of it, as you say, is really tactical. It's him asking for assistant brand men to kind of do the grunt work so the more senior brand men could do this. And it was just striking me that it almost reads like one of my end-of-year emails asking the boss for more resources or interns or something like that. It was just remarkable.
How Colley, Levy, and Kotler Shaped Marketing and Brand
David: Oh, I would mention three other things that really elevated branding, and they occurred around 1950 or 1960. In 1959, a guy named Russell HColley was writing for a think tank, and he wrote something called "Defining Advertising Goals for Measured Advertising Results." It was an ANA publication, and what he did was to say, if you want to measure advertising, you need to measure the things that are driving sales, not just sales. You measure awareness, you measure image, you measure intentions. And so after that, people started doing tracking studies, market research where they did that. So that was really a step up for management of branding, indeed marketing.
And then two years later, a guy named Sid Levy, who was then a professor of marketing with Phil Kotler at Northwestern, and he wrote an article called "Symbols for Sale," and it was all about how a product can become a symbol of yourself. And that was really a step up, and it really introduced the whole concept of self-expressive benefits, which had been seen, but nobody had codified it.
And then about nine years later, he and Phil Kotler wrote a famous article called "Broadening the Concept of Marketing," and that meant that marketing is not just for packaged goods, marketing is for the US Army, it's for nonprofits, it's for cities, it's for states and countries. Now, all those kind of entities are really interested in branding today because they understand that their objectives really require communication, and it's hard to communicate without a brand that's working.
Andrew: I spoke with Phil about that. I think it was 1968 or '69 that was written.
The Evolution of Brand Management: From Tactical to Strategic
Andrew: If you went back, there was Procter & Gamble, early '30s, Neil McElroy introduced brand management at that company. Then Phil Kotler, 30 to 40 years later, expands the concepts of marketing. In between that phase, who owned branding at a company? Was branding usually owned by an internal brand manager at most companies? Was it an external marketing agency or advertising agency that managed it? How did most companies handle it at that time?
David: It was handled by the head of marketing or the marketing department, and they'd have some people that would be responsible for advertising, for promotions, for different elements of a Salesforce if it was a B2B company. So there was no entity called branding. Well, there still isn't. I mean, it's not real common. I mean, it's not universal, for sure, that they have somebody in charge of branding because it's so intermixed into marketing. In fact, branding is sort of intermixed with the whole business strategy or organizational strategy.
Andrew: Procter & Gamble, a consumer packaged goods company — was it primarily companies like that that had brand managers or brand men, as they were called back then, or did other companies and other industries adopt this Procter & Gamble model as well?
David: The packaged goods were the first, and that's because P&G were training all these people that were spreading out. But then came the durables, like the cars — the car companies — and appliances, and then came services, like banks and so on. And the slower ones were B2B companies who are, you know, the Salesforce, you know, "We don't need any help, thank you very much. We're going to, we're going to convince people to go our way." The last ones to come on were things like hospitals, and they kind of discovered branding and patient behavior and so on just a few decades ago. So it has been a progression through the system.
Andrew: When I look at some of the early academic teaching of marketing, its roots as applied economics, the marketing mix, the four P's. Branding isn't one of the words, or brand is maybe there but it was in the background. When did brand become a more prominent part?
Defining and Managing Brand Equity
David: The concept of brand equity really came on the scene in the late '80s. I wrote my first book trying to define brand equity, called "Managing Brand Equity," and that was really when brand equity became a thing.
The concept of brand is not, in my view, you can't take that too far. It's brand equity that is the more important construct. I don't really think about brands very much because it's kind of just a nominal product. Brand means that that represents who did it or who's responsible for the product. So if you brand cattle, then you know whose cattle that is. But I'm more interested in brand equity — that is, what's the value of a brand?
That, I concluded, was three things. It was not just brand awareness, but brand elements. So you have to be aware, you have to be credible, and if you could, you know, make a great hybrid car, it didn't matter if they were looking for electronic vehicles, EVs. And so you had to be credible in that space, you had to be relevant in that space, not just generally visible.
The second thing, you had to have a right image, which really involved not only functional benefits but emotional, self-expressive, and social benefits as well. And finally, you had to develop a loyal customer base.
When I developed this model of brand equity, it was different than anybody else at the time because for everybody else, brands was awareness and image, that was it. And so you got visible and you tried to create an interesting image — that was branding, and then that would cause brand loyalty to occur. But I said that brand loyalty was part of it, and that turned out to be really significant because when you put brand equity on the table as part of brand, that really changes everything. I mean, it changes, you know, who runs brands, it changes what you do, it gets you involved in strategy, not just tactics. Because image and awareness, you can delegate to an agency, but brand loyalty, you can't. It gets you involved in developing new offerings and so on. So that was really a key step.
Andrew: This gets you to your book, "Managing Brand Equity." I think it was published in 1991. How was it adopted by the industry? Was this book an immediate hit? Did it have — was it adopted by companies as well, or what was the impact of this book?
David: Well, the contribution of the book was really to elevate brand as an asset concept, that it's not a tactical thing you delegate to an agency, it's an asset, it's one of your assets, and you got to build the asset, you got to manage the asset, you have to protect the asset, you have to leverage the asset like any other asset. In fact, you can argue that business strategy is all about leveraging assets, that's what it is. So this becomes really an important asset, and that was a contribution of the book.
And it came out in two ways. One was, as I said, the structure of brand equity — relevance, image, and loyalty. But the other thing was, for each of those areas, I pointed out the six or seven ways that this contributes to an organization's success. So the net result was 20 or so bullet points that showed different ways that this works. You know, like, for example, if you gain visibility, you get credit for being successful or credit for being good enough to buy, because otherwise, why would you have heard of it? So if you multiply that insight by 20, you see that all this brand stuff really pays off. And so it helped people think through why a brand is worth doing.
Building Strong Brands
David: Then I got a lot of response to that book, and a lot of people said, "Okay, I buy into that. How do you build brands?" And so I wrote a book called "Building Strong Brands," and in that book, I developed a framework for how you do that. It was very juxtaposed against the advertising agency's point of view. They were always looking for the big idea, the three-word phrase and so on, because they'd build up a campaign around that. And so my idea was that, no, it's not a three-word phrase, it's multi-dimensional. It's — especially for B2B or service companies — that's eight or 10 or 12 dimensions, and three or four of these would be the most important. And you know how to figure out what those are and what they really mean and then how you advance it. So that was kind of my model. I also said that it involves things like personality, like organizational characteristics, not just offering characteristics. That turned out to be really pivotal. I'm not saying I replaced Procter & Gamble, but a lot of organizations around the world started using that model.
The Rise of the CMO: Marketing Enters the C-Suite
Andrew: So this late '80s, early '90s period — was this also around the time that CMOs started to emerge as an executive function and marketing got a seat at the table with executives? What was the emergence of this?
David: Yeah, this idea that brand is an asset and there's brand equity and you can build it changed everything. It changed what marketing did. Instead of being a tactical arm, it's now a strategic arm, it's part of strategy, and it brings to the strategy table a knowledge of the customer, a knowledge of the segmentation. And the second thing it did was to change who does marketing. Instead of being a middle management function, it's now at the C-suite, there's a CMO or Vice President of Marketing. That just changes everything. So and people begin to realize that, you know, brand loyalty is something we have to all worry about, and we have to figure out offerings that'll make it happen, we have to figure out how the customer journey is and so on. That makes everybody in the organization kind of part of the marketing team.
Andrew: As a professional marketer, I should thank you for that, because it's good to roll up to a CMO who has a seat at the table.
The Evolution of the Aaker Model
Andrew: You mentioned your book, "Building Strong Brands," and you introduced a brand identity model here. This later evolved into a brand vision model. Sometimes these are collectively known as the Aaker Model. Can you share about how you developed these brand frameworks and how they're different?
David: I think that the overriding motivator of me is that, you know, we're talking about a long-term asset that's going to be built and managed and leveraged, and it's not a three-word phrase. I was really obsessed with the idea that we didn't want a three-word phrase. The other thing I was — the other thing that a lot of people did that had brand models, they'd have a set of boxes, and they'd have six or eight boxes. And so if you, at the end, when you're developing your strategy for your brand, you have to fill in each box. There was a personality box, so you got to say what your personal — there was a benefit box, there was a, you know, organizational value box, there was all — there would be really six or 10 boxes, and it did not matter if that box was relevant to you, and it did not matter if there was some box they needed that wasn't there.
And so I was also obsessed with that. So the second principle of my approach was no boxes. You create the boxes that work for you at your time. You say, what I want to stand for, what are the six things I want to stand for? And you — there's no predetermined boxes, and you're not out of luck if you miss a box because you're going to create your own box. So those are the two premises of my model. It's multi-dimensional, it's not a three-word phrase, and the dimensions are not preset.
Andrew: I love this. It is such a pet peeve of mine, I guess, when somebody sends over some boxes to be filled out for something that's strategic and a little more personalized. And it seems so reductionist to just say, "Hey, my job is to check some box here about, oh, here's the tagline and here's this segmentation." I mean, useful to some degree, probably better than nothing, but also just so constraining for something —
Branding and Disruptive Innovation
David: I've now turned to applying brand in different areas. In one of my books, I talk about branding and disruptive innovation, and the fact that in disruptive innovation, you have a lot of thought leaders, a lot of books and so on, but nobody mentions branding. So I point out that in branding, you need to become the exemplar, you got to define the disruptive innovation, you got to scale it, and you got to build barriers, and that's all branding. So what I've tried to do is to take branding and apply it to different areas, strategic areas that are adjacent to branding.
David Aaker’s Mentorship and Partnership with Scott Galloway
Andrew: So in addition to applying branding to areas that are adjacent to branding and your number of books and models and ideas you put forth, you've also spent decades as an educator in marketing. One of your students was Scott Galloway, whom you worked with at Prophet, and of course, he's one of the top marketing professors and recognizable thought leaders. And while researching your work, I came across a YouTube video of Scott, and he was talking about the impact you had on his life.
Scott Galloway (Video Clip Courtesy of The Brainwaves Video Anthology): The teacher that had the greatest influence on my life was David Aaker, who's a professor of marketing at the Haas School of Business. And David taught a class called brand strategy, and at the time in the early '90s, it was a fairly novel idea that you could manage brands as an asset and that potentially the most valuable assets of a company were its intangibles, whether it's Coke in America, whether it's Louis Vuitton and European elegance. But this notion of managing these intangibles that led to irrational behavior, which led to irrational margins and above-market return on investment and shareholder value, was a fairly novel thought. And I remember about halfway through the course thinking for the first time in my life knowing this is what I want to do with my life.
Andrew: I'll share this YouTube video link. If you haven't seen it — he speaks not only about this but about what an important impact you had on him as a person and as a role model. And I'm just curious about your initial interactions with Scott Galloway and if you knew immediately that he was a bright student or just what your initial collaboration with him was like.
David: Well, I'm a big fan of Scott's. I listen to his Pivot and Prof G. I think he's really so insightful and so knowledgeable, it's very impressive. He just again and again seems to have the right answers, and I wish people like him were running our government. He enticed me to join Prophet in 2000, and when I did that, I could see him in action. He started a company that was supposed to be a market research company, and he found out that people didn't pay for market research, but they did pay for having him come down and come into their office and tell them how dumb they were and they needed to change strategy. He was so good at that. He was — I mean, still is. I mean, he's got this ability to be very critical but at the same time be very helpful to companies that will listen to him. And then when I joined him, I told him he was trying to do brand work, and I said, "Scott, you need to have a brand model. You don't need mine, but you need a model." And that's when he got me to join, so he could have a model.
Brand Consultation and The Decline of the Tagline
Andrew: So in your decades as a brand consultant at Prophet, you worked with some of the world's most recognizable brands. And when it comes to companies and the branding challenges they face, and when they come to you for advice, what have you seen change over the years with them, and what's stayed the same?
David: You want to find out what you stand for, and you want to get these pillars, I now call them, that differentiate, that resonate, and that are doable. And then you want to get them done. But I get involved in tactics. I've been really patient with the inability of the Democratic Party to communicate its ideas. And when I looked out there, I see just a lot of ad hoc, sort of short-term messaging. There's no taglines that anybody remembers, there are no visual symbols that people remember. And I tried to encourage some to move in that direction, but it's hard to — it's hard to get in front of people.
Andrew: Taglines are really interesting. You mentioned how brand and brand equity is more than just two or three words, but it seems like taglines have sort of disappeared. And if you ask me, even from the last five years or more, I couldn't think of a major brand that has a tagline or a new tagline that's been introduced and had the impact the way something like "Just Do It" or "I'm Lovin' It" or "Think Different" or —
David: "The Ultimate Driving Machine" is probably the best tagline of all time.
Andrew: Yes, absolutely.
David: And that tagline tells you something about, what that car is made of, but also tells you that it's about sort of exhilaration, race driver exhilaration, and the word "driver." What an umbrella it's been for them to do so much. It's one of the things that's allowed them to do, really, is to move down, and they make small cars, they even make a Mini BMW, and it's okay because it still fits under the umbrella.
Andrew: Yeah, so I mean, BMW aside, why do you think taglines don't seem to have — they don't seem to be as prominent as they used to be? What would you attribute that to?
David: They're not easy to come up with. It's not easy to come up with the right umbrella. So you might need an umbrella for a campaign and then an umbrella for a bunch of campaigns, and it's not easy to come up with the right one. And if you don't come up with the right one, it's better not to even have one, although sometimes a tagline just for a single ad can be worthwhile. But anyway, that's one reason — it's not easy to come up with. I think the other reason is these creatives are so focused on the experience of the video or the article or the ad or the print ad, and they're really so focused on the content of the print or the characters in the video, and they just want to get that right, and they — and this tagline is kind of the strategic thing, it doesn't get as much attention, I think.
Andrew: Well, David, your insights and your stories have been incredibly valuable. Thanks so much for sharing your wisdom with us today. How can our listeners learn more about your work and follow you online?
David: You can just go to davidaaker.com. My biggest — my blog output comes on LinkedIn, so you can connect to me on LinkedIn, and if you go to davidaaker.com, you'll get the blogs, too.
Andrew: I will share a link to davidaaker.com and to your LinkedIn page where listeners can follow you in the show notes. So David, thanks so much for your time.
David: Oh, thanks for having me.
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