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Must-Have!
Develop offerings so innovative that competitors are irrelevant.

The only way to grow, with rare exceptions, is to develop offerings so innovative that they create customer “must-haves” that define new subcategories for which competitors are not relevant. The goal is to win not by having a brand preferred over competitors but because competitors were not considered. You strive not to be the best but the only.

Winning this brand-relevance war involves engaging in substantial or transformational innovation to change what customers buy, to manage perceptions of the resulting new subcategory, and to build barriers to prevent competitors from overcoming their visibility and credibility barriers.

Creating a marketplace with weak or nonexistent competition has a huge potential payoff. It is Economics 101, the ticket to real growth in sales and profits. Consider the Chrysler minivan introduced in 1982 as the Plymouth Voyager and Dodge Caravan, which sold 200,000 during its first year, 12.5 million since then and enjoyed 16 years with no viable competitors. It literally carried Chrysler for nearly two decades.

The alternative, which I call brand-preference competition, is by far the more common strategy. It focuses on making a brand preferred among the choices considered by customers in a defined subcategory. The goal is to beat competition through the use of incremental innovation to make the brand ever more attractive or reliable or the offering less costly. Faster, cheaper, better is the mantra. Resources are expended on communicating more effectively with cleverer advertising, more impactful promotions, more visible sponsorships, and more involving social-media programs.

The problem is that “my brand is better than your brand” marketing rarely changes the marketplace no matter how much budget is available. The stability of brand positions in nearly all markets is simply astonishing. There is just too much customer and market momentum. It is also just so not fun.

With few exceptions, the only time that a market structure experiences any meaningful change is when a new, “must-have” was introduced with a major innovation. For example, the market-share trajectory within the Japanese beer industry changed only four times during five decades: three when new subcategories were introduced (Asahi Dry Beer in 1986, Kirin Ichiban in 1990, and Happoshu in the late 90s) and once in 1995 when two subcategories were both repositioned. All the marketing in other years simply did not move the needle.

You can look at any category and the result is the same. In automobiles, for example, market dynamics are driven by innovations represented by brands such as Ford’s Mustang and Taurus, the VW bug, Mazda’s Miata, Chrysler’s Minvans, Toyota’s Prius and Lexus, BMW’s Minicooper, and the Enterprise Rent-A-Car. In computers, the market was altered by new subcategories like Digital’s minicomputer, Silicon Graphics’ workstations, Sun’s network servers, Dell’s build-to-order PCs and Apple’s interface.

In services, Westin’s Heavenly Bed defined the premium bed hotel. In packaged goods, there is Odwalla, SoBe, and Dreyer’s Slow Churned ice-cream. In retailing there is Whole Foods Markets, Zara, Best Buy’s Geek Squad, Ikea, Zappos and Muji. Let’s take a closer look at Muji to provide a profile of one brand that has created “must-haves.”

Muji is one of the top brands in Japan, according to the BrandJapan database, and it has an expanding global presence. Yet the Muji brand vision is not to be a brand! It is the no-brand brand, representing simplicity, moderation, humility, self-restraint, and close to nature — the opposite of Ginza glitz. The Muji philosophy is to deliver functional products that strive not to be the best but “enough.” Enough does not mean compromise and resignation, but a feeling of satisfaction in knowing that the product will deliver what is needed, but no more. The aspiration is to achieve the extraordinary by modesty and plainness in the pursuit of the pure and ordinary. This is not a contradiction at Muji.

A visit to a Muji store is an eye-opener. One of the first things you notice is that the clothes are more bland than bright. Beige works. And there is no logo on the front of the shirt. In fact, there is no label at all — not even on the inside of the garment. Why would you want a label? The furniture, cookware, office equipment, and even the homes (yes Muji carries homes) are plain but functional. The designs are simple, but that’s not to make some minimalist statement; they just provide what is needed to deliver function.

Not surprisingly, Muji is sensitive to the environment. They aspire to live in compatibility and sensitivity with the earth. Toward that end, they developed a set of three large campgrounds that allow people to enjoy undisturbed nature. The campsites host Muji summer-camp jamborees that bond Muji and the participants to the environment.

Muji delivers several “must-haves,” including anti-brand, anti-glitz values; a calm, relaxing shopping experience; and an environmentally sensitive, outdoors lifestyle. In doing so, it has defined a new and hard-to-match subcategory that delivers both self-expressive and emotional benefits.

When the opportunity to create and own a subcategory appears, it should not be squandered because it can be the only route to changing a brand’s position in the marketplace. But the route to success can be difficult. Some guidelines:

Adjust the innovation portfolio. Divert some resources from incremental to substantial or transformational innovation and adjust the organization so that it will accept some risks and challenges. Most organizations that focus on brand-preference competition will often avoid seeking out and supporting innovations that will make a real difference.

Evaluate the innovation. Make sure that the innovation really involves a “must-have” for customers. Beware of the innovation that appears to be a market changer when it is only an incremental improvement, and know that innovation champions tend to be overly optimistic in their evaluation. But also beware of being too pessimistic about the ability of the team to deal with the challenges that are always present with a significant innovation. Without organizational commitment we would never have seen the Prius, the iPhone, or Dreyer’s Slow Churned ice-cream.

Be the exemplar. Become the representative or exemplar of the subcategory as Fiber One and Whole Foods Markets have done. The goal is to be the only visible and credible brand. Toward that end, there should be a single-minded focus on defining and building the subcategory rather than the brand. When possible, the brand should be perceived as the thought leader with not only new products but also visible comments on the subcategory and its future.

Execute flawlessly. Delivering the promise out of the box is indispensible to the creation of critical market momentum. Superior execution also generates a barrier to competitors, especially if it is based not only on what is done but the values and organization behind it. That was certainly the case with Zappos and its “wow! experience,” its culture celebrating weirdness, and its call center.

Build additional barriers to competitors. Make it difficult and expensive to be a player in the new subcategory. For example, develop a strong brand and a loyal customer base. Engage in innovation over time to provide a moving target to competitors and energy to the brand, as Apple and Gillette have done. Scale the innovation as Ikea, Starbucks and eBay have done. Develop branded differentiation such as EarthGrains’ Eco-Grain, Westin’s Heavenly Bed, or Oral B’s Action Cup toothbrush. Add services to the offering, like Sephora did with its BeautyTalk website.

Pursuing a brand-relevance strategy is not always easy for an organization. The organization needs to have the capability to sense changes in the marketplace and its customers, an ability to commit to a new concept and bring it to market, and a willingness to take risks by going outside the comfort zone represented by the existing target market, value proposition, and business model. An organization good at brand-preference competition will not always support game-changing innovation. Changes in culture, structure, process, and resource allocation may be needed. There has to be a strategic commitment to introduce such changes. They will not happen by themselves.



DAVID AAKER is vice chairman of Prophet, and the author of Brand Relevance: Making Competitors Irrelevant, as well as the brand blog, davidaaker.com. He can be reached at daaker-@-prophet.com.


MARCH / APRIL 2012 | PDF | Subscribe | Home