Brand Relevance

1. Brand relevance supersedes brand preference in driving market dynamics

Results are gained by exploiting opportunities, not by solving problems.

Shift in focus. The traditional approach of competing for brand preference within established categories is giving way to a more strategic focus on brand relevance. This shift recognizes that market dynamics are often driven by the emergence of new categories or subcategories, rather than incremental improvements within existing ones.

Impact on competition. By creating or dominating new categories or subcategories, companies can make competitors irrelevant, rather than just less preferred. This approach can lead to periods of reduced or non-existent competition, allowing for higher profitability and market momentum.

Strategic implications:

• Companies should prioritize identifying or creating new market spaces
• Investment in substantial or transformational innovations becomes crucial
• Success metrics shift from market share within a category to the ability to define and dominate new categories

2. Creating new categories or subcategories makes competitors irrelevant

The best way to predict the future is to invent it.

Redefining the market. By introducing innovative offerings that create new categories or subcategories, companies can fundamentally change what customers buy, rather than just influencing which brand they choose within an existing category.

Competitive advantage. This approach allows companies to compete in arenas where established competitors are at a disadvantage or completely irrelevant. It's about changing the rules of the game rather than just playing it better.

Examples and impact:

• Toyota's Prius creating the hybrid car subcategory
• Apple's iPod redefining portable music players
• Salesforce.com pioneering cloud-based enterprise software
• These innovations led to extended periods of market dominance and above-average profitability

3. Substantial and transformational innovations define new market spaces

If there is no differentiation, there is no innovation.

Innovation continuum. Innovations range from incremental to substantial to transformational, with the latter two having the potential to create new categories or subcategories.

Characteristics of category-creating innovations:

• Address unmet needs or create new ones
• Provide a qualitatively different value proposition
• Often combine multiple benefits or technologies
• May redefine the competitive space

Impact on strategy:

• Requires a shift from focusing on product features to envisioning new market spaces
• Demands investment in R&D and market research to identify transformative opportunities
• Necessitates the ability to execute and scale innovative concepts

4. Defining and managing new categories is crucial for long-term success

When I don't know whether to fight or not, I always fight.

Beyond product innovation. Creating a new category or subcategory involves more than just introducing a new product. It requires actively defining and managing the perceptions of the new market space.

Key aspects of category management:

• Identifying and prioritizing aspirational associations
• Developing a positioning strategy
• Creating innovations to advance the category
• Using the brand and its marketing programs to build visibility and image

Long-term strategy:

• Aim to become the exemplar brand for the new category
• Continuously innovate to make the category a moving target for competitors
• Build and maintain customer loyalty to the category, not just the brand

5. Evaluating concepts requires balancing market potential and execution capability

A great company is more likely to die of indigestion from too much opportunity than starvation from too little.

Evaluation framework. Assessing the potential of new category-creating concepts involves three key questions:

1. Is there a market?
2. Can we compete and win?
3. Will a market leadership position endure?

Balancing act. Evaluation requires navigating between overestimating market potential (rosy picture bias) and underestimating it (gloomy picture bias). It's crucial to objectively assess both the market opportunity and the company's ability to execute.

Strategic considerations:

• Market size and growth potential
• Competitor response and barriers to entry
• Alignment with company strategy and capabilities
• Resource requirements and ROI potential

6. Building barriers to entry sustains competitive advantage

Always pursue a strategy that your competitors can't copy.

Types of barriers:

1. Investment barriers (e.g., proprietary technology, scale economies)
2. Owning compelling benefits
3. Customer relationships beyond functionality
4. Strong link to the category or subcategory

Strategies for creating barriers:

• Develop and protect intellectual property
• Build brand equity and loyalty
• Create network effects or ecosystem advantages
• Continuously innovate to remain a moving target

Impact on strategy:

• Focus on creating sustainable differentiation, not just temporary advantages
• Invest in assets and capabilities that are difficult for competitors to replicate
• Strive to become the exemplar brand for the category or subcategory

7. Maintaining relevance requires constant innovation and adaptation

If you are on the right track, you'll get run over if you just sit there.

Dual threat to relevance:

1. Category or subcategory relevance: When what you're selling is no longer what customers want to buy
2. Energy relevance: When your brand loses visibility, energy, and interest

Strategies for maintaining relevance:

• Stick to your knitting (focus on core strengths)
• Reposition the brand
• Gain parity with new innovations
• Leapfrog competitors with superior innovations
• Disinvest or exit declining categories

Key to success:

• Constantly monitor market trends and customer needs
• Be willing to cannibalize your own products before competitors do
• Maintain a culture of innovation and adaptability

8. Energy and visibility are essential for brand relevance

It is kind of fun to do the impossible.

Energy as a key brand asset. Brands with energy remain healthy and drive financial returns, even as traditional brand equity measures decline.

Ways to energize a brand:

• Continuous product innovation
• Customer involvement and engagement
• Retail experiences and publicity events
• Promotions targeting new customers

Branded energizers:

• Sponsorships (e.g., Valvoline and NASCAR)
• Social programs (e.g., Avon Breast Cancer Crusade)
• These can provide energy, visibility, and emotional connections beyond what product innovations alone can achieve

9. Customer relationships beyond functionality create powerful differentiation

There is nothing more exhilarating than to be shot at without result.

Beyond functional benefits. Building customer relationships based on shared interests, personality, passion, or social programs can create powerful differentiation that's difficult for competitors to replicate.

Strategies for deepening customer relationships:

• Align with customer values and interests (e.g., Whole Foods and healthy living)
• Develop a distinctive brand personality (e.g., Virgin's rebellious spirit)
• Create passionate brand communities (e.g., Harley-Davidson)
• Engage in meaningful social programs (e.g., Patagonia's environmental activism)

Impact on brand strategy:

• Focus on creating emotional and self-expressive benefits in addition to functional ones
• Invest in building and nurturing customer communities
• Align corporate social responsibility initiatives with brand values and customer interests

Last updated: November 19, 2024