Innovation: BRAND IT OR LOSE IT
David Aaker
I
nnovation is increasingly at the center of the strategy and the DNA of most firms. The logic is that innovation will lead to growth and profitability. Growth will come from innovation-driven new products and businesses and profit will follow from innovation-inspired margin increases and cost decreases. Further, as most markets drift toward commodity status with offerings becoming similar, innovation is seen as the way to create differentiation, thereby shielding firms from price erosion. Indicators of the interest in innovation abound. Each year some of the most influential books are focused on topics such as how to innovate, organizational characteristics of innovative firms, creating new business arenas, disrupting the market, anticipating trends, and R&D.1 Further, business publications such as Business Week and Fortune regularly have cover stories on, or related to, innovation. It is hard to find a firm that does not give lip service to innovation. Nearly every firm will include innovation as one of its cultural values and as one of the pillars of their strategy. Many have innovation as a corporate tagline—HP’s “Invent” to Toshiba’s “Leading Innovation” to Toyota’s “Moving Forward” to Cargill’s “Nourishing Ideas.” GE, for example, placed a new emphasis on innovation in 2001. The flagship program was the internally branded “Imagination Breakthrough” initiative, in which each business is charged to develop three breakthrough proposals with $100 million potential, and which has created some 80 such potential businesses. Externally, GE repositioned its brand around a new tagline “Imagination at Work,” which replaced their classic but confining “We Bring Good Things to Life.” Proctor & Gamble, another firm emphasizing new innovation initiatives, established in 2000 a goal of sourcing 50% of all innovation outside P&G from
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a global network of innovative sources and bring the resulting ideas into the P&G business units (for example, Swiffer was produced by Unicharm, a competitor in Japan).2 With all this interest in innovation, there is little discussion of how innovation should be branded. The subject of branding is virtually never raised in the books and articles on innovation. The focus is on the benefits and even necessity of innovation, how to make it happen, how to overcome organizational barriers, and how to overcome implementation problems. Discussions of branding are absent. However, a brand strategy can be critical to the success of an innovation, particularly in the long-term. There are times when a firm literally needs to brand it or lose it. Without a successful branding strategy, an innovation can be short-lived—diffusing into a confused marketplace with its impact dissipated— or become another forgotten internal initiative. In such cases, branding can make all the difference. That does not mean that all innovations should be branded. Far from it. There is a real risk of over-branding resulting in confusion and under-resourced brands. Branding, it should be emphasized, does not mean simply putting a name and logo on an innovation. Rather, it means that a brand is part of a coherent strategy, supported by actively managed and adequately funded brand-building programs. Branded innovations can potentially help advance a business in three distinctive ways. ▪ They can create or improve the offering, making it more differentiated and more attractive. In this context, the innovation can be represented by a branded or sub-branded product or by a branded feature, ingredient, or service. ▪ They can create a new subcategory to change what customers are buying. The branding challenge is to manage perceptions of the subcategory and to influence which brands are relevant to it. ▪ They can affect perceptions of the organization or corporate brand with respect to innovativeness in order to make it respected, to give it energy, and/or to make its new product offerings more credible. In each of these roles, the ability of the innovation to achieve its potential impact will be enhanced if it is branded, assuming that the innovation merits branding and that the brand strategy is well conceived and executed.
Creating or Improving an Offering Innovations are often directed at creating or enhancing the value proposition of a business to the customer. The offering is improved perhaps because performance is made better, features are added, or the purchase is made more convenient. In any case, the innovation objective is to improve
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the attractiveness of the product for potential customers and to increase the loyalty of existing customers. Such innovation, properly branded, can influence the marketplace and be a powerful impetus to the business for a long time. It can combat the slide into a commodity status, with the associated margin erosion. However, when the innovation is not branded, the impact is usually short-lived, if it occurs at all. Putting new or improved on a box of Tide detergent is unlikely to create a lasting sense of differentiation. Amazon developed a powerful feature, the ability to recommend books or other products based on a customer’s interests as reflected by their purchase history and the purchase history of those that bought similar offerings. Unfortunately, they never branded it. As a result, the feature became basically a commodity that is an expected feature of many e-commerce sites. If Amazon had branded it and then actively managed that brand, improving the feature over time, it would have become a lasting point of differentiation that today would be invaluable. They missed a golden opportunity. They did not make that same mistake with One-Click, a branded service that plays a key role in defining Amazon in what has become a messy marketplace. The problem with sliding innovations into the existing offerings is twofold. First, the market contains many who are not motivated, or perhaps simply are not able to sort out the new product claims and the rationale behind those claims. These people develop a coping strategy that ignores what is seen to be confused and contradictory competitive claims. As a result, the claims of “new and improved” simply fade in the muddled environment. Second, any dramatic, visible improvement is likely to be quickly copied (or appear to be copied) by competitors. Any belief that a unique point of differentiation has been achieved will recede as the perception that competitors have matched the advance carries the day.
The Value of Branding Branding changes all that. A new offering can have its own brand (NetFlix), endorsed brand (Apple’s iPod), or sub-brand (Glad Press’n Seal). Further, an innovation that represents a feature (Cadillac’s On-Star), ingredient (Dove’s Weightless Moisturizer), or service (Best Buy’s Geek Squad) could also be branded directly. A David A. Aaker is the Vice-Chairman of Prophet brand provides several powerful functions, and Professor Emeritus of Marketing Strategy at the Haas School of Business, UC Berkeley. most of which go back to the basic value of a brand in any context. A brand (as summarized in Figure 1) allows ownership of the innovation, adds credibly and legitimacy, enhances visibility, and helps communicate facts.3 First and foremost, a brand provides the potential to own an innovation, because a brand is a unique indicator of the source of the offering. With the proper investment and active management of both the innovation and its brand, this ownership potential can be extended into the future indefinitely. A competitor may be able to replicate the offering (or its new feature, ingredient, or
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FIGURE 1. Why Brand Innovation?
Own the Innovation
Add Credibility/Legitimacy
Better Withstand Competition
Brand Signals Worth
Branding the Innovation
Aids Communication
Visibility Enhanced
Brand Can Represent Complex Narratives
Aids Recall and Recognition
service), but if it is branded, they will need to overcome the power of the brand. Another firm can copy the objective features of Apple’s iPod or Westin’s Heavenly Bed, but there will only be one authentic product and that is the one carrying the brand name. In fact, it is sometimes possible to have such a strong brand that it gets credit for innovations by others. Dolby may be an example. An advance in audio technology may be attributed to Dolby no matter where it originates. Second, a brand can add credibility and legitimacy to a claim. An unbranded claim is likely to be interpreted as another example of puffery, a better fabric or a more reliable engine. The brand specifically says that the benefit was worth branding. The observer will instinctively believe that there must be a reason why it was branded. Suburu has long emphasized 4-wheel drive and many car brands now offer this feature. Audi, however, has a branded version, Quattro, which gives them a credibility and relevance that the others lack. In essence, the message is that there are 4-wheel drives and then there is Quattro. The ability of a brand to add credibility was rather dramatically shown in a study of branded attributes. Carpenter, Glazer, and Nakamoto found that the inclusion of a branded attribute (such as “Alpine Class” fill for a down jacket, “Authentic Milanese” for pasta, and “Studio Designed” for compact disc players) dramatically affected customer preference toward premium-priced brands.4 Respondents were able to justify the higher price because of the branded attributes. Remarkably, the effect occurred even when the respondents were given information implying that the attribute was not relevant to their choice.
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Third, a brand name can help make the innovation visible because it provides a label for the “news.” As a result, it is easier to achieve higher recall and recognition scores around the new offering or a branded feature, ingredient, or service. It is much easier to remember a brand name than the details of a new offering. In fact, one of the characteristics of a good brand name is that it is easy to recall. Further, the job of linking the point of differentiation to the parent brand is also made much easier. The Heavenly Bed is more memorable than Westin’s “improved bed.” Fourth, a brand makes communication more efficient and feasible. A new product or product feature, for example, even one regarded as a breakthrough by its designers, may engender a monumental lack of interest among the target audience. Even when the communication registers, it can be perceived as too complex to warrant processing and linking to an offering. The act of giving the product or feature a name can help by providing a vehicle to summarize a lot of information. A name such as Oral B’s Action Cup provides a way to crystallize detailed characteristics, making it easier to both understand and remember. Imagine if Chevron attempted to explain why “Chevron gasoline” was different without the use of the Techron brand. It would not be persuasive or even feasible.
To Brand or Not to Brand, That Is the Question To own, control, and fully benefit from an innovation, you have to build a brand (as opposed to just giving it a name and logo). Consider the power of brands such as the Apple iPod, Toyota Prius, or Tide’s Simple Pleasures as opposed to offerings such as the Apple MP3 player, Toyota’s compact hybrid, and Tide detergent with vanilla and lavender scents. Descriptors attached to an established brand would not have been able to adequately represent the innovation. Or consider branded features such as Westin’s Heavenly Bed, branded ingredients such as or Cadillac’s Northstar engine, or branded service such as Tide’s Stain Detective. In each case, the brands are supported by actively managed brand-building programs and provide a point of differentiation that has real legs. However, there is the danger of over-branding, to put brands on innovations that do not warrant brand investments. Such brands are often starved of the resources needed to be successful because they never merited investment in the first place or because their strategic role changed. Branding innovation can thus create a Shakespearean dilemma—to brand, or not to brand. This crucial decision is influenced by some powerful organizational and psychological forces. On one hand, there is a pressure to brand everything. A technical or a marketing person, who has given birth to an idea and nurtured that idea through all kinds of budget committees and other organizational barriers, wants his or her baby to have a name so that customers (and the business itself) will more easily recognize its importance. As a result, in the absence of strong procedures and policies, names are given. The end result can be a proliferation of brands with resulting underfunding, confusion, and lack of priorities.
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The goal of branding innovation should not be an excuse to slap a brand on everything. On the other hand, there is also a tendency to fail to recognize when a major innovation can be fully leveraged only by attaching a brand to it. This tendency is in part an overreaction to the over-branding problem that many firms have experienced. When there is a branding mess, one solution is to avoid introducing more brands. This problem is also due in part to a lack of branding sophistication. There is too often a failure to understand how a family of brands can help achieve strategic and tactical goals, how priority brands can advance strategy, and how an unbranded innovation can drift into the cluttered and confused competitive landscape. So how can the firm recognize when the opportunity represented by an innovation should be fully realized with the help of a brand and when should the innovation be classified as incremental and be represented by the existing brand? Basically, the criteria should be whether the innovation is worth branding. This in turn depends on three dimensions, as suggested by Figure 2: FIGURE 2. To Brand or Not to Brand? whether it is significant advance, whether it is meaningful enough • Is it a significant advance? to customers to affect purchase and • Do the customers care? loyalty, and whether it merits a longterm commitment to building and • Will it merit investment over time? managing the brand. — Sales and profit stream? — Opportunity to create and hold market leadership? First, the innovation should represent a significant advance and — Potential to be a moving target? it should be newsworthy. Westin’s Heavenly Bed, created in 1999, was truly a better bed. It was a customdesigned mattress set (by Simmons) with 900 coils, three versions of a cozy down blanket for three climates, a comforter with a crisp duvet, three highestquality sheets, and five goose down pillows. It was noticeably and experientially superior. Westin, of course, had beds in their rooms before 1999 and could have branded these existing beds as the “Heavenly Bed.” However, it would not have worked. The fact that the new beds were demonstrably superior, which resulted in word-of-mouth buzz about the bed, was critical to its success.
Second, the innovation also needs to be an advance that is meaningful to the customers, meaningful enough to alter their behavior and loyalty patterns. The ultimate level of impact is when the innovation serves to define a new category by changing what people buy. The Heavenly Bed addressed the very heart of what a hotel room experience is—providing a good night’s sleep. It successfully changed that experience, and for some it created a new subcategory— hotels with premium beds. The impact of the Heavenly Bed reflected its relevance to the customers. During the first year of its life, those hotels sites that featured The Heavenly Bed had a 5% increase in customer satisfaction and a noticeable increase in perceptions of cleanliness, room décor, and maintenance
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as well as increased occupancy. The bed was so good that Westin began offering the beds for sale, selling $5 million worth in 2005. Third, time needs to be added to the equation. An innovation worth branding also warrants active management over time to justify investments to improve the offering and to engage in brand-building efforts. The value of the branding effort will depend on the value of the business it will support, which in turn is based on the current and potential business size, its profitability, the intensity of current and potential competitors, and the potential to maintain the innovation-based differentiation. Added value can also come from the role of a branded innovation to influence perceptions of a corporate brand. The Heavenly Bed did influence a Westin’s business. The effort to extend the branded innovation helped prolong its market impact. Heavenly followed up bed innovation with the Heavenly Bath, which has custom designed showers with dual showerheads (plus such things as Heavenly branded soap, towels, and other amenities). There is a Heavenly Online Catalog where you can order the whole Heavenly line and access a bridal registry. Can you imagine the frustration of a competitor’s task force assigned to respond to the Heavenly Bed when they learn there is now a Heavenly Shower to contend with? Given that the brand is worth branding and investing in over time, a brand can provide a decisive enhancement to the success prospects of the innovation. If the Heavenly Bed were simply an improved bed at the Westin Hotel, it never would have got buzz and traction and, certainly, would not have emerged as a point of differentiation six years after its introduction and years after competitors had introduced competitive beds. Of course, a brand is only one part of bringing an innovation to market. Success will depend on the performance of the innovation, the value of its benefits to customers, and the funding and quality of the brand-building effort as well as the brand. However, a brand can play a role in enhancing the success prospects.
Managing the Perceptions of a New Subcategory There is a spectrum of innovation from incremental to substantial to transformational. When a transformational innovation occurs, it is an opportunity to create a new subcategory and to change what people are buying.
Why Brand an Innovation Reflecting a New Subcategory? When an innovation has the potential to create a new subcategory, branding that innovation can help make sure that the opportunity is realized. A branded innovation can provide a vehicle to define, position, and dominate the new subcategory. The challenge is first to make sure that the subcategory is selected by customers, and second to make the brand the dominant choice. Winning occurs when the competitor’s brand is not seriously considered because it is not believed to be relevant to the new subcategory.
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For the subcategory to be selected, it needs to be defined and positioned and a brand can play a key role in this task. There is often little inclination to expend resources to define and advance a subcategory that may be messy and complex, especially when brand-building resources are limited. However, if the branded innovation can be used to define the subcategory, the task of managing the subcategory and the brand becomes more feasible. The Westin Heavenly Bed, for example, defines for some a subcategory within the hospitality industry, hotels with premium beds. While others will attempt to gain relevance, Westin can manage the subcategory by, for example, defining premium beds around the Heavenly Bed. By extending the subcategory’s scope with the Heavenly Bath brand, it can make it harder to copy the concept. It would be much harder, probably impossible, to achieve the desired result without the Heavenly brand. The early market leader brand has the potential to position or reposition the whole subcategory. For the leading brand, winning the subcategory battle for relevance is more important and effective than winning a brand share fight. Asahi, as the dry beer subcategory innovator and early subcategory leader in 1986, positioned the subcategory with respect to taste (sharp, clean, and less aftertaste) and personality (young, energetic, aggressive, and innovative). A few years later when they became the clear subcategory leader, they repositioned dry beer as being global, a market leader, and delivering the freshest beer—and, as a result, created a market share surge. Focusing on positioning a brand’s subcategory rather than (or in an addition to) positioning a brand is a very different approach to competitive strategy. It was more effective for Welch’s grape juice to reposition its subcategory as a healthy product containing antioxidants than to argue it was the best grape juice brand. The leading brand in an emerging subcategory can be the innovator who exploits first-mover advantages, including exploiting the authenticity label. That was the case with Asahi Super Dry. Often, however, a leading brand, such as Gillette in safety razors or Word in word processing, was not the pioneer. Rather, the leading brand can be a brand that has taken over leadership in the subcategory because of its resources and product improvements. When the brand defines the subcategory, the subcategory will take on the characteristics of the brand. Further, the brand will become the most visible option for the subcategory. The inevitable result will be that the brand is also considered the most relevant brand, perhaps the only relevant brand, for the subcategory. One goal of subcategory management is to define the subcategory to include features that influence which brands are relevant. Consider the iPod. When it arrived there was the category of digital audio players and, more specifically, the subcategory of portable MP3 players. They were all able to collect and playback music. The iPod created a new subcategory that involved more than playing music. With a design that was cool, elegant, and compact with easy-touse features, it was visually and experientially appealing. Additionally, the companion brand iTunes provided easy access to music and other entertainment vehicles plus computer-based management of the iPod content inventory. Thus
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the subcategory was defined in such a way that Apple’s iPod, at least initially, was the only game in town. The iPod subcategory earned credibility and clarity by linking with the Apple brand. Competitors emerged such as Microsoft’s Zune, but they struggled because they were perceived to be deficient with respect to some of the attributes, even though that perception was not always accurate. Attribute perceptions attached to the iPod brand became difficult to overcome. Consider also the hybrid automobile subcategory. Toyota, the early hybrid leader (even though Honda actually introduced the first hybrid), had an opportunity to manage the perceptions of the subcategory while simultaneously positioning itself as the leading subcategory brand. The Prius brand provided leadership in the compact hybrid subcategory along with the branded Toyota Hybrid Synergy Drive that provided a seamless integration to shape and influence the larger hybrid subcategory. The Prius thus provides a point of reference around which the subcategory concept can be defined.
Categorization Theory Categorization theory is helpful to understand the process and the objective of influencing the perceptions of the subcategory.5 Categorization is considered by many psychologists as the fundamental cognitive activity that provides coherence to knowledge and judgments about nearly all aspects of daily life— including people, issues, products, and brands. There are two prevalent models of categorization. The first model conceptualizes a prototypical, hypothetical object in the category that could be an “average” or ideal object. New objects could be evaluated as to how similar they are to the prototype in terms of overall impression or by an analysis of attributes. The prototype model works best in categories with established objects with available information and experience about those objects. The second model conceptualizes a category as a collection of exemplars of the category, one or more objects that represent the category well. New objects are then evaluated in terms of their similarity to the exemplars in terms of an overall impression or by using an attribute-based comparison. For a newly created subcategory, an accepted innovator would become the only or the dominant exemplar and also the driver of the subcategory prototype. Until the 1970s, most categorization studies assumed that an object was either in a category or outside of it. However, a classic study by the Berkeley psychologist Eleanor Rosch, published in 1975, showed that an object could have a link to a category that ranged from strong to weak.6 Her study involved ten categories including vegetables. She found, for example, that peas and carrots were good representations of vegetables while green onions and pumpkins were weak representations. The fact that most categories have strong and weak representatives has implications for the management of emerging subcategories —the goal is to make a brand the carrot of a new subcategory and to position a competitor as a pumpkin. There are two key advantages to being considered highly typical of a category that has been well documented in hundreds of categorization studies.7
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First, as the typicality of an object becomes greater, the connection of that object to the category will be made faster, more accurately, and with more reliability. More important, if the category is cued, the more typical objects will be more likely to be recalled, and be recalled before others. This later finding is important to subcategories driven by a branded innovation because the challenge is to be recalled and considered when the subcategory is cued. If you want to buy a compact hybrid, Prius is likely to first and perhaps only model to come to mind because of its strength on the typicality dimension. A second advantage is that objects with high typicality will influence attitudes and behavior toward the subcategory.8 If the Westin Heavenly Bed is wellliked, the subcategory “hotel with premium beds� will also tend to be both liked and patronized. As a result, brand-building efforts behind the Heavenly Bed brand will help the subcategory (hotels with premium beds), which is the front half of winning the relevance challenge. A branded innovation forming a new subcategory should attempt to achieve and retain the position of being the sole, authentic exemplar of the new product subcategory. Going forward, however, competitors will enter, and the challenge is to inhibit competitors from becoming relevant exemplars. If that is not possible, the brand should at least retain the position of being the salient exemplar, the one that is considered the most typical of the subcategory, the one that comes to mind first. How does a firm address that challenge? Categorization theory provides some guidelines. First, evidence suggests that the most influential exemplars will be those that are perceived to be superior in terms of quality, performance, and reliability. If the brand is positioned early as the leading brand in terms of both sales and innovation, it is likely to be considered the best with respect to performance as well. Second, a brand that is liked and has generated loyalty will tend to be a preferred over another brand when both have equal typicality. If, therefore, a brand can generate such a relationship with customers, a competitor attempting to become an equally relevant exemplar for the subcategory would have to achieve a comparable degree of loyalty, which could be a difficult task. Third, research has shown that the most influential exemplar will be the one with the most exposure. The strongest exemplars have been shown in a variety of studies to be those that are easiest to recall and also the easiest to associate with the subcategory—two qualities that are linked to exposure. Thus, visibility of a branded innovation will be a driver of its ability to create a preferred exemplar role in a new subcategory. Strong exemplars such as iPod and Prius earned a buzz effect in the marketplace as a result of high exposure. Finally, the brand should leverage the first-mover position by influencing the attributes associated with the subcategory. The firm should actively manage the identity of the attributes that will define the subcategory. What attributes are and are not associated with the subcategory? Can the attributes be prioritized with respect to their importance in defining the subcategory? The objective should be to define the subcategory in such a way that it emphases any
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attributes that are likely to be exclusive or at least superior to likely competitors and excludes or de-emphasizes attributes likely to be stressed by competitors. By conceptualizing a subcategory, how has the challenge of marketing a new market entry become any different? After all, a new entry to any market will aspire to be high-quality, well-liked, visible, and associated with distinctive attributes. One answer is that the target segments will be those attracted to the new subcategory rather than a broader market. Another is that focus of the positioning strategy will be on the subcategory rather than (or in addition to) the brand. The goal should be to make the subcategory visible and appealing with strong links to the brand. Winning in the marketplace will take a very different route. Instead of being preferred to competitor brands, a brand will win because competitors will not be considered or will not be considered seriously. A basic presumption is that it can be easier to market a subcategory than a brand because it is hard to maintain differentiation with another brand. It is a broader mindset and one that aspires to control the future evolution of the marketplace. The challenge is to have competitors emerge as less than strong, salient exemplars. The more complex the context, the easier this will be because customers who are evaluating a new candidate for a subcategory will be uncertain about some of its attributes and will consequently conclude that it is less than a good exemplar. Zune, the iPod competitor from Microsoft, is at a disadvantage with respect to becoming associated with the new subcategory defined by iPod, the established exemplar.
Branding Issues One strategy for a competitor facing a branded innovation that has gotten traction is to appear similar by mimicking irrelevant attributes. Thus, in the packaged good field, private label products often appear as similar as possible in look, feel, and packaging in order to associate with the reigning exemplar. Research has shown that this strategy works. Thus, the early market leader should watch for others that copy features, even those that are less important or irrelevant all together. Asahi earned domination of the dry beer subcategory by engaging in the “dry beer wars,� which involved making its large competitor Kirin stop marketing a dry beer product with very similar packaging and product display materials. These efforts paid off as some distance was created between the pioneering brand and the copy. When branding a new offering (or its feature, ingredient, or service), there is usually the choice of using an existing brand with a descriptor (Apple MP3 player), a sub-brand (Pontiac Firebird), an endorsed brand (Ralph Lauren’s Polo), or a new brand (Lexus). The choice hinges on two issues. First, is the offering worth branding (which involves the three dimensions introduced above)? Second, how much separation is desirable from the parent brand and the new offering? If a descriptor is used, there is little separation and the associations with the parent brand will dominate. If there is a new brand or an endorsed brand, there will be enough leeway to chart an independent course.
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If a new subcategory is to be created that represents an economic opportunity and is to have (as an exemplar) the brand attached to the new offering, then the use of a new brand or endorsed brand will usually be the best course. The use of an existing master brand with a descriptor or even sub-brand will generate existing associations that may limit the ability of brand to clearly delineate the boundaries of the new subcategory. Subcategory exemplars work best when a single brand takes the lead. When Chrysler developed the minivan, an extremely successful new product, it had a great run as an innovator. However, Chrysler provided two exemplars, the Dodge Caravan and the Plymouth Voyager. The existence of two exemplars may have weakened their ability to own the subcategory. Managing a subcategory is a challenge that is often foreign to marketing strategists, whose life has always been to beat competitors and gain market share in an established category or subcategory. Dynamic subcategories introduce a new and different strategic reality.
Affecting the “Perceived Innovativeness” of an Organization Branding an innovation can also provide another benefit. It can affect the “innovativeness” image of the organization brand (which is often but not always the corporate brand). In most cases, the organization brand will benefit from being perceived as being innovative. As a result, innovation initiatives are designed not only to create innovative processes and products, but also to affect the perception of the organization in the marketplace. There are practical reasons why a reputation for innovation is desirable over and above simply harvesting the fruits of innovation. First, an innovative image provides credibility to new products. Research has shown that an image of being innovative will enhance the prospects for new products, particularly those that are significantly different from their predecessors. One study found that the acceptance of a new product was affected by the organization’s reputation for being innovative, but a reputation for being socially responsible had no such impact.9 Customers reduce their natural skepticism about a new offering when comes from a firm that has a perceived track record of innovation. Second, a reputation for innovation will make the firm more attractive to customers. It will provide energy to a firm. In fact, the best energizer is a hot new product, especially one that has a buzz around it. People are attracted to energy, whether it is from a person or firm. Further, innovation can contribute to a firm’s stature because innovation is associated with success and leadership. People respect leadership and like to be associated with leaders. Customers have a bias to working with firms they respect. At the end of the day, buyers don’t want to analyze attributes of all-too-similar offerings and usually go with their gut.
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It is not easy to achieve a reputation for innovation. In fact, most firms aspire to be perceived as innovative but few really break out of the clutter. How does a firm develop a reputation as an innovator? It is not enough to become an innovative firm or even to demonstrate innovation after innovation. Facts do not automatically translate into perception. Consider quality reputation. During the past two decades, a host of firms have developed quality programs that have created high quality. Yet many of these firms did not get credit in the marketplace because their prior reputation could not be overcome or because the quality story could not get traction. Perhaps the firms could never develop a communication program effective enough to overcome the momentum of their reputation. Consider the U.S. automobile brands such as Buick and Cadillac that have closed the quality gap yet find it difficult to change perceptions, while other brands such as Toyota and Mercedes maintain a quality image even when their products stumble. In fact, one study showed that, on average, customers perceptions of quality take six years to “catch up” to actual quality changes—and for automobiles, it is actually 9.5 years.10 Similarly, a firm can develop an exceptional program of innovation that results in radically new or improved processes and/or offerings. However, it is just as hard to tell the innovation story as it is to tell the quality story. The fact is that nearly all organizations are claiming, some quite vocally, that they are “the” innovative firm in their space, complete with advertising and taglines. So breaking out of the clutter and creating credibility in a claim that appears little different than others is a challenge.
Why Brand the Innovation? Branding the innovation can potentially help make the innovation visible, communicate its features, and provide credibility and substance to the perceived innovativeness of the organizational brand. Consider the two firms Samsung and Sharp, both with innovative successful entries into the television set market. Sharp branded its LCD sets as Aquos and its introduction in Japan in 2005 led to a significant boost in perceived innovativeness for Sharp (from 23 to 12 among all Japanese brands). Samsung, on the other hand, chose to introduce its sets under the Samsung brand without a branded innovation. While Samsung was successful, several questions arise: ▪ Was the visibility of the Samsung technological advance as high and widespread as it would have been if the innovation were branded? And would a brand have helped to communicate the nature of the innovation? There will be clutter in the marketplace and the task of getting through with a message about another Samsung product will be nontrivial. ▪ Would branding an innovation interject more credibility even for Samsung, which enjoyed a generally positive image?
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▪ Would a sub-brand have helped or hindered linking the innovation to the Samsung brand? By making the technology more credible and visible it potentially could have helped. However, if the technology were branded under the Samsung brand the step of linking the technology brand to Samsung would not be necessary. ▪ What about the long-term impact? Will the perceived technological advances of Samsung have a long life or will they dissipate over time? Would a brand like Aquos, properly managed over time, allow the message to be extended because the brand is owned? Consider Sony’s Trinitron brand. Introduced in 1968 as a branded television set technology, it served to help Sony be a market leader for over two decades. A 2000 study in Japan revealed that the sub-brands Playstation, Handycam, Vaio, and AIBO (a robot) contributed to the Sony image.11 Certainly these subbrands and others helped Sony maintain its perceived innovativeness rating long after it had demonstrated real innovative product development. As late as 2003, Sony was still the top-rated brand in Japan along the perceived innovativeness scale even after being a non-factor in major consumer electronic categories such as cell phones, flat-screen TVs, PDAs, and the iPod surge.12 The cost and risk associated with a new innovation brand needs to be balanced against the four advantages (summarized in Figure 1). A key determinant is the long-term commitment to the branded innovation and how persistent the link is made over time. Certainly, the link between Walkman and Sony is solid because of the way the Walkman brand was presented and because of Sony’s long-term commitment.
Evidence of the Influence of a Branded Innovation on the Organizational Brand There is a large body of evidence in psychology that the perceptions of an object will be affected by what is associated with it. A person’s personality is affected by his or her clothes, friends, activities, and living space, among other things. They all send signals as to what type of person she or he is. A brand’s image is associated, for example, with the color of the product or package, the price, the music in an ad, and the store in which it appears. The organizational brand that can be linked to a branded innovation will benefit from that association. The brand helps make the innovation and its link to the organizational brand more salient. That is what a brand does. Another well-accepted psychological phenomenon is a cognitive drive toward consistency. If two associations are inconsistent, there will be an effort to reconcile that inconsistency. Thus, one misstep of a well-regarded brand may be excused or written off as an accident. However, several missteps may result in a change for the worse in brand perceptions. Similarly, a credible branded innovation will tend to help build or support an innovative image for the organization brand.
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FIGURE 3. Branded Innovation—iPod and au Impact on Apple & KDDI
Apple
KDDi
iPod
120
110
110
100
100
au
90
90
80
80
70
70
60
60
50
50 Year 1
Year 2
Year 3
Year 1
Year 2
Year 3
Further, there is general acceptance of the proposition that one brand can affect another. The Z sports car series is assumed to help the image of Nissan. The VISA Signature Card is thought to make the VISA brand more appealing because upscale people will be using it. The dozen or so designer brands at Target are intended to influence the impression of Target. There is also some evidence that one brand can drive perceptions of another linked to it. One study of a quarterly database of high-tech firms found that brand equity as measured by attitude toward the brand seldom varied from quarter to quarter.13 However, one exception was the observation that the brand IBM significantly improved at the time that the ThinkPad brand got traction in the marketplace. Even though the brand ThinkPad was a tiny part of the IBM sales, it moved the IBM brand ahead. More evidence comes from an annual survey by Nikkei BP Consulting that rates over a thousand brands in Japan along some 15 dimensions, including innovativeness.14 The survey, now with seven years of data, provides some additional insights into the power of sub-brands that are perceived as innovative. The results on the innovativeness scale show a familiar long-tailed pattern. The top ten brands have scores ranging from 90 to 115, the next 30 from 75 to 90 and the following 60 from 60 to 75. The survey includes only a limited number of branded innovations. Still, there is a high incidence of these sub-brands among the top echelon of innovative brands over the seven years of data—15% of the top ten and 29% of the top 100. The survey results also suggest a relationship between the innovativeness scores of sub-brands with their parent brand. Overall the correlation between changes in the innovativeness scores of sub-brands and changes in their parent brand innovativeness score over 72 data points is .44, which means that 18% of the variance of changes in innovativeness for an organization brand can be explained by changes in perceived innovativeness of a sub-brand. Also, if the six sub-brands that were in the top ten sometime during the last five years are
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examined, the relationship is strong. For example, Nintendo’s perceived innovation went from 70 to 114 in 2007 while the sub-brand Nintendo DS went from 73 to 114. The Prius scores went from 78 to 98 to 98 the Toyota scores went from 72 to 79 to 94. As shown in Figure 3, the Apple image went from 74 to 80 to 71 while its sub-brand iPod went from 89 to 115 to 106 and the sub-brand au (a cell phone service) went from 82 to 88 to 104 while its parent brand, KDDI, went from 78 to 82 to 94. Just as innovation need not be limited to an offering, neither do branded innovations. AT&T probably still benefits from a branded R&D center, the Bell Labs, even long after it was spun out into Lucent Technology. There are branded programs that can be a source of innovation and energy, especially for firms for whom it is unrealistic to come out with truly exceptional offerings. HarleyDavidson is more than a brand, it is an experience and a community supported by several branded programs. The Harley-Davidson Ride Planner allows a person to create a ride plan given starting and ending points plus desired stops. The output is a detailed map that you can save and share with friends. The Avon Breast Cancer Crusade with its Avon Walk for Breast Cancer and other activities has added energy and a sense of innovation to the Avon brand. Dove has done the same with its branded Dove Self Esteem Fund that is part of its “real beauty/real women” campaign.
A Final Word The forgotten dimension of innovation is branding. This means not just applying a name and logo, but creating a brand supported by a strategy and an actively managed brand-building program. Unless an innovation is branded, there is the risk that the innovation could fade into the crowded marketplace and see its life shortened. The return on investment could then be reduced by orders of magnitude. Branding has the potential to own an innovation over time, to add credibility and legitimacy to the innovation, to enhance its visibility, and to make communication more feasible and effective. When a transformational innovation that creates a new subcategory is involved, a brand can help to define, position, and dominate that new subcategory. In addition, a strong branded innovation can affect the reputation of the parent organizational brand. Not all innovations should be supported by a strong, actively managed brand, but the brand decision should be part of the innovation strategy. Notes 1. Clayton M. Christensen, Scott D. Anthony, and Erik A. Roth, Seeing What’s Next (Boston, MA: Harvard Business School Press, 2004); W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy (Boston, MA: Harvard Business School Press, 2005); Gary Hamel, Leading the Revolution (Boston, MA: Harvard Business School Press, 2000); Richard Foster and Sarah Kaplan, Creative Destruction (New York: Currency, 2001); Michael L. Tushman and Charles A. O’Reilly III, Winning through Innovation (Boston. MA: Harvard Business School Press, 2002); Chris Zook, Beyond the Core (Boston, MA: Harvard Business School Press, 2004); Tom Kelley, The Art of Innovation (New York, NY: Currency, 2001); Gregory A. Moore, Dealing With Darwin (London: Portfolio, 2005).
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2. Larry Huston and Nabil Sakkab, “Connect and Develop,” Harvard Business Review, 84/3 (March, 2006): 58-66. 3. For a more extensive discussion of the value of a brand to customers and firms see David A. Aaker, Managing Brand Equity (New York, NY: The Free Press, 1991), chapter 11. 4. Gregory S. Carpenter, Rashi Glazer, and Kent Nakamoto, “Meaningful Brands from Meaningless Differentiation: The Dependence on Irrelevant Attributes,” Journal of Marketing Research, 31/3 (August 1994): 339-350. 5. For a summary of categorization theory see Barbara Loken, Lawrence W. Barsalou, and Christopher Joiner, “Concepts and Categorization in Consumer Psychology,” in Curtis Haugtvedt, Paul Herr, and Frank Kardes, eds., The Handbook of Consumer Psychology (Mahwan, NJ: Erlbaum, 2007); Joel B. Cohen and Kunal Basu, “Alternative Models of Categorization: Toward a Contingent Processing Framework,” Journal of Consumer Research, 13/4 (March 1987): 455-472. 6. Eleanor Rosch, “Cognitive Representations of Semantic Categories,” Journal of Experimental Psychology: General, 104/3 (September1975): 192-233. 7. Loken et al., op. cit. 8. Barbara Loken, Christopher Joiner, and Joann Peck, “Category Attitude Measures: Exemplars as Inputs,” Journal of Consumer Psychology, 12/2 (December 2002): 149-161. 9. Kevin Lane Keller and David Aaker, “The Impact of Corporate Marketing on a Company’s Brand Extensions,” Corporate Reputation Review, 1/4 (Summer 1998): 356-378. 10. Debanjan Mitra and Peter N. Golder, “Customer Perceptions of Product Quality: A Longitudinal Study,” MSI Report No. 050-110, 2006. 11. David A. Aaker, Brand Portfolio Strategy (New York, NY: The Free Press, 2004), p. 132. 12. This comes from the Nikkei BP survey, “Brand Japan 2007,” conducted by Nikkei BP Consulting, is the seventh annual survey-based evaluation of some 1,000 brands in the Japanese market. 13. David A. Aaker and Robert Jacobson, “The Value Relevance of Brand Attitude in High Technology Markets,” Journal of Marketing Research, 38/4 (November, 2001): 485-493. 14. Nikkei BP Consulting, op. cit.
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