Brand power key to profits, U.S. professor advises

by Setsuko Kamiya

Japanese manufacturers have long considered the quality of their products to be their greatest strength.

American marketing guru David A. Aaker, however, believes they now need to focus on differentiating their products to survive in an increasingly competitive global market.

“Differentiation is really the key to having healthy profits,” said Aaker, a professor emeritus of marketing at the Haas School of Business at the University of California at Berkeley. “A brand allows you to differentiate.”

In a recent interview with The Japan Times in Tokyo, Aaker pointed out that having a strong brand gives businesses a loyal customer base and makes communications with customers more effective.

He also noted that a strong brand can lower the chances of retailers wrongly pricing a product, removing it from shelves, or reducing its impact.

Aaker’s writings, popular since the early 1990s, have influenced businesses in the United States and Europe with the philosophy that a brand is a strategic asset essential to long-term performance.

A key for building a strong brand is to know your “brand identity,” what the brand stands for, and how you want the brand to be perceived by customers, he stressed.

Aaker, who since October has been serving as an adviser to advertising agency Dentsu Inc., said Japanese firms have recently begun to attach importance to building brands, but they are still five to 10 years behind their Western competitors.

“After focusing on cost, price and so forth, so many Japanese companies are recognizing that their businesses have become too much of a commodity and their margins are shrinking,” he said.

In interviews with top management personnel, Aaker found that Japanese manufacturers have begun to notice they are less brand-oriented and more instinctively engineering- and manufacturing-driven instead.

Top officials at Sony Corp. were the sole exception. Among all the Japanese executives he spoke with, Sony’s showed the strongest interest in branding, Aaker said, adding that this is why he thinks Sony is a strong company.

“Every company is so obsessed with being innovative, and the implication is that if you are innovative, branding will take care of itself because people will buy your products,” he said.

But with foreign competitors improving the quality of their products in the global market, quality alone can no longer serve as the point of differentiation for Japanese products.

“When you relied on quality as a point of differentiation but have a weak personality, how are you going to differentiate? That’s their challenge,” Aaker said.

Some Japanese companies have finally begun to establish “brand-managing teams.”

But Aaker observes that the teams are given lower budgets and authority on business strategies than their Western counterparts, and that such a phenomenon is unique to Japan. “It’s very hard for them to become a brand-building force if they have no power, no money.”

Japanese brand-management teams tend to focus on tactical aspects like logos and visual representation, which are important but just a part of what brand building is, he said. Lacking authority, they have yet to get into the very basics of what a brand should stand for.

“Many companies in Japan, even though they say they know that a brand is important, they don’t really understand why how you build a brand is important. I think these teams need to get more sophisticated about branding.”