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 n...

David Aaker: "The Father of Modern Branding"