FALL 2003 VOL.45 NO.

MITSloan
Management Review

David Aaker

The Power of the

Branded Differentiator

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of the article appears as originally published. REPRINT NUMBER 45116
The Power of the
Branded Differentiator
T he competitive terrain for most brands today is difficult to brutal. Many
are contending with overcapacity, downward price pressures and eroding
margins. Whole classes of products are stale, improvements are quickly
copied, and proliferation only confuses people and ultimately turns them off.
For many consumers, competing brands are essentially the same. In this con-
text, it is increasingly hard to create and maintain points of differentiation,
one of the main drivers of brand strength.
The power of differentiation in building brand strength has been documented
by Young & Rubicam Inc.’s Brand Asset Valuator study, a global survey of brand
equity conducted every few years that covers more than 35 countries, 13,000
brands, 450 global brands and 50 measures organized along four key dimensions
— differentiation, relevance, esteem and knowledge. As one Y&R expert put it,
“Differentiation is the engine of the brand train — if the engine stops, so will the
train.”1 Successful new brands consistently score highest on that dimension, and
mature brands — even when they remain strong on relevance, esteem and
knowledge — start to fade when they lose clear points of differentiation.
There is considerable logic behind such results. If a brand fails to develop or
Many brands today
maintain differentiation, consumers have no basis for choosing it over others.
mean little to The product’s price will then be the determining factor in a decision to pur-
chase. Absent differentiation, the core of any brand and its associated business
consumers, who have — a loyal customer base — cannot be created or sustained.
Creating or obtaining points of differentiation is a challenge. It is difficult to
become accustomed come up with new products, features, services or programs that in the eyes of
to buying on price customers are truly distinctive and deliver worthwhile benefits. Worse, even
when a company does develop a point of difference, aggressive competitors
alone. But a new tool often quickly copy it. The solution is to brand the differentiator. While a specific
point of differentiation can be copied, a brand can be owned and actively man-
can help companies aged to create a lasting point of difference in the customer’s mind.
A branded differentiator can be a feature, service, program or ingredient. To
separate themselves
be worthy of the term “differentiator” — to be more than just a name slapped on
from the crowd. a feature — it must be meaningful to customers; that is, it must be both perti-
nent and substantial enough to matter when people are purchasing or using the
product or service. It must also be actively managed (and thus be able to justify
David Aaker
David Aaker is vice chairman of Prophet, a brand strategy firm, and professor emeritus
of marketing strategy at the University of California at Berkeley’s Haas School of Busi-
ness. He can be reached at [email protected].

FALL 2003 MIT SLOAN MANAGEMENT REVIEW 83

the investment of management time) over an extended period — ing higher prices for various products. Remarkably, they had the
years or even decades — so that it does not become stagnant. same response even when they were given information implying
Consider the introduction in 1999 of the “Heavenly Bed” by that the attribute was not relevant to their choice.
Westin Hotels & Resorts. The bed features a custom-designed Whenever relevance is an issue, however, it too can be
mattress set, three different down blankets (for three climates), enhanced by a branded differentiator. It can make a dimension of
five goose-down pillows and more. The new bed was meaningful the category more visible and more important to the decision
to guests, since it addressed a hotel room’s central function: to process. When a prospective buyer of a jacket sees a sun-protec-
provide a good night’s sleep. And it had an impact on the chain’s tion brand attached to it, the fabric and its sun-protection prop-
customers: During the first year of its existence, Westin sites that erties become more salient.
featured the bed experienced a 5% increase in customer satis- The existence of a brand name also makes it easier for con-
faction, a noticeable improvement in perceptions of cleanliness, sumers to remember the differentiator and to link it to the parent
room décor and maintenance, and increased room occupancy. or master brand. The name can represent a complex set of attrib-
The company actively manages the brand, making it a moving utes and benefits and the logical links between the two. People
target for competitors. For example, it sells the Heavenly Bed who buy Chevron gas, for example, don’t have to read up on
directly and has generated considerable word-of-mouth buzz gasoline ingredients to connect Techron to the Chevron Corp.
through such sales. Westin also extended the brand by creating a brand; they may simply remember the name and assume it is a
“Heavenly Bath” line and a Web site — the “Heavenly Online beneficial addition to the product. Similarly, consumers who find
Catalog” — to make products and accessories available. The com- out about Procter & Gamble Co.’s Pampers Parenting Institute
pany employs advertising, promotions, loyalty programs and on- will easily connect it to Pampers diapers and will intuit the range
site communication to maintain the connection in the public’s of complex information available on that Web site.
mind between the Heavenly line and Westin Hotels. Nothing A third reason to brand a differentiator is to enable more effi-
would be worse, from Westin’s perspective, than finding that peo- cient and effective communication. For example, a new product
ple were attributing the Heavenly line to a competitor. feature that is self-evidently important to the product designers
In this article, we’ll explore the different types of branded dif- may induce nothing but yawns in the target audience. Attempts to
ferentiators, the pros and cons of developing them internally communicate the feature’s benefits can sound like typical puffery.
versus looking outside for them and questions about managing Giving the feature a name can make it easier to express the differ-
these “brands within brands.” Before getting to those topics, entiator’s value to the public.
however, it’s necessary to explain why branding a differentiator Finally, a branded differentiator can also be the basis for sus-
is an important and valuable task. tainable competitive advantage, especially if it is actively man-
aged. The company that has created and developed the brand
Why Brand Them? will not be easily overcome on that dimension, even if rivals
Any addition to a branded offering that has real value will differ- replicate the differentiator. An example is Amazon.com Inc.’s
entiate the product or service whether it is branded or not, so 1-Click ordering, a service that plays a key role in defining the
why expend the extra effort? There are several reasons, most of company. The online retailer missed a golden opportunity to
which go back to the basic value of a brand in any context. brand another point of differentiation that would be invaluable
First, the existence of a brand can add credibility to claims made — the ability to recommend products on the basis of a cus-
on its behalf. The message to consumers is that the organization tomer’s purchase history and those of people who had bought
believed the new benefit was worth the commitment that goes with similar offerings. As a result, that feature became a commodity
branding. They will instinctively sense that the effort was under- that many e-commerce sites employ.
taken for a reason. The existence of four-wheel drive in automo- The fundamental point in all of this is that branding a differ-
biles is a good example. Many auto manufacturers offer this entiator, just like branding the actual product or service, can pay
feature, but Audi AG has a technologically advanced branded ver- off in a variety of ways. The following examples show the bene-
sion, quattro, that gives it a credibility lacking in generic versions. fits of using different types of differentiators — features, services,
The ability of a brand to add credibility was rather dramati- programs and ingredients. Managers who search for a differen-
cally shown in a study of branded attributes.2 The researchers tiator in all four areas (keeping in mind that the categories can
found that the inclusion of a branded attribute (such as Alpine overlap) will be more likely to find an effective one.
Class fill for a down jacket, Authentic Milanese for pasta and
Studio Designed for compact disc players) dramatically affected Branded Features. A branded feature can signal superior per-
customer preferences for premium-priced brands. Survey formance for a great variety of products. It can also provide a way
respondents cited the branded attributes as justification for pay- for a company to own that point of superiority over time.

84 MIT SLOAN MANAGEMENT REVIEW FALL 2003

 The Gillette Co.’s Oral-B brand, for example, has created a team of physicians for such calls. One response was to brand the
position for itself over the years as the toothbrush “more dentists HMO’s same-day appointment systems as “Urgent Care” and to
use.” The company makes its innovations visible with branded emphasize its ability to deliver same-day personal contact with a
features. For example, its Indicator bristles, which change color as physician. The brand helped reposition a negative signal as a
the brush becomes worn, have been well received in the market- positive attribute.
place. And the market leader, the Oral-B Advantage toothbrush, A branded service can help redefine a company’s business.
has branded features that help communicate its points of differ- For example, when competitors are all selling a similar product,
entiation: the Power Tip bristles at the end of the brush that help the company that offers a systems solution could change what
clean hard-to-reach areas and the Action Cup shape that con- customers want to buy. United Parcel Service Inc. was just a
forms to teeth and gum contours. package delivery service until it began working with companies
A branded feature can also differentiate by reflecting an orga- to offer help with logistics, customs, planning and more. It now
nization’s heritage and promise. Krispy Kreme Doughnuts Corp. offers a set of branded solutions under the umbrella brand UPS
has enjoyed incredible buzz and sales growth after starting to sell Supply Chain Solutions. These branded differentiators have the
at retail in the early 1990s. Early on, one enterprising retailer put potential to create a new product category in which its tradi-
a “Hot Light” sign in the shop window. When the light was tional rivals cannot compete.
turned on, passersby knew that hot doughnuts would soon be for
sale. For fanatics, who now often line up outside a store before Branded Programs. The classic examples are loyalty programs
opening time, the sign is a beacon. It is also a symbol of the core such as Hilton Hotel Corp.’s HHonors and frequent flyer plans.
brand promise of freshness and has been redesigned and nur- The key is that the program must be carefully managed — con-
tured over time to maintain that association. tinually updated so that it remains engaging and truly a differen-
A branded feature can also support the idea that a company, tiator. The airline programs, pioneered by American Airlines Inc.
particularly in the high-tech sector, is innovative. Sony Corp. has more than 20 years ago, still have a lot of vitality and sources of
a host of brand features such as DUALSHOCK 2 analog con- ongoing differentiation. But as these programs have proliferated,
troller (in PlayStation 2), i.LINK digital interface (in VAIO lap- it has been difficult to make them appealing. United Airlines Inc.’s
tops) and Super NightShot (in the Handycam). All signal a point Mileage Plus, for example, has the Star Alliance (which allows
of differentiation for tech-loving customers and reflect the inno- customers to use their miles with more than a dozen airlines),
vation pillar of the Sony brand. Note that while these are all, in a electronic upgrade programs, and a host of promotions and part-
sense, ingredients in the finished products, they distinguish nerships with hotels, rental car companies and restaurants.
themselves as features in that they have a direct impact on what Web technology has been an impetus for many new branded
the customer can do with the electronics. programs. The Pampers Web site includes not only the Pampers
Parenting Institute but also a sweepstakes for free diapers and
Branded Services. The classic way to differentiate a brand in a three “centers” dedicated to learning, playing and sharing infor-
mature category is to add a service. Branding that service and mation. The institute provides authoritative advice from world
actively managing it over time can create a differentiator for the experts in child care, health and development; it also publishes an
parent brand. e-mail newsletter and leads a campaign to reduce sudden infant
Consider the Tide Stain Detective, a section of the Tide Web death syndrome. In part because of the institute, in 2001 Pampers
site that provides customers with advice on removing almost any had the second most popular baby-care site with around one
stain. The service provides both credibility and differentiation for million unique visitors per month, many times more than that of
Procter & Gamble Co.’s Tide detergent. Further, as managers Kimberly-Clark Corp.’s Huggies. And those visiting the Pampers
actively improve the service over time, its impact will grow as site and accessing its branded programs are 30% more likely to
more people use the site. And as the Tide Stain Detective brand purchase Pampers than if they had not done so.3
becomes better established, competitors will have a harder time Some branded programs can enhance the brand by provid-
countering by offering a service of their own. ing a basis for a closer relationship with their customers. Harley-
Service organizations can sometimes solve an image problem Davidson Inc.’s Ride Planner, for instance, allows a visitor to the
by bundling and branding existing operations. For example, one Harley Web site to create a route by keying in starting and ending
large HMO was perceived as an impersonal bureaucracy that points plus desired stops. The output is a detailed map that can
emphasized efficiency over human compassion. The image in be saved and shared with friends. The site also features a Photo
part derived from the HMO’s use of a semiautomated appoint- Center, a place to post photos of memorable trips for friends and
ment system; in addition, patients couldn’t be sure of seeing family to enjoy regardless of their location. Among motorcycle
their regular doctors on same-day visits since the HMO used a manufacturers, only Harley has these branded programs.

FALL 2003 MIT SLOAN MANAGEMENT REVIEW 85

Branded Ingredients. Another approach to differentiation is branded point of differentiation. Still another approach is to use a
to brand an ingredient or technology. Even if customers do not branded differentiator not suitable for competitors; a value brand
understand how the ingredient works, the fact that it was branded could access certain differentiators, for example, that would only
lends credibility to the explicit or implied claims and can result in harm premium brands if they were to follow suit.
enhanced perceptions of quality. An external branded differentiator may enhance the perceived
A branded ingredient is especially useful in communicating quality of the master brand. Poulan Lawn Tractors, less expensive
quality when it is difficult to see it objectively. Chevron, for exam- and established than its competitors, visibly communicates that it
ple, would have a hard time explaining why the inclusion of the uses engines from the Briggs & Stratton Corp. in order to elimi-
product branded as Techron in its gasoline makes it different. The nate or at least reduce the perception that Poulan’s quality might
brand, however, provides a communication aid. Customers may be inferior. Since the Briggs & Stratton brand signals good qual-
not know how Techron works (it cleans engine deposits, among ity to consumers, a natural implication is that the other Poulan
other things) but they do know that Chevron thought enough components are also well made. In contrast, competitors such as
about the ingredient to brand it. John Deere and Sears, Roebuck and Co.’s Craftsman are assumed
Many car manufacturers brand ingredients or technologies to to have excellent components and have no incentive to use an
help communicate points of differentiation. For example, Gen- external brand. In fact, using one could detract from their offer-
eral Motors Corp.’s Cadillac DeVille comes with the Northstar ings by suggesting that customers need reassurance about their
engine. The engine gets good gas mileage for its size, offers a par- components. Similarly, a private study of chocolate morsels in
ticularly smooth ride and interacts with the steering, braking and packaged cookies showed that a branded component improves a
traction systems to enhance performance. Cadillac continually product’s perceived quality only when its reputation exceeds that
improves the engine, making it a moving target for competitors. of the master brand. For example, branded chocolate morsels
The Northstar helps explain in part why Cadillac does well in raised perceptions of Nabisco cookies but did nothing for those
owner satisfaction ratings. of Pepperidge Farm, presumably because consumers assumed
that Pepperidge Farm used only the best ingredients anyway.
External Branded Differentiators In addition to influencing consumers’ ideas about quality, an
The examples above were created and built internally, a costly and external branded differentiator needs to augment the product in
difficult process. An alternative is to use another company’s brand, a way that is meaningful to the customer and capable of influ-
one that already has traction, credibility and strong associations as encing choice and loyalty. The K.C. Masterpiece Barbecue Sauce
a differentiator. Assuming such a brand can be located, the master brand clearly added a flavor to Lay’s Potato Chips that is per-
brand’s problem is then reduced to creating an alliance and ceived to be tasty and unique, but Pizza Hut Doritos and Taco
attaching it to the target brand. Although not easy, these tasks can Bell Doritos failed because they did not offer a flavor or customer
sometimes be considerably more feasible and economical than the connection that would help the chip brand. A successful external
effort and expense required to create a new brand. differentiator, in contrast, gives the main brand access to its loyal
Although external branded differentiators can be features, customer base. Thus Dreyer’s seeks to gain a following among
services or programs, they are most commonly ingredients. Snickers devotees by producing ice cream of that flavor.
Dreyer’s Grand Ice Cream, for example, has an agreement with An external brand can only be thought of as a differentiator
Mars Inc. that allows it to use Snickers, Twix, Milky Way and only when it is part of the position and long-term strategy of the
M&M’s as the basis for ice cream flavors. To qualify as an exter- master brand. A brand that represents a visible attribute but is
nal branded differentiator, it cannot be available to competitors. secondary to the positioning strategy does not qualify. For exam-
Thus brands that do not grant exclusive rights within a product ple, the fact that Toyota Motor Corp.’s Lexus brand uses the Mark
category to one company — Intel Inside, Dolby and Gore-Tex, Levinson audio system in its vehicles impresses audiophiles but is
for example — are not differentiators. not salient for most customers.
To obtain such exclusivity, the parent brand may opt to sign An external branded differentiator might have several reasons
a long-term contract with the differentiator, as Dreyer’s did with to partner with a master brand. It may gain visibility and credi-
Mars. But there are other ways to create the appearance of exclu- bility, for example, as in the case of K.C. Masterpiece with its
sivity that can also be effective (and potentially cheaper). One is to attachment to Lay’s. Another reason is simply the revenue that
use first-mover advantage and heavy cobrand building to become the relationship will generate. When Poulan emphasizes that its
so dominant that others are either discouraged from attempting a machines are powered by Briggs & Stratton engines, it has made
similar strategy or fail to gain visibility with customers if they do a statement to customers that is difficult to retract. As a result,
try it. Another approach is combine an external feature or ingre- Poulan is much less likely to go elsewhere for engines. Quite apart
dient with an internal one so that the combination becomes the from the revenue obtained for the sale of the product, an exter-

86 MIT SLOAN MANAGEMENT REVIEW FALL 2003

nal brand can also earn licensing revenue. The revenue that Her- takes a lot of work. Before moving ahead, managers should ask
shey Foods Corp. gets for supplying General Mills Inc.’s Betty themselves these questions:
Crocker brand and others with chocolate is over and above the
value of the product alone. ■ What is the brand’s identity and position? What will resonate
with customers and help differentiate the brand from com-
Lease or Own? petitors?
As with many other managerial tools today, companies must
decide whether it is better to own an internally branded differen- ■ Are there existing features or services that could be branded?
tiator or to lease an established external brand. Would their potential be enhanced if they were bundled or
There is evidence that in some cases using an established (or extended with another brand?
external) branded differentiator is the more effective approach.4
In an experiment, researchers compared extension concepts, one ■ How is the market segmented? For each segment, what are the
containing an established ingredient brand (P&G’s Dayquil current and emerging benefits that customers are seeking?
added to Kraft Foods’ LifeSavers) and the other a self-branded What possible branded differentiators would increase sales and
ingredient (ClearCold added to LifeSavers). The established loyalty?
ingredient brand scored higher in both the line extension and
brand extension contexts. The credibility of the established brand ■ Are there sources of brand differentiators outside the com-
was critical. Of course, this was a laboratory test and it may be pany? How might they be connected to the brand?
that with a compelling story brilliantly executed, ClearCold could
eventually have been accepted. Once a branded differentiator is in the works, it must be linked
Leasing an external brand was the answer for H.J. Heinz Co., to the target brand. It’s a disaster when a company develops a
which struggled when it attempted to market a ketchup with its powerful branded differentiator only to learn that most con-
own brand of hot sauce. It has succeeded in the meantime, how- sumers attribute it to a competitor’s brand. The final key is the
ever, by cobranding its Ketchup Kick’rs with the Tabasco brand. need to take a strategic, long-term view. Branded differentiators
Use of the established brand gave the product credibility and dif- should have a relatively long life; otherwise the cost of brand
ferentiated it from similar products on the market. building will have to be amortized over too short a period to
But generally speaking, the internal option is preferable. When make it worthwhile. And they must be actively managed during
the branded differentiator is owned, the parent brand can man- their lifetimes; some might need their own development pro-
age it without interference and retain all the resulting profits and grams in order to maintain the strength needed to perform the
brand equity. The external brand must be markedly superior to assigned role.
make it the better choice. Consider General Electric Co.’s experi- Many consumers today are jaded by brands suffering from
ence in using a “Water by Culligan” water filtration system for its stagnant management in overcrowded categories. At the same
upscale refrigerators. GE came to realize that the external brand time, people are looking for help in choosing products and serv-
was not enough of a differentiator over its own “Smart Water” fil- ices that are appearing at a bewildering rate. Branded differentia-
tration system. Thus despite the fact that Culligan is the top name tors, when chosen carefully and managed thoughtfully, can
in water conditioners, GE stopped using Culligan’s water filters in rejuvenate old brands and give them a way of establishing or
its refrigerators. recovering the competitive advantage that all companies seek.
Although internal ownership may be preferable, there’s no pat
answer to the lease-or-own dilemma. To make the decision, com-
REFERENCES
panies must assess their ability to develop and manage a branded
differentiator on their own while considering the availability of 1. S. Agris, presentation at Stanford University, March 2001.

an external possibility. If a promising outsider does exist, man- 2. G.S. Carpenter, R. Glazer and K. Nakamoto, “Meaningful Brands
From Meaningless Differentiation: The Dependence on Irrelevant
agers must also factor in the feasibility of working with an Attributes,” Journal of Marketing Research 31 (August 1994): 339-350.
alliance over time. 3. J. Neff, “Pampers,” Advertising Age, August 6, 2001, S4.
4. K.K. Desai and K.L. Keller, “The Effects of Ingredient Branding
Managing Branded Differentiators Strategies on Host Brand Extendibility,” Journal of Marketing 66 (Janu-
Managers considering when and how to use a branded differen- ary 2002): 73-93.

tiator must keep two essential points in mind. First, the existence
of the concept should not be used as a rationale to add brands Reprint 45116. For ordering information, see page 1.
indiscriminately. Second, identifying a branded differentiator Copyright  Massachusetts Institute of Technology, 2003. All rights reserved.

FALL 2003 MIT SLOAN MANAGEMENT REVIEW 87

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