New Strategies on Brand Building

Seminar by Al and Laura Ries

1. The fundamental law of Marketing is the Law of Leadership. It is better to be first than to be better. Microsoft launched in 1981 while Apple launched in 1984. Apple is better in hardware, software and other areas but has only 3% share while Microsoft has 94% share.
2. If first is perceived to be the best, then automatically the company will attract good people, good distributors and so on. The key is to create the perception in the mind that being first means being the best.
3. To win the battle in market one needs to win the battle in mind. Xerox invented laser printer. But did not enter the market. HP was the first. Red Bull was the first energy drink. Coca cola introduced KMX energy drink. Red Bull outsold KMX 20:1. Last leader brand produced by Coca cola was ‘Sprite’. Their strategy has predominantly to be better.
4. Instead of trying to build a better product win the ‘better perception’.
5. Another Law of Marketing is the Law of Mind. First in the market is nothing. First in mind is everything. Duryea was the first car in the market but Ford’s Model T was first in mind. Yuengling was the first beer in market but Budweiser was first beer in mind. Similarly, first bookstore on Net was Powell’s.com but Amazon.com is first in mind.
6. First search engine was Alta Vista. But the first search engine in mind is Google. Focus gets one into the mind. Alta Vista turned itself into a portal. It lost its focus and was ultimately sold to Overture and then to Yahoo. Today, Google is the leading Search Engine. Not enough to be first but need to be first in the mind.
7. The Law of Leadership is the Law of PR. Building buzz makes news. Being first in a new category makes news. Not being better than your competitors.
8. Law of Profits. You can sell anything if it’s cheap enough. To make money you need a brand.
9. Motorola invented the cell phone. But Motorola put its name on a variety of products. In last 10 years, Motorola has achieved sales of $289 bn. And a net profit margin of less than one half of one percent. It is now in the process of getting focused. It has sold its satellite and other businesses. Nokia too once made everything including paper. But it decided to focus on cell phones and has now dominated this market. Nokia, in last 10 years, achieved sales of $193 bn. And a net profit margin of 11%.
10. What makes India successful today? High intelligence and low wages. Success will turn the low wages into high wages. As a result business will move from India to China, USA. Is a country with medium intelligence and high wages? It is successful because it has powerful brands. India will not become powerful if it does not have powerful brands. If Indian brands don’t go global, global brands will come here and take over.
11. Law of Line Extension. You can’t stand for something if you put your name on everything. In the Japanese electronics market, everybody makes everything. It’s a line extension society. Nobody builds a brand. Everybody sells on price. Nobody makes money. The total consumer electronic industry in Japan, over last 10 years, has made revenues of $3 trillion but its net profit margin has been just 0.2%. Whereas in America the revenues of top 500 companies, in last 10 years, has been $7 trillion and net profit margin 6%. Automobile market in Japan is more focused.
12. Japan has everything. Intelligent workforce, world-class production facilities and so on. But no Marketing. In last 15 years, Japanese stock market has gone down by 59% while the American stock market has risen by 378%. The same thing will happen in Korea. They too will put their name on everything and fail to build brands. IBM too put its name on everything. It suffered a mainframe mentality. Did not capture the position in mind for PCs. In the last 23 years has lost $15 bn. on PCs. It has now sold out to Lenovo. The leader in PCs is Dell. Ironically, the 2nd year student of the University of Texas was pitted against the world’s largest viz. IBM and the student won because Dell had one product, one market, one distribution channel and has had an outstanding stock market performance.
13. Law of Divergence. As time goes on every category will diverge. Telephones will branch out into becoming regular telephones, cordless telephones, walkie-talkies and cell phones. Similarly, television will diverge into Broadcast television, Pay-per-view television, Cable television and Satellite television. TV sets branch out into becoming Cathode-ray tube (CRT), Liquid-Crystal display (LCD), Liquid crystal on Silicon (LCOS), Digital Light Processing (DLP), Plasma, Organic light-emitting diode (OLED). Hotels will diverge into being expensive, medium price, low price, motels, low price motels, suite hotels, weekly hotels.
14. Divergence comes from Darwin who has explained the concept in ‘The origin of Species’. The panthera tree has a lion, a jaguar, a tiger and a leopard. Humanoid tree has the Gorilla, Chimpanzee, Orangutan and the Human being. Man did not evolve. He diverged. Evolution is gradual change. Divergence is abrupt change.
15. Today, all the hype is about convergence. Nicholas Negroponte predicted convergence. ‘The Wall Street Journal’ on July 14, 1993 carried the following report: “Shock is a common feeling these days among leaders of 5 of world’s biggest industries: computing, communications, consumer electronics, entertainment and publishing. Under a common technological lash–the increasing ability to cheaply convey huge chunks of video, sound, graphics and text in digital form–they are transforming and converging.”
16. Companies never give up. First interactive TV was launched in 1977. It failed to take off. First Web TV was launched in1997. It didn’t take off. Microsoft is now working on a Media center TV. Every time a new technology arrives the shout for convergence goes up.
17. Apple iPod sold 14 mn pcs. And, with all the hype around smart phones which are equipped with 3-G networks and have a game player and a TV and a credit card and so on has not been such a hit. ‘Trea’ the brand of such a convergence device has sold just 602,000 pcs.
18. Average life of a cell phone is 18 months. Will one sell off a smart phone so soon? In a scenario of divergence there will be people who will opt to pay $5000 for a smart phone inasmuch as there will be people who will want a simple cell phone.
19. TVs are getting bigger and PCs are getting smaller and heavier. But everybody is running around trying to combine things. McDonald’s has gone to the extent of opening a hamburgher hotel. As if people who stay in a hotel are interested only in eating hamburgers.
20. Convergence was invented by the Swiss army knife. Convergence can work where convenience is an issue. For instance having a convenience store next to a gas station. It will not take over the grocery market but satisfies the convenience value.
21. George Santayana stated that ‘those who cannot remember the past are condemned to repeat it.’ Sears Roebuck had a catalogue which had convergence products listed in it and they did not take off. One of them was a Food processor and Pleasure vibrator. In sports they have tried to have the same stadium work as a Football stadium and a Baseball stadium. It is good at neither. Single sports stadiums have prospered.
22. Bad ideas never die. Combination of an airplane and a car. Or a combination of a boat and an automobile. The resultant amphicar drives like a boat and floats like a car. It does neither well. A flying car is too light for the road and too heavy for the sky.
23. Law of Expansion. If a brand name is put on everything it weakens the brand name. Chevrolet is a large, small, cheap, expensive, car or truck. It is everything and yet nothing. Volkswagen, after tasting success through its Beetle, expanded to think big, think fast, think smart and think ahead and came out with different types of cars. It failed. Mercedes moved down the market. And expanded into bringing out a cheaper version, a sports car, mini van, mini truck, mountain bike, and a baby Benz. Initially, it sold well but in the long run it has destroyed the brand.
24. Saturn was the only brand with one model, one price. It was very successful. In 1994, it was no.1 car in terms of vehicles sold per dealer. Then it decided to expand and go upscale. In 2004, it was in 12th position in terms of number of vehicles sold per dealer. One doesn’t buy the same brand of car. When one is young and single then one buys a Saturn. When one gets promoted possibly a BMW. After marriage buy a Volvo and when one gets divorced a Ferrari. One moves according to the ladder of life.
25. Law of Contraction. When a brand focuses it succeeds. Howard Schultz’s Starbucks sells only coffee. Willie’s coffee shop sold everything. Starbucks has succeeded while nobody hears of Willie’s. Narrow the focus. Subway sells only one type of sandwich viz. the submarine sandwich. The conventional way of growing a store is to sell as many things as possible. But 'Toy r Us' sells only toys and is hugely successful. With a few kilowatts of power but converted into a laser beam through narrow focusing can achieve immense power. Rolex means an expensive watch. Zara means just-in-time fashion.
26. The secret of success is if you want to be rich, you have to do what rich people did before they became rich. If you want to have a successful company, you have to do what successful company leaders did before they became successful. Don’t look at them now when they have become successful and do what they are doing now. Do what they did before becoming successful. Emery freight was into everything. Fred Smith narrowed the focus-small packages overnight. The fastest growing city in USA with only one industry is Las Vegas.
27. Law of Opposites. Need to be the opposite of what got in mind first. Instead of trying do what the leader does and do it better try to do it differently. Red Bull was the first energy drink. Everybody copied Red Bull. There were 37 different brands of energy drinks–all in 8.30 oz. cans. ‘Monster’ came in and launched a 16 oz. can. Today, Monster is no. 2 brand. It took an opposite position to Red Bull. The largest selling pickle is Vlasic. It is sold from shelves. ‘Claussen’ came in and occupied the position of being ‘crisp’ pickle. And, was sold from the refrigerated section of the Mall. Being sold from this section automatically got associated with ‘crispness’. The opposite position. Similarly, candy bars are associated with being for kids. ‘Snickers’ is the first candy bar for adults. The leading operating system is Microsoft but it is proprietary. Linux took the opposite position of being a free operating system. Coca Cola was established in 1886. It was associated with old generation. Pepsi came in and got itself associated with ‘New Generation’.
28. Along the same lines Listerine was leading Mouthwash but it was bad tasting. Many other brands were launched which were also ‘bad tasting’. ‘Scalp’ was a brand which took the opposite position of being ‘good tasting’. ‘Wal Mart’ is cheap. But Target is ‘cheap chic’. New York is the largest city and is on the East Coast. Los Angeles is 2nd largest and is on the West Coast. Marlboro is no.1 brand. It is Western and Macho. No.2 brand is ‘Newport’ which is Eastern and Menthol. Hertz is no.1 car rental for businessmen. So, they have their outlets located outside the airport. ‘Enterprise’ took opposite position of having outlets in suburbs and serving the common man. Barbie dolls are good looking while Bratz dolls are ugly.
29. Law of the mushy middle. Nature favors the extremes. The perception is that the sweet spot lies in the middle of market. Reality is that the center is the wrong place to be in. In airlines industry, the extremely expensive airlines are doing well. At bottom end, with absolutely no frills, airlines are doing well. But ‘Delta’ and ‘American Airlines’ in the middle are doing badly. As the market diverges the extremes do well. ‘Wal Mart’ is cheap, Target is cheap chic. Both are doing well. But ‘K Mart’ which tried to occupy the middle position failed. Every category diverges to create opportunities at the extreme but not in middle. There are cheap laptops and expensive full-feature laptops but no market in the middle.
30. Law of Patience. It takes time to build a brand. Like a plane which slowly gathers speed and takes off. Unlike the rocket launcher. Tylenol was introduced in 1956. In 2000, it became the largest selling single drug in USA and its sales crossed $500 mn. One needs 110% of power to take off but at 30000 feet one throttles back to 70% of power. It took 17 years to build the Taj Mahal. Rocket launches turn into fads. Cabbage dolls and hula-hoops are examples.
31. Law of Exceptions. There are exceptions to every law. The law will not work 100% of the time. For instance Virgin puts its name on everything. But Virgin is headed by Branson who is a PR genius. If one’s company has such a genius then one can think of branding everything with same name. Instead of basing strategies on exceptions base them on consensus work.
32. Law of 2nd brands. Introduce another brand for a different category. Toyota introduced a Lexus in an up market segment. It became the largest selling luxury brand in America. Customers don’t buy a Lexus because it is made by Toyota but in spite of it being made by Toyota. When Levis wanted to go casual they first created Levis ‘Tailored Classics’ which failed miserably. Levis then launched the range under the name ‘Dockers’. It became a successful $1 bn. Brand. Gillette’s most successful brand is ‘Mach 3’. Now, Gillette is coming out with a 5-blade shaving system. It will be branding it with a different name viz. ‘Fusion’. Motorola too has now started using a different brand name for its cell phone viz. ‘Razr’.
33. Given that all cameras are going digital and PCs are turning digital, if one looks at Kodak and Kodak is associated with film, in order to save the company one could evaluate keeping Kodak as a film brand and launch a second brand for digital market. To save the brand one could look at moving the brand name to digital market. From a marketing perspective it means moving the name from one point in brain to another which is very difficult. Kodak is associated with film and not the digital market even though it invented digital cameras. Kodak entered the digital market with brand name Kodak and lost its leadership. One can claim the caterpillar to be a flying caterpillar but actually they are 2 separate entities. Barnes & Noble is the largest bookstore in America. B&N tried to move the name on to Internet and failed. Amazon a new company succeeded.
34. Brands are built in a blaze of publicity or PR. Botox was built totally on PR over a period of 9 years. It launched its first ad campaign 9 years after its launch. Viagra was built on PR which was followed by an ad plan. PR gets the idea into the mind. It is the nail. Advertising entrenches the idea in mind. It is like a hammer. Volkswagen was launched in1950. It was PR that built up the brand. It was only in 1960 that the ad campaign was launched. Ad campaign helped it to reach the 500 mn. Unit sale figure. Harry Potter was built by PR. Cheesecake factory is a restaurant which is no.1 restaurant chain in America. It never advertised in 28 years.
35. If one wants to make one’s company famous then one can make one’s CEO famous. Jeff Bezos, Steve Ballmer, Michael Dell, Herb Kellegher, Linus Torvalds. Trump is the King of PR.
36. Advertising has little credibility in the mind. What you say about yourself has little credibility. The percentage that think advertising is honest is going down. PR has credibility in the context of ‘Third Party Effect’. Oprah Winfrey picked 48 books. Each one of them made it to the NYT list. There is a book titled ‘East of Eden’-John Steinbeck. It had sold 50,000 books but then Oprah Winfrey picked it and its sales touched 1 mn. copies. What we need is PR oriented advertising. PR establishes credibility of the brand. Advertising reaffirms the brand’s credibility. Advertising Agencies focus on creativity. This is wrong. You can’t have advertising trying to make advertising famous. What advertising industry believes in is PR not advertising. They seem to be interested only in awards.
37. Advertising can be effective if message is right. Find out what’s in the mind and reinforce the idea in mind. Any advertising that touches an idea or concept that is already embedded in the prospect’s mind is the right message. Especially, if that idea or concept contains a motivating reason to buy the brand.
38. Advertising is like a good joke. Best jokes don’t communicate, they just take advantage of what’s already in the mind.
39. Law of Advertising. It maintains your brand. Many established brands don’t spend enough on advertising. Can’t rely on PR forever. The belief can’t be that once a brand is established then its market share is mine forever. So let’s spend our ad dollars on line extensions, new flavors, new market segments. Nothing decays as surely as a brand unsupported by advertising.
40. Law of the Word. Volvo looks at ‘safety’. It invests in ‘safety’. But then it lost its focus and came out with a convertible. Its sales dipped. Owning a word leads to profits. Brands are built in the mind. To find that word and own it one has to sacrifice and give up the rest of the market and focus. Nokia gave up the rest and focused on cell phone. Movado is a museum watch. Zippo is a wind-proof lighter. Among B-Schools, Northwestern is known for Marketing, Chicago for Quantitative Analysis and Harvard for Management.
41. After studying the competition decide on the position opposite and own the word. For instance, most fitness clubs are for men and women. ‘Curves’ is a fitness club only for ‘Women’. Marlboro threw out the cowgirls and began to own cowboys. Competition for United Jersey bank is Chase and Citi. Impression is that big banks are slow. So United Jersey bank became the fast bank.
42. The American Cancer Association advertises the 7 danger signals of cancer. Nobody remembers one. ‘3 signs of heart attack’, ‘5 rules for a healthier heart’. Too much information. Basically the heart is a pump. It is the same size no matter what the size of the person. So if a person starts bloating the pump starts struggling. So focus only on obesity. The 3 biggest sports in America are breakfast, lunch and dinner.
43. Leaders own the category. One thinks of the leader. One may not buy it. Where consultants are concerned, Drucker owned ‘Management’, Porter owned ‘Strategy’, Tom Peters ‘Excellence’, Michael Hammer ‘Reengineering’. Movie stars too own a word. John Wayne became a Man’s man, Marilyn Monroe, the sexy woman, Julia Roberts, the pretty woman, Arnold Schwarzenegger the ‘Terminator’.
44. If you can own one attribute in the mind, the prospect will give you many others.
45. Guatemala in Central America does not own a word in people’s minds and therefore even though it has the capacity of being a world-class tourist destination it is not. The Mayan ruins of Guatemala are one of the richest archaeological sites in world. And just as Taj Mahal is associated with India and the Great Wall with China, there is no such association of the Mayan ruins with Guatemala. Tourism is just 1% of GDP. In order to get that association one can think of changing Guatemala to Guatemaya. India is famous for its ‘intellectual capital’–its PhDs and engineers and so on-and yet one doesn’t project it that way.
46. Law of the negative. See if one can turn it into a positive. Volvo turned ugliness into reliability.
47. Law of focus. Every company needs to resist the temptation to keep adding products and services. As categories grow and opportunities appear as forks on the pathway, the tendency is to take both forks. In airline industry, the 2 forks could be illustrated as Passengers or cargo, business or tourist, domestic or international, high or low prices, full service or no frills, first class or coach and so on. Southwest however took only one fork. Business destinations only. Coach class service only. Domestic only, no international flights. Only one type of aircraft in comparison to delta which as 8 different types of aircraft. The result is that Southwest Airlines, over the last 10 years, has earned a revenue of $44 bn. And a net profit margin of 8 percent. While the 5 largest airlines in USA have together earned $657 bn. And, a net income loss of $646.
48. Law of Borders. No borders for a brand. The future belongs to brands. Anywhere in the world the bar contains the same brands. But the global brand needs to come from somewhere. Coca Cola is from America. Lexus is from Japan even though it is made in America. Brand needs to be consistent with the country of origin. Italy with fashion, Switzerland with watches, India with intellectual capital. If one is strong in one country then one can move the strength to another country. Siemens, no.1 brand in Europe now no.1 in USA. A global brand has to be acceptable worldwide.
49. Law of consistency. Success is measured over a period of time. In a constantly changing world we don’t.
50. Law of singularity. A car that’s safe. An expensive watch.