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The 22 Immutable Laws Of Marketing by Al Ries is a true marketing classic that was recommended to me by every marketer and their mother.
The central idea of the book is that people’s purchasing behavior follows certain patterns (laws) and that you have to align your marketing with those laws or risk failing. Al Ries’s line of thinking goes like this: There are laws of nature, so why shouldn’t there be laws of marketing? He then goes on to give many examples to illustrate the validity of the laws, as well as examples of companies that failed by ignoring them.
The following summary of The 22 Immutable Laws Of Marketing by Al Ries is meant to be concise, reminding me of high-level concepts and not trying to recreate the whole book. This summary is basically a bunch of notes and lessons paraphrased or quoted directly from the book and does not contain my own thoughts.
• When a company makes a mistake today, footprints quickly show up on its back as competition runs off with its business. To get the business back, the company has to wait for others to make mistakes and then figure out how to exploit the situation.
• The way to avoid making mistakes in the first place is to make sure your programs are in tune with the laws of marketing.
• There are laws of nature, so why shouldn’t there be laws of marketing? You can build a great-looking airplane, but it’s not going to get off the ground unless it adheres to the laws of physics, especially the law of gravity. You can build an architectural masterpiece on a sand dune, but the first hurricane will undermine your creation. So it follows that you can build a brilliant marketing program only to have one of the immutable laws knock you flat if you don’t know what they are.
• Programs that work are almost always in tune with some fundamental force in the marketplace.
Law 1. The Law of Leadership
It’s better to be first than it is to be better.
• Many people believe that the basic issue in marketing is convincing prospects that you have a better product or service. Not true. If you have a small market share and you have to do battle with larger, better-financed competitors, then your marketing strategy was probably faulty in the first place. You violated the first law of marketing.
• The basic issue in marketing is creating a category you can be first in. It’s the law of leadership: It’s better to be first than it is to be better. It’s much easier to get into the mind first than to try to convince someone you have a better product than the one that did get there first.
• Most companies wait until a market develops, then they jump in with a better product, often with their corporate name attached. In today’s competitive environment, a me-too product with a line extension name has little hope of becoming a big, profitable brand.
• The leading brand in any category is almost always the first brand into the prospect’s mind.
• Not every first is going to become successful, however. Timing is an issue—your first could be too late. For example, USA Today is the first national newspaper, but it is unlikely to succeed. It has already lost $800 million and has never had a profitable year. In a television era, it may be too late for a national newspaper.
• Some firsts are just bad ideas that will never go anywhere. Frosty Paws, the first ice cream for dogs, is unlikely to make it. The dogs love it, but the owners are the ones who buy groceries, and they think that dogs don’t need an ice cream of their own. They should be happy just to lick the plates.
• The law of leadership applies to any product, any brand, any category. Let’s say you didn’t know the name of the first college founded in America. You can always make a good guess by substituting leading for first.
• No two products are any similar than twins are. Yet twins often complain that the first of the two whom a person meets always remains their favorite, even though the person also gets to know the other one. People tend to stick with what they’ve got. If you meet someone a little better than your wife or husband, it’s really not worth making the switch, what with attorneys’ fees and dividing up the house and kids.
• One reason the first brand tends to maintain its leadership is that the name often becomes generic. Xerox, the first plain-paper copier, became the name for all plain-paper copiers. People will stand in front of a Ricoh or a Sharp or a Kodak machine and say, “How do I make a Xerox copy?” They will ask for the Kleenex when the box clearly says Scott. They will offer you a Coke when all they have is Pepsi- Cola.
• If you’re introducing the first brand in a new category, you should always try to select a name that can work generically. Lawyers advise the opposite, but what do they know about the laws of marketing?
• Not only does the first brand usually become the leader, but also the sales order of follow-up brands often matches the order of their introductions. The best example is ibuprofen. Advil was first, Nuprin was second, Medipren was third. That’s exactly the sales order they now enjoy: Advil has 51 percent of the ibuprofen market, Nuprin has 10 percent, and Medipren has 1 percent.
• If the secret of success is getting into the prospect’s mind first, what strategy are most companies committed to? The better product strategy. The latest and hottest subject in the business management field is benchmarking. Touted as the “ultimate competitive strategy,” benchmarking is the process of comparing and evaluating your company’s products against the best in the industry. It’s an essential element in a process often called “total quality management.” Unfortunately, benchmarking doesn’t work. Regardless of reality, people perceive the first product into the mind as superior. Marketing is a battle of perceptions, not products.
Law 2. The Law of the Category
If you can’t be first in a category, set up a new category you can be first in.
• If you didn’t get into the prospect’s mind first, don’t give up hope. Find a new category you can be first
• When you launch a new product, the first question to ask yourself is not “How is this new product better than the competition?” but “First what?” In other words, what category is this new product first in?
• This is counter to classic marketing thinking, which is brand oriented: How do I get people to prefer my brand? Forget the brand. Think categories. Prospects are on the defensive when it comes to brands. Everyone talks about why their brand is better. But prospects have an open mind when it comes to categories. Everyone is interested in what’s new. Few people are interested in what’s better.
• When you’re the first in a new category, promote the category. In essence, you have no competition. DEC told its prospects why they ought to buy a minicomputer, not a DEC minicomputer.
Law 3. The Law of the Mind
It’s better to be first in the mind than it is to be first in the marketplace.
• Is something wrong with the law of leadership in chapter 1? No, but the law of the mind modifies it. Being first in the mind is everything in marketing. Being first in the marketplace is important only to the extent that it allows you to get in the mind first.
• IBM wasn’t first in the marketplace with the mainframe computer. Remington Rand was first, with UNIVAC. But thanks to a massive marketing effort, IBM got into the mind first and won the computer battle early.
• The law of the mind follows from the law of perception. If marketing is a battle of perception, not product, then the mind takes precedence over the marketplace.
• Thousands of would-be entrepreneurs are tripped up every year by this law. Someone has an idea or concept he or she believes will revolutionize an industry, as well it may. The problem is getting the idea or concept into the prospect’s mind.
The conventional solution to the problem is money. That is, the resources to design and build product or service organizations plus the resources to hold press conferences, attend trade shows, run advertisements, and conduct direct mail programs.
Unfortunately, this gives rise to the perception that the answer to all marketing questions is the same: money. Not true. More money is wasted in marketing than in any other human activity (outside of government activities, of course). You can’t change a mind once a mind is made up.
• Do you want to change something on a computer? Just type over or delete the existing material. Do you want to change something in a mind? Forget it. Once a mind is made up, it rarely, if ever, changes. The single most wasteful thing you can do in marketing is trying to change a mind.
• If you want to make a big impression on another person, you cannot worm your way into their mind and then slowly build up a favorable opinion over a period of time. The mind doesn’t work that way. You have to blast your way into the mind.
The reason you blast instead of worm is that people don’t like to change their minds. Once they perceive you one way, that’s it. They kind of file you away in their minds as a certain kind of person. You cannot become a different person in their minds.
• One of the mysteries of marketing is the role of money. One day a few dollars can work a major miracle. The next day millions of dollars can’t save a company from going under. When you have an open mind to work with, even a small amount of money can go a long way. Apple got off the computer ground with $91,000 contributed by Mike Markkula.
Law 4. The Law of Perception
Marketing is not a battle of products, it’s a battle of perception.
• Marketing people are preoccupied with doing research and “getting the facts.” They analyze the situation to make sure that the truth is on their side. Then they sail confidently into the marketing arena, secure in the knowledge that they have the best product and that ultimately the best product will win.
• It’s an illusion. There is no objective reality. There are no facts. There are no best products. All that exists in the world of marketing are perceptions in the minds of the customer or prospect. The perception is the reality. Everything else is an illusion.
• Most people think they are better perceivers than others. They have a sense of personal infallibility. Their perceptions are always more accurate than those of their neighbors or friends. Truth and perception become fused in the mind, leaving no difference between the two.
• To cope with the terrifying reality of being alone in the universe, people project themselves on the outside world. They “live” in the arena of books, movies, television, newspapers, magazines. They “belong” to clubs, organizations, institutions. These outside representations of the world seem more real than the reality inside their own minds.
People cling firmly to the belief that reality is the world outside of the mind and that the individual is one small speck on a global spaceship. Actually, it’s the opposite. The only reality you can be sure about is in your own perceptions. If the universe exists, it exists inside your own mind and the minds of others. That’s the reality that marketing programs must deal with.
There may well be oceans, rivers, cities, towns, trees, and houses out there, but there just isn’t any way for us to know these things except through our own perceptions. Marketing is a manipulation of those perceptions.
• Most marketing mistakes stem from the assumption that you’re fighting a product battle rooted in reality. All the laws in this book are derived from the exact opposite point of view.
• What some marketing people see as the natural laws of marketing are based on a flawed premise that the product is the hero of the marketing program and that you’ll win or lose based on the merits of the product. Which is why the natural, logical way to market a product is invariably wrong.
Only by studying how perceptions are formed in the mind and focusing your marketing programs on those perceptions can you overcome your basically incorrect marketing instincts.
• Each of us (manufacturer, distributor, dealer, prospect, customer) looks at the world through a pair of eyes. If there is objective truth out there, how would we know it? Who would measure it? Who would tell us? It could only be another person looking at the same scene through a different pair of eye windows.
• Truth is nothing more or less than one expert’s perception. And who is the expert? It’s someone who is perceived to be an expert in the mind of somebody else.
• Marketing people focus on facts because they believe in objective reality. It’s also easy for marketing people to assume that truth is on their side. If you think you need the best product to win a marketing battle, then it’s easy to believe you have the best product. All that’s required is a minor modification of your own perceptions.
• Changing a prospect’s mind is another matter. Minds of customers or prospects are very difficult to change. With a modicum of experience in a product category, a consumer assumes that he or she is right. A perception that exists in the mind is often interpreted as a universal truth. People are seldom, if ever, wrong. At least in their own minds.
• You believe what you want to believe. You taste what you want to taste. Soft-drink marketing is a battle of perceptions, not a battle of taste.
• What makes the battle even more difficult is that customers frequently make buying decisions based on second-hand perceptions. Instead of using their own perceptions, they base their buying decisions on someone else’s perception of reality. This is the “everybody knows” principle.
• If you have had a bad experience with a Japanese car, you’ve just been unlucky, because everybody knows the Japanese make high-quality cars. Conversely, if you have had a good experience with an American car, you’ve just been lucky, because everybody knows that American cars are poorly made.
Law 5. The Law of Focus
The most powerful concept in marketing is owning a word in the prospect’s mind.
• A company can become incredibly successful if it can find a way to own a word in the mind of the prospect. Not a complicated word. Not an invented one. The simple words are best, words taken right out of the dictionary.
This is the law of focus. You “burn” your way into the mind by narrowing the focus to a single word or concept. It’s the ultimate marketing sacrifice.
Federal Express was able to put the word overnight into the minds of its prospects because it sacrificed its product line and focused on overnight package delivery only.
• In a way, the law of leadership—it’s better to be first than to be better—enables the first brand or company to own a word in the mind of the prospect. But the word the leader owns is so simple that it’s invisible.
The leader owns the word that stands for the category. For example, IBM owns computer. This is another way of saying that the brand becomes a generic name for the category. “We need an IBM machine.” Is there any doubt that a computer is being requested?
• An astute leader will go one step further to solidify its position. Heinz owns the word ketchup. But Heinz went on to isolate the most important ketchup attribute. “Slowest ketchup in the West” is how the company is preempting the thickness attribute. Owning the word slow helps Heinz maintain a 50 percent market share.
• If you’re not a leader, then your word has to have a narrow focus. Even more important, however, your word has to be “available” in your category. No one else can have a lock on it.
You don’t have to be a linguistic genius to find a winner. Prego went against leader Ragu in the spaghetti sauce market and captured a 27 percent share with an idea borrowed from Heinz. Prego’s word is thicker.
• The most effective words are simple and benefit-oriented. No matter how complicated the product, no matter how complicated the needs of the market, it’s always better to focus on one word or benefit rather than two or three or four.
• Also, there’s the halo effect. If you strongly establish one benefit, the prospect is likely to give you a lot of other benefits, too. A “thicker” spaghetti sauce implies quality, nourishing ingredients, value, and so on. A “safer” car implies better design and engineering.
• Words come in different varieties. They can be benefit related (cavity prevention), service related (home delivery), audience related (younger people), or sales related (preferred brand).
• Although we’ve been touting that words stick in the mind, nothing lasts forever. There comes a time when a company must change words. It’s not an easy task.
• What won’t work in marketing is leaving your own word in search of a word owned by others.
• The essence of marketing is narrowing the focus. You become stronger when you reduce the scope of your operations. You can’t stand for something if you chase after everything.
• Some companies accept the need to narrow the focus and try to accomplish this strategy in ways that are self-defeating. “We’ll focus on the quality end of the market. We won’t get into the low end where the emphasis is on price.” The problem is that customers don’t believe you unless you restrict your business to high-priced products only, like Mercedes-Benz or BMW.
• You can’t narrow the focus with quality or any other idea that doesn’t have proponents for the opposite point of view. You can’t position yourself as an honest politician, because nobody is willing to take the opposite position (although there are plenty of potential candidates). You can, however, position yourself as the pro-business candidate or the pro-labor candidate and be instantly accepted as such because there is support for the other side.
• When you develop your word to focus on, be prepared to fend off the lawyers. They want to trademark everything you publish. The trick is to get others to use your word. (To be a leader you have to have followers.) It would be helpful for Lotus to have other companies get into the groupware business. It would make the category more important and people would be even more impressed with Lotus’s leadership.
• Once you have your word, you have to go out of your way to protect it in the marketplace. The case of BMW illustrates this very well. For years, BMW was the ultimate “driving” machine. Then the company decided to broaden its product line and chase Mercedes-Benz with large, 700-series sedans. The problem is, how can a living room on wheels be the ultimate driving machine? Not only can you not feel the road, but you’ll also crush all the pylons in your driving commercials.
• The law of focus applies to whatever you’re selling, or even whatever you’re unselling. Like drugs, for example. The antidrug crusade on television and in magazines suffers from a lack of focus. There is no one word driven into the minds of drug users that could begin to unsell the drug concept.
• The law of focus, a marketing law, could help solve one of society’s biggest problems.
Law 6. The Law of Exclusivity
Two companies cannot own the same word in the prospect’s mind.
• When a competitor owns a word or position in the prospect’s mind, it is futile to attempt to own the same word. The Atari story shows the futility of attempting to move in on the home computer position against well-entrenched competitors. A variation called game computer might have been possible because it would have taken advantage of the perception of Atari as a creator of computer games. But that’s about it. The home computer position belonged to Apple, Commodore, and others.
• What often leads marketers down this booby-trapped lane is that wonderful stuff called research. Armies of researchers are employed, focus groups conducted, questionnaires tabulated—and what comes back in a three-pound report is a wish list of attributes that users want from a product or service. So if that’s what people want, that’s what we should give them.
What researchers never tell you is that some other company already owns the idea. They would rather encourage clients to mount massive marketing programs. The theory is that if you spend enough money, you can own the idea. Right? Wrong.
Law 7. The Law of the Ladder
The strategy to use depends on which rung you occupy on the ladder.
• While being first into the prospect’s mind ought to be your primary marketing objective, the battle isn’t lost if you fail in this endeavor. There are strategies to use for No. 2 and No. 3 brands.
• Your marketing strategy should depend on how soon you got into the mind and consequently which rung of the ladder you occupy. The higher the better, of course.
• The mind is selective. Prospects use their ladders in deciding which information to accept and which information to reject. In general, a mind accepts only new data that is consistent with its product ladder in that category. Everything else is ignored.
• What about your product’s ladder in the prospect’s mind? How many rungs are there on your ladder? It depends on whether your product is a high-interest or a low-interest product. Products you use every day (cigarettes, cola, beer, toothpaste, cereal) tend to be high-interest products with many rungs on their ladders. Products that are purchased infrequently (furniture, lawn mowers, luggage) usually have few rungs on their ladders.
• Products that involve a great deal of personal pride (automobiles, watches, cameras) are also high-interest products with many rungs on their ladders even though they are purchased infrequently.
• Products that are purchased infrequently and involve an unpleasant experience usually have very few rungs on their ladders. Automobile batteries, tires, and life insurance are three examples.
• The ultimate product that involves the least amount of pleasure and is purchased once in a lifetime has no rungs on its ladder. Ever hear of Batesville caskets? Probably not, although the brand has almost 50 percent of the market.
• There’s a relationship between market share and your position on the ladder in the prospect’s mind. You tend to have twice the market share of the brand below you and half the market share of the brand above you.
• Marketing people often talk about the “three leading brands” in a category as if it were a battle of equals. It almost never is. The leader inevitably dominates the No. 2 brand and the No. 2 brand inevitably smothers No. 3.
• What’s the maximum number of rungs on a ladder? There seems to be a rule of seven in the prospect’s mind. Ask someone to name all the brands he or she remembers in a given category. Rarely will anyone name more than seven. And that’s for a high-interest category.
• Sometimes your own ladder, or category, is too small. It might be better to be a small fish in a big pond than to be a big fish in a small pond. In other words, it’s sometimes better to be No. 3 on a big ladder than No. 1 on a small ladder.
• The top rung of the lemon-lime soda ladder was occupied by 7-Up. (Sprite was on the second rung.) In the soft-drink field, however, the cola ladder is much bigger than the lemon-lime ladder. (Almost two out of three soft drinks consumed in America are cola drinks.) So 7-Up climbed on the cola ladder with a marketing campaign called “The Uncola.”
As tea is to coffee, 7-Up became the alternative to a cola drink. And 7-Up sales climbed to where the brand was the third largest-selling soft drink in America.
• The ladder is a simple, but powerful, analogy that can help you deal with the critical issues in marketing. Before starting any marketing program, ask yourself the following questions: Where are we on the ladder in the prospect’s mind? On the top rung? On the second rung? Or maybe we’re not on the ladder at all. Then make sure your program deals realistically with your position on the ladder.
Law 8. The Law of Duality
In the long run, every market becomes a two-horse race.
• Early on, a new category is a ladder of many rungs. Gradually, the ladder becomes a two-rung affair.
• The law of duality suggests that the market shares of the top three brands are unstable. Furthermore, the law predicts that the leader will lose market share and No. 2 will gain.
• In a maturing industry, third place is a difficult position to be in.
• Time frames, however, can vary. The fast-moving video game market played itself out in two or three seasons. The long-distance telephone market might take two or three decades.
• When you’re a weak No. 3, like Royal Crown, you aren’t going to make much progress by going out and attacking the two strong leaders. What they could have done is carved out a profitable niche for themselves—The Law of Focus.
• Knowing that marketing is a two-horse race, in the long run, can help you plan strategy in the short run. It often happens that there is no clear-cut No. 2. What happens next depends upon how skillful the contenders are.
• Successful marketers concentrate on the top two rungs. Jack Welch, the legendary chairman and CEO of General Electric, said recently: “Only businesses that are No. 1 or No. 2 in their markets could win in the increasingly competitive global arena. Those that could not were fixed, closed, or sold.” It’s this kind of thinking that built companies like Procter & Gamble into the powerhouses they are. In 32 of its 44 product categories in the United States, P&G commands the No. 1 or No. 2 brands.
• Early on, in a developing market, the No. 3 or No. 4 positions look attractive. Sales are increasing. New, relatively unsophisticated customers are coming into the market. These customers don’t always know which brands are the leaders, so they pick ones that look interesting or attractive. Quite often, these turn out to be the No. 3 or No. 4 brands. As time goes on, however, these customers get educated. They want the leading brand, based on the naive assumption that the leading brand must be better.
Law 9. The Law of the Opposite
If you’re shooting for second place, your strategy is determined by the leader.
• In strength, there is weakness. Wherever the leader is strong, there is an opportunity for a would-be No. 2 to turn the tables. Much like a wrestler uses his opponent’s strength against him, a company should leverage the leader’s strength into a weakness.
• If you want to establish a firm foothold on the second rung of the ladder, study the firm above you. Where is it strong? And how do you turn that strength into a weakness? You must discover the essence of the leader and then present the prospect with the opposite. (In other words, don’t try to be better, try to be different.) It’s often the upstart versus old reliable.
• When you look at customers in a given product category, there seem to be two kinds of people. There are those who want to buy from the leader and there are those who don’t want to buy from the leader. A potential No. 2 has to appeal to the latter group. In other words, by positioning yourself against the leader, you take business away from all the other alternatives to No. 1. If old people drink Coke and young people drink Pepsi, there’s nobody left to drink Royal Crown cola.
• Don’t simply knock the competition. The law of the opposite is a two-edged sword. It requires honing in on a weakness that your prospect will quickly acknowledge. (One whiff of Listerine and you know that your mouth would smell like a hospital.) Then quickly twist the sword. (Scope is the good-tasting mouthwash that kills germs.)
• As a product gets old, it often accrues some negative baggage. This is especially true in the medical field.
• There has to be a ring of truth about the negative if it is to be effective.
• Marketing is often a battle for legitimacy. The first brand that captures the concept is often able to portray its competitors as illegitimate pretenders.
• A good No. 2 can’t afford to be timid. When you give up focusing on No. 1, you make yourself vulnerable not only to the leader but to the rest of the pack.
Burger King’s most successful years came when it was on the attack. It opened with “Have it your way,” which twitted McDonald’s mass-manufacturing approach to hamburgers. Then it hit McDonald’s with “Broiling, not frying” and “The Whopper beats the Big Mac.” All these programs reinforced the No. 2, alternative position.
Then, for some unknown reason, Burger King ignored the law of the opposite. It got timid and stopped attacking McDonald’s. The world was introduced to “Herb the nerd,” “The best food for fast times,” “We do it the way you do it,” “You’ve got to break the rules,” and on and on. It even started a program to attract little kids, the mainstay of McDonald’s strength.
Law 10. The Law of Division
Over time, a category will divide and become two or more categories.
• Like an amoeba dividing in a petri dish, the marketing arena can be viewed as an ever-expanding sea of categories. A category starts off as a single entity. Computers, for example. But over time, the category breaks up into other segments.
• The law of division even affects countries. (Witness the mess in Yugoslavia.) In 1776, there were about 35 empires, kingdoms, countries, and states in the world. By World War II, the number had doubled. By 1970, there were more than 130 countries. Today, some 190 countries are generally recognized as sovereign nations.
• Each segment is a separate, distinct entity. Each segment has its own reason for existence. And each segment has its own leader, which is rarely the same as the leader of the original category. IBM is the leader in mainframes, DEC in minis, Sun in workstations, and so on.
• Instead of understanding this concept of division, many corporate leaders hold the naive belief that categories are combining. Synergy and its kissing cousin the corporate alliance are the buzzwords in the boardrooms of America.
• In the future, according to the press, we won’t have banks, insurance companies, stockbrokers, or mortgage lenders. We’ll have financial services companies. It hasn’t happened yet.
Prudential, American Express, and others have fallen into the financial services trap. Customers don’t buy financial services. They buy stocks or life insurance or bank accounts. And they prefer to buy each service from a different company.
• The way for the leader to maintain its dominance is to address each emerging category with a different brand name, as General Motors did in the early days with Chevrolet, Pontiac, Oldsmobile, Buick, and Cadillac (and recently with Geo and Saturn).
• Companies make a mistake when they try to take a well-known brand name in one category and use the same brand name in another category.
• What keeps leaders from launching a different brand to cover a new category is a fear of what will happen to their existing brands. General Motors was slow to react to the superpremium category that Mercedes-Benz and BMW established. One reason was that a new brand on top of Cadillac would enrage GM’s Cadillac dealers.
Eventually, GM tried to take Cadillac up-market with the $54,000 Allante. It bombed. Why would anyone spend that kind of money on a so-called Cadillac, since their neighbors would probably think they paid only $30,000 or so? No prestige.
• Timing is also important. You can be too early to exploit a new category. Back in the fifties, the Nash Rambler was America’s first small car. But American Motors didn’t have either the courage or the money to hang in there long enough for the category to develop.
It’s better to be early than late. You can’t get into the prospect’s mind first unless you’re prepared to spend some time waiting for things to develop.
Law 11. The Law of Perspective
Marketing effects take place over an extended period of time.
• The long-term effects of marketing are often the exact opposite of its short-term effects.
• In the short term, a sale increases business. But there’s more and more evidence to show that sales decrease business in the long term by educating customers not to buy at “regular” prices.
Aside from the fact that you can buy something for less, what does a sale say to a prospect? It says that your regular prices are too high. After the sale is over, customers tend to avoid a store with a “sale” reputation.
To maintain volume, retail outlets find they have to run almost continuous sales.
• There is no evidence that couponing increases sales in the long run. Many companies find they need a quarterly dose of couponing to keep sales on an even keel. Once they stop couponing, sales drop off. In other words, you keep those coupons rolling out not to increase sales but to keep sales from falling off if you stop. Couponing is a drug. You continue to do it because the withdrawal symptoms are just too painful.
• Any sort of couponing, discounts, or sales tends to educate consumers to buy only when they can get a deal. What if a company never started couponing in the first place? In the retail field, the big winners are the companies that practice “every day low prices”— companies like Wal-Mart and K Mart and the rapidly growing warehouse outlets. Yet almost everywhere you look you see yo-yo pricing. The airlines and supermarkets are two examples.
• In the short term, line extension invariably increases sales. In the long term, it decreases sales.
• Unless you know what to look for, it’s hard to see the effects of line extension, especially for managers focused on their next quarterly report—if a bullet took five years to reach a target, very few criminals would be convicted of homicide.
Law 12. The Law of Line Extension
There’s an irresistible pressure to extend the equity of a brand.
• By far the most violated law in our book is the law of line extension. What’s even more diabolical is that line extension is a process that takes place continuously, with almost no conscious effort on the part of the corporation. It’s like a closet or a desk drawer that fills up with almost no effort on your part.
One day a company is tightly focused on a single product that is highly profitable. The next day the same company is spread thinly over many products and is losing money.
• When a company becomes incredibly successful, it invariably plants the seeds for its future problems.
• When you try to be all things to all people, you inevitably wind up in trouble. “I’d rather be strong somewhere,” said one manager, “than weak everywhere.”
• In a narrow sense, line extension involves taking the brand name of a successful product (e.g., A-1 steak sauce) and putting it on a new product you plan to introduce (e.g., A-1 poultry sauce).
It sounds so logical. “We make A-1, a great sauce that gets the dominant share of the steak business. But people are switching from beef to chicken, so let’s introduce a poultry product. And what better name to use than A-1. That way people will know the poultry sauce comes from the makers of that great steak sauce, A-1.”
But marketing is a battle of perception, not product. In the mind, A-1 is not the brand name, but the steak sauce itself. “Would you pass me the A-1?” asks the diner. Nobody replies: “A-1 what?”
• There are as many ways to line extend as there are galaxies in the universe. And new ways get invented every day. In the long run and in the presence of serious competition, line extensions almost never work.
• Creating flavors is a popular way to try to grab market share. More flavors, more share. Sounds right, but it doesn’t work.
• Invariably, the leader in any category is the brand that is not line extended.
• Why does top management believe that line extension works, in spite of the overwhelming evidence to the contrary? One reason is that while line extension is a loser in the long term, it can be a winner in the short term. Management is also blinded by an intense loyalty to the company or brand. Why else would PepsiCo have introduced Crystal Pepsi in spite of the failures of Pepsi Light and Pepsi AM?
• More is less. The more products, the more markets, the more alliances a company makes, the less money it makes. “Full-speed ahead in all directions” seems to be the call from the corporate bridge.
• Less is more. If you want to be successful today, you have to narrow the focus in order to build a position in the prospect’s mind.
• In the conventional view, a business strategy usually consists of developing an all-encompassing vision. In other words, what concept or idea is big enough to hold all of a company’s products and services on the market today as well as those that are planned for the future?
In the conventional view, strategy is a tent. You stake out a tent big enough so it can hold everything you might possibly want to get into.
IBM has erected an enormous computer tent. Nothing in the computer field, today or in the future, will fall outside the IBM tent. This is a recipe for disaster. As new companies, new products, new ideas invade the computer arena, IBM is going to get blown away. You can’t defend a rapidly growing market like computers even if you are a financial powerhouse like IBM. From a strategic point of view, you have to be much more selective, picking and choosing the area in which to pitch your tent.
• For many companies, line extension is the easy way out. Launching a new brand requires not only money but also an idea or concept. For a new brand to succeed, it ought to be first in a new category (chapter 1: The Law of Leadership). Or the new brand ought to be positioned as an alternative to the leader (chapter 9: The Law of the Opposite). Companies that wait until a new market has developed often find these two leadership positions already preempted. So they fall back on the old reliable line extension approach.
• The antidote for line extension is corporate courage, a commodity in short supply.
Law 13. The Law of Sacrifice
You have to give up something in order to get something.
• The law of sacrifice is the opposite of the law of line extension. If you want to be successful today, you should give something up.
• There are three things to sacrifice: product line, target market, and constant change.
• The full line is a luxury for a loser. If you want to be successful, you have to reduce your product line, not expand it.
• Marketing is a game of mental warfare. It’s a battle of perceptions, not products or services.
• The world of business is populated by big, highly diversified generalists and small, narrowly focused specialists. If line extension and diversification were effective marketing strategies, you’d expect to see the generalists riding high. But they’re not. Most of them are in trouble.
• In the early sixties, Pepsi-Cola finally developed a strategy based on the concept of sacrifice. The company sacrificed everything except the teenage market. Then it brilliantly exploited this market by hiring its icons: Michael Jackson, Lionel Richie, Don Johnson.
Within one generation, Pepsi closed the gap. Today it is only 10 percent behind Coca-Cola in total U.S. cola sales. (In the supermarket, Pepsi-Cola actually outsells Coca-Cola.)
• There seems to be an almost religious belief that the wider net catches more customers, in spite of many examples to the contrary.
• The target is not the market. That is, the apparent target of your marketing is not the same as the people who will actually buy your product. Even though Pepsi-Cola’s target was the teenager, the market was everybody. The 50-year-old guy who wants to think he’s 29 will drink the Pepsi.
The target of Marlboro advertising is the cowboy, but the market is everybody. Do you know how many cowboys are left in America? Very few. (They’ve all been smoking Marlboros.)
• If you try to follow the twists and turns of the market, you are bound to wind up off the road. The best way to maintain a consistent position is not to change it in the first place.
Law 14. The Law of Attributes
For every attribute, there is an opposite, effective attribute.
• Too often a company attempts to emulate the leader. “They must know what works,” goes the rationale, “so let’s do something similar.” Not good thinking. It’s much better to search for an opposite attribute that will allow you to play off against the leader. The key word here is opposite—similar won’t do.
Coca-Cola was the original and thus the choice of older people. Pepsi successfully positioned itself as the choice of the younger generation.
Since Crest owned cavities, other toothpastes avoided cavities and jumped on other attributes like taste, whitening, breath protection, and, more recently, baking soda.
• Marketing is a battle of ideas. So if you are to succeed, you must have an idea or attribute of your own to focus your efforts around. Without one, you had better have a low price. A very low price.
• Some say all attributes are not created equal. Some attributes are more important to customers than others. You must try and own the most important attribute.
Cavity prevention is the most important attribute in toothpaste. It’s the one to own. But the law of exclusivity points to the simple truth that once an attribute is successfully taken by your competition, it’s gone. You must move on to a lesser attribute and live with a smaller share of the category. Your job is to seize a different attribute, dramatize the value of your attribute, and thus increase your share.
• You can’t predict the size of a new attribute’s share, so never laugh at it.
Law 15. The Law of Candor
When you admit a negative, the prospect will give you a positive.
• It goes against corporate and human nature to admit a problem. For years, the power of positive thinking has been drummed into us. “Think positive” has been the subject of endless books and articles. So it may come as a surprise to you that one of the most effective ways to get into a prospect’s mind is to first admit a negative and then twist it into a positive.
• Candor is very disarming. Every negative statement you make about yourself is instantly accepted as truth. Positive statements, on the other hand, are looked at as dubious at best. Especially in an advertisement.s mind is to first admit a negative and then twist it into a positive.
• Marketing is often a search for the obvious. Since you can’t change a mind once it’s made up, your marketing efforts have to be devoted to using ideas and concepts already installed in the brain. You have to use your marketing programs to “rub it in.” No program did this as brilliantly as the Avis No. 2 program.
• The explosive growth of communications in our society has made people defensive and cautious about companies trying to sell them anything. Admitting a problem is something that very few companies do.
• One final note: The law of candor must be used carefully and with great skill. First, your “negative” must be widely perceived as negative. It has to trigger an instant agreement with your prospect’s mind. If the negative doesn’t register quickly, your prospect will be confused and will wonder, “What’s this all about?”
Next, you have to shift quickly to the positive. The purpose of candor isn’t to apologize. The purpose of candor is to set up a benefit that will convince your prospect.
Law 16. The Law of Singularity
In each situation, only one move will produce substantial results.
• Many marketing people see success as the sum total of a lot of small efforts beautifully executed. They think they can pick and choose from a number of different strategies and still be successful as long as they put enough effort into the program. If they work for the leader in the category, they fritter away their resources on a number of different programs. They seem to think that the best way to grow is the puppy approach—get into everything.
If they’re not with the leader, they often end up trying to do the same as the leader, but a little better. Trying harder is not the secret of marketing success.
Whether you try hard or try easy, the differences are marginal. Furthermore, the bigger the company, the more the law of averages wipes out any real advantage of a trying-harder approach.
• History teaches that the only thing that works in marketing is the single, bold stroke. Furthermore, in any given situation there is only one move that will produce substantial results.
Most often there is only one place where a competitor is vulnerable. And that place should be the focus of the entire invading force.
• What works in marketing is the same as what works in the military: the unexpected.
• To find that singular idea or concept, marketing managers have to know what’s happening in the marketplace. They have to be down at the front in the mud of the battle. They have to know what’s working and what isn’t. They have to be involved. Because of the high cost of mistakes, management can’t afford to delegate important marketing decisions.
It’s hard to find that single move if you’re hanging around headquarters and not involved in the process.
Law 17. The Law of Unpredictability
Unless you write your competitors’ plans, you can’t predict the future.
• Implicit in most marketing plans is an assumption about the future. Yet marketing plans based on what will happen in the future are usually wrong.
With hundreds of computers and an army of meteorologists, no one can predict the weather three days in advance, so how do you expect to predict your market three years in advance?
• Failure to forecast competitive reaction is a major reason for marketing failures.
• There are those who would say that America’s big problem is the lack of the long view, that American management is too short term in its thinking. Won’t eliminating long-term plans make things even worse?
On the surface those concerns are real. But it’s important to understand what is meant by long term versus short term. Most of corporate America’s problems are not related to short-term marketing thinking. The problem is short-term financial thinking.
Most companies live from quarterly report to quarterly report. That’s a recipe for problems. Companies that live by the numbers die by the numbers.
• Good short-term planning is coming up with that angle or word that differentiates your product or company. Then you set up a coherent long-term marketing direction that builds a program to maximize that idea or angle. It’s not a long-term plan, it’s a long-term direction.
• Tom Monaghan’s short-term angle at Domino’s Pizza was to come up with that “home delivery” idea and build a system that delivered pizzas quickly and efficiently. His long-term direction was to build the first nationwide home delivery chain as rapidly as possible.
Monaghan couldn’t own the words home delivery until he had enough franchisees to afford national advertising. He accomplished both objectives, and today Domino’s is a $2.65 billion company with a 4 % share of the home delivery business. Monaghan did it all without a complex, 10-year plan.
• So what can you do? How can you best cope with unpredictability? While you can’t predict the future, you can get a handle on trends, which is a way to take advantage of change. One example of a trend is America’s growing orientation toward good health. This trend has opened the door for a number of new products, especially healthier foods.
• The danger in working with trends is extrapolation. Many companies jump to conclusions about how far a trend will go.
Equally as bad as extrapolating a trend is the common practice of assuming the future will be a replay of the present. When you assume that nothing will change, you are predicting the future just as surely as when you assume that something will change. Remember Peter’s Law: The unexpected always happens.
• While tracking trends can be a useful tool in dealing with the unpredictable future, market research can be more of a problem than a help. Research does best at measuring the past. New ideas and concepts are almost impossible to measure. No one has a frame of reference. People don’t know what they will do until they face an actual decision.
• One way to cope with an unpredictable world is to build an enormous amount of flexibility into your organization. As change comes sweeping through your category, you have to be willing to change and change quickly if you are to survive in the long term.
• A company must be flexible enough to attack itself with a new idea. Change isn’t easy, but it’s the only way to cope with an unpredictable future.
• There’s a difference between “predicting” the future and “taking a chance” on the future. Orville Redenbacher’s Gourmet Popping Corn took a chance that people would pay twice as much for a high-end popcorn. Not a bad risk in today’s affluent society.
• No one can predict the future with any degree of certainty. Nor should marketing plans try to.
Law 18. The Law of Success
Success often leads to arrogance, and arrogance to failure.
• Ego is the enemy of successful marketing. Objectivity is what’s needed. When people become successful, they tend to become less objective. They often substitute their own judgment for what the market wants.
• Success is often the fatal element behind the rash of line extensions. When a brand is successful, the company assumes the name is the primary reason for the brand’s success. So they promptly look for other products to plaster the name on.
Actually, it’s the opposite. The name didn’t make the brand famous (although a bad name might keep the brand from becoming famous). The brand got famous because you made the right marketing moves. In other words, the steps you took were in tune with the fundamental laws of marketing.
You got into the mind first. You narrowed the focus. You preempted a powerful attribute.
Your success puffs up your ego to such an extent that you put the famous name on other products. Result: early success and long-term failure as illustrated by the failure of Donald Trump.
• The more you identify with your brand or corporate name, the more likely you are to fall into the line extension trap. “It can’t be the name,” you might be thinking when things go wrong. “We have a great name.”
• Actually, ego is helpful. It can be an effective driving force in building a business. What hurts is injecting your ego in the marketing process. Brilliant marketers have the ability to think as a prospect thinks. They put themselves in the shoes of their customers. They don’t impose their own view of the world on the situation. (Keep in mind that the world is all perception anyway, and the only thing that counts in marketing is the customer’s perception.)
• DEC’s founder is Kenneth Olsen. His success made Ken such a believer in his own view of the computer world that he pooh-poohed the personal computer, then open systems, and, finally, reduced instruction set computing (RISC). In other words, Ken Olsen ignored three of the biggest developments in the computer category. (A trend is like a tide—you don’t fight it.) Today Ken Olsen is out.
• The bigger the company, the more likely it is that the chief executive has lost touch with the front lines. This might be the single most important factor limiting the growth of a corporation. All other factors favor size. Marketing is war, and the first principle of warfare is the principle of force. The larger army, the larger company, has the advantage. But the larger company gives up some of that advantage if it cannot keep itself focused on the marketing battle that takes place in the mind of the customer.
• If you’re a busy CEO, how do you gather objective information on what is really happening? How do you get around the propensity of middle management to tell you what they think you want to hear? How do you get the bad news as well as the good?
One possibility is to go “in disguise” or unannounced. This is especially useful at the distributor or retailer level. In many ways, this is analogous to the king who dresses up as a commoner and mingles with his subjects. Reason: to get honest opinions of what’s happening.
• Another aspect of the problem is the allocation of time. Quite often the CEO’S time is taken up with too many United Way meetings, too many industry activities, too many outside board meetings, too many testimonial dinners.
According to one survey, the average CEO spends 18 hours a week on “outside activities.” The next time-waster is internal meetings. The average CEO spends 17 hours a week attending corporate meetings and 6 hours a week preparing for those meetings. Since the typical top executive works 61 hours a week, that leaves only 20 hours for everything else, including managing the operation and going down to the front. No wonder chief executives delegate the marketing function. That’s a mistake.
• Marketing is too important to be turned over to an underling. If you delegate anything, you should delegate the chairmanship of the next fund-raising drive. (The vice president of the United States, not the president, attends the state funerals.) The next thing to cut back on are the meetings. Instead of talking things over, walk out and see for yourself. As Gorbachev told Reagan, “It is better to see once than to hear a hundred times.”
• Small companies are mentally closer to the front than big companies. That might be one reason they grew more rapidly in the last decade. They haven’t been tainted by the law of success.
Law 9. The Law of Failure
Failure is to be expected and accepted.
• Too many companies try to fix things rather than drop things. “Let’s reorganize to save the situation” is their way of life. Admitting a mistake and not doing anything about it is bad for your career. A better strategy is to recognize failure early and cut your losses.
American Motors should have abandoned passenger cars and focused on Jeep. IBM should have dropped copiers and Xerox should have dropped computers years before they finally recognized their mistakes.
• The Japanese seem to be able to admit a mistake early and then make the necessary changes. Their consensus management style tends to eliminate the ego. Since a large number of people have a small piece of a big decision, there is no stigma that can be considered career damaging. In other words, it’s a lot easier to live with “We were all wrong” than the devastating “I was wrong.”
This egoless approach is a major factor in making the Japanese such relentless marketers. It’s not that they don’t make mistakes, but when they do, they admit them, fix them, and just keep coming.
• The hugely successful Wal-Mart has another approach that enables the company to deal with failure. It’s called Sam Walton’s “ready, fire, aim” approach. It’s an outgrowth of his penchant for constant tinkering.
Walton was well aware that nobody hits the target every time. But at Wal-Mart, people aren’t punished if their experiments fail. As Wal-Mart’s chief executive said in a Business Week article, “If you learn something and you’re trying something, then you probably get credit for it. But woe to the person who makes the same mistake twice.”
Wal-Mart is different from many large corporations because, so far, it appears to be free of an insidious disease called the “personal agenda” that can creep into any corporation.
• Marketing decisions are often made first with the decision maker’s career in mind and second with the impact on the competition or the enemy in mind. There is a built-in conflict between the personal and the corporate agenda.
This leads to a failure to take risks. (It’s hard to be first in a new category without sticking your neck out.) When the senior executive has a high salary and a short time to retirement, a bold move is highly unlikely.
Even junior executives often make “safe” decisions so as to not disrupt their progress up the corporate ladder. Nobody has ever been fired for a bold move they didn’t make.
• In some American companies, nothing gets done unless it benefits the personal agenda of someone in top management. This severely limits the potential marketing moves a company can make. An idea gets rejected not because it isn’t fundamentally sound but because no one in top management will personally benefit from its success.
Law 20. The Law of Hype
The situation is often the opposite of the way it appears in the press.
• When IBM was successful, the company said very little. Now it throws a lot of press conferences. When things are going well, a company doesn’t need the hype. When you need the hype, it usually means you’re in trouble.
• Young and inexperienced reporters and editors tend to be more impressed by what they read in other publications than by what they gather themselves. Once the hype starts, it often continues on and on.
• History is filled with marketing failures that were successful in the press. The essence of the hype was not just that the new product was going to be successful. The essence of the hype was that existing products would now be obsolete.
Over the years, the greatest hype has been for those developments that promise to single-handedly change an entire industry, preferably one that’s vital to the American economy.
• Forget the front page. If you’re looking for clues to the future, look in the back of the paper for those innocuous little stories.
• Capturing the imagination of the public is not the same as revolutionizing a market.
• Not that there isn’t a grain of truth in every over-hyped story. Anyone with $580,000 plus tax can buy a little five-seat Bell helicopter. The pen computer might be attractive to a narrow segment of the market, especially the traveling-salesperson crowd. The videophone could revolutionize the phone-sex industry, and there’s a substantial market for mobile homes and recreational vehicles, all manufactured on assembly lines. But, for the most part, hype is hype. Real revolutions don’t arrive at high noon with marching bands and coverage on the 6:00 P.M. news. Real revolutions arrive unannounced in the middle of the night and kind of sneak up on you.
Law 21. The Law of Acceleration
Successful programs are not built on fads, they’re built on trends.
• A fad is a wave in the ocean, and a trend is the tide. A fad gets a lot of hype, and a trend gets very little. Like a wave, a fad is very visible, but it goes up and down in a big hurry. Like the tide, a trend is almost invisible, but it’s very powerful over the long term.
• A fad is a short-term phenomenon that might be profitable, but a fad doesn’t last long enough to do a company much good. Furthermore, a company often tends to gear up as if a fad were a trend. As a result, the company is often stuck with a lot of staff, expensive manufacturing facilities, and distribution networks.
• When the fad disappears, a company often goes into a deep financial shock.
• Here’s the paradox. If you were faced with a rapidly rising business, with all the characteristics of a fad, the best thing you could do would be to dampen the fad. By dampening the fad, you stretch the fad out and it becomes more like a trend.
You see this in the toy business. Some owners of hot toys want to put their hot toy name on everything. The result is that it becomes an enormous fad that is bound to collapse. When everybody has a Ninja turtle, nobody wants one anymore.
The Ninja turtle is a good example of a fad that collapses in a hurry because the owner of the concept got greedy. The owner fans the fad rather than dampening it.
On the other hand, the Barbie doll is a trend. When Barbie was invented years ago, the doll was never heavily merchandised into other areas. As a result, the Barbie doll has become a long-term trend in the toy business.
• The most successful entertainers are the ones who control their appearances. They don’t overextend themselves. They’re not all over the place. They don’t wear out their welcome.
• One way to maintain a long-term demand for your product is to never totally satisfy the demand.
Law 22. The Law of Resources
Without adequate funding, an idea won’t get off the ground.
• Even the best idea in the world won’t go very far without the money to get it off the ground. Inventors, entrepreneurs, and assorted idea generators seem to think that all their good ideas need is professional marketing help.
Nothing could be further from the truth. Marketing is a game fought in the mind of the prospect. You need money to get into a mind. And you need money to stay in the mind once you get there.
• You’ll get further with a mediocre idea and a million dollars than with a great idea alone.
• Ideas without money are worthless. Well. . . not quite. But you have to use your idea to find the money, not the marketing help. Marketing can come later.
• Remember: An idea without money is worthless. Be prepared to give away a lot for the funding.
• In marketing, the rich often get richer because they have the resources to drive their ideas into the mind. Their problem is separating the good ideas from the bad ones, and avoiding spending money on too many products and too many programs—The Law of Focus.
• Competition is fierce. The giant corporations put a lot of money behind their brands. Procter & Gamble and Philip Morris each spend more than $2 billion a year on advertising. General Motors spends $1.5 billion a year.
• Unlike a consumer product, a technical or business product has to raise less marketing money because the prospect list is shorter and media is less expensive. But there is still a need for adequate funding for a technical product to pay for brochures, sales presentations, and trade shows as well as advertising.
• The more successful marketers front load their investment. In other words, they take no profit for two or three years as they plow all earnings back into marketing.
• Money makes the marketing world go round. If you want to be successful today, you’ll have to find the money you need to spin those marketing wheels.
• There is danger in trying to apply the laws of marketing within an existing organization. Many of these laws fly in the face of corporate ego, conventional wisdom, and the Malcolm Baldrige awards.
• The law of perception runs counter to the corporate culture of most companies where trying to be better is deeply ingrained. People are forever running around and “benchmarking” the leader in the category and then setting out to “beat their specs.” It’s what the quality movement is all about.
• The law of leadership is tough for many to swallow. Most people want to believe they got to the top by being better, not by being first. So beware! Management won’t take kindly to any suggestions that will take the emphasis off their better product strategy.
• The law of sacrifice could cause you problems. Offering everything for everybody is deeply ingrained in most organizations. If you have any doubts, just stroll down the aisles of any supermarket. What you will find is variation upon variation of sizes, flavors, and forms. It boggles the mind. Why this happens is painfully obvious. Nobody wants to focus.
Large companies have offices filled with young, bright marketing people. Do you expect them to just sit there and do nothing? They feel compelled to tinker and make improvements. After all, how can they make their mark on the organization?
• The law of focus suggests owning a word in the prospects’ minds. What word does your company own in the minds of your prospects? “I don’t know,” might be your response. “We make a variety of products for many different industries.” So beware! You have some pruning to do, which, isn’t going to be easy to sell to the powers that be.
• The law of perspective will frustrate anyone looking for quick marketing victories. Companies want to see instant results. So beware! Those accountants will give you a hard time in the short term.
• The law of line extension is the most dangerous law of all to deal with. In this case, you have to be prepared to demolish what management holds to be a basic truth: Big successful brands have equity that can be exploited to encompass different kinds of products.
Line extension makes eminent sense in the boardroom. You won’t find one director in a dozen who would be willing to challenge management on this critical issue.
So beware! Management will not take kindly to any efforts to curtail their equity expansions. You may just have to wait them out. Management is mutable, but the laws of marketing are not.
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