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Alries

Focus: The most-important principle in marketing

If you had to pick one concept to define the essence of marketing, what would that one concept be?

I believe the essence of marketing is associating your brand with a single idea in consumers’ minds. Some examples:
• BMW . . . Driving.
• Mercedes-Benz . . . Prestige.
• Volvo . . . Safety.

When you own a word in the mind, you have what I call a “focus.”

What’s a Chevrolet?

In the past decade, General Motors has spent $8.8 billion advertising its Chevrolet brand. Suppose someone asked you, What’s a Chevrolet? What single idea has Chevrolet put in the minds of car buyers? None, that I know of. Why is that? Because the brand is not focused on anything in particular. Except for BMW, Mercedes, and Volvo, that’s true of most automobile brands.

Professor Allen Smith at Florida Atlantic University sent students from his “principles of advertising” class to interview automobile dealers. They were surprised to find how few salespeople could articulate a cohesive marketing message for their brands. Said Smith: “They found out most people didn’t know anything about the brand strategy at all. They knew the gas mileage and horsepower and all that but not the concept of the brand itself.”

A large, small, cheap, expensive car or truck. Actually, it’s easy to define what a Chevrolet is. And that’s the problem with most brands. They have line-extended themselves into oblivion.

Chevrolet has nine car models: Camaro, Caprice, Corvette, Cruze, Impala, Malibu, Sonic, Spark, and Volt. And nine truck models: Avalanche, Captiva Sport, Colorado, Equinox, Express/G van, Silverado, Suburban, Tahoe, and Traverse.

When you sell everything under one brand name, it’s almost impossible to create an advertising program that will differentiate your brand.

The best you can do is to create some unique, uplifting slogan that hopefully people will remember. Like Chevrolet’s old slogan, “Chevy runs deep,” or the current one, “Find new roads.”

Ask a BMW owner, why he or she bought a BMW and they are likely to say, ‘because it’s a fun car to drive.’ (An idea “The ultimate driving machine” put in car buyers’ minds.)

Ask a Chevrolet owner, why he or she bought a Chevrolet and will they say, ‘because I’m looking for new roads to drive on?’

A narrow focus versus a broad focus.

n 1962, Chevrolet was the dominant automobile brand in America with 31 percent of the market. That same year, 87 percent of Chevrolet vehicles were “entry-level” cars.

In 2012, Chevrolet markets entry-level cars as well as cheap cars, luxury cars, sports cars, SUVs, and trucks. But Chevrolet is no longer the dominant automobile brand. Ford is. Ford has 15.2 percent market share versus Chevrolet’s 12.3 percent.

How come Ford outsells Chevrolet in spite of the fact that Ford also markets a wide array of vehicles under one brand name?

Ford has a position. It’s the largest-selling truck brand. Chevrolet doesn’t. Chevrolet has lost its “car” position to Toyota. Chevrolet is No.2 in cars as well as No.2 in trucks.

IBM versus a second-year student at the University of Texas.

In 1984, Michael Dell left the university to launch a personal computer company, a business he had founded in his college dorm room. And what company was Dell’s major competitor at the time? Would you believe, it was IBM, a company that had 50 percent of the personal computer market that year.

In 1984, IBM had net profits of $6.6 billion, the largest any company anywhere in the world had ever achieved. That year, according to Fortune magazine, IBM was the most admired company in America.

Yet it was Dell, not IBM, that went on to become the world’s largest maker of personal computers. After losing a reported $15 billion over a 23-year period, IBM sold its personal computer operations to Lenovo in 2005 for $1.75 billion.

Why was Dell successful and IBM not? Because Dell had a focus. Normally, a company wants to maximize sales by selling its products in all distribution channels. Not Michael Dell. He focused on selling personal computers by phone. And not all types of personal computers either. He focused on the business market only.

Thinking narrow paid off big for Dell. One product: the personal computer. One market: the business market. One distribution channel: direct by phone (later switched to the Internet.)

Dell Computer in the decade of the 1990s had tThinking narrow paid off big for Dell. One product: the personal computer. One market: the business market. One distribution channel: direct by phone (later switched to the Internet.)

Dell Computer in the decade of the 1990s had the best market performance of Standard & Poor’s 500-stock index.

So what happened next? Dell Computer did the same thing as Chevrolet. It got into the consumer field, retail distribution, plus a host of other products and services including MP3 players, television sets, and smart phones, all under the Dell name. And this year, Michael Dell put his company up for sale.

First the sentence, then the trial. That’s the way it is in many corporations today. First you decide what you want to do. Then you figure out the reasons why your decision is the right one. No wonder line extension is so popular. It’s logical. And it supports the No.1 goal of management which is to “expand the business.”

And what better way to expand the business, goes the thinking, then by using our great brand on a number of new products and new markets. Not only is line extension logical, you can always find examples where line extensions have worked. Bud Light. Diet Coke. General Electric. Kraft.

Would you like to smoke? Forget the warnings you read in the paper. You can always find people who smoked all their lives and never got lung cancer. First the decision. Then the supporting reasons.

The case against line extension. It doesn’t depend on case histories. If everyone in an industry line extends their brands (as happened in the beer business) then it’s not an

issue at all. The winner will be the leading brand and its line extension (Budweiser and Bud Light) regardless of what the competition does or doesn’t do. (And in the cola business, Coke and Diet Coke.) The case against line extension is a philosophical exercise. For a brand to exist, it needs to be filed away in the mind. And where does a consumer put your brand in his or her mind? If you say, “Would you like a Budweiser?” the consumer thinks “beer.” Why is this so? Because apparently the Budweiser brand is filed in a mental category called “beer.” Or if you say, “Xerox this document,” the consumer thinks “make a copy.” The Xerox brand is apparently filed in a mental category called “copier.” So what happened when Xerox, the copier company, introduced Xerox computers? Nothing. And Xerox went on to lose billions of dollars.

What’s a Yahoo?

Yahoo became the world’s most-valuable Internet brand by focusing on “search.” At one point in time, Yahoo had a market capitalization of $114 billion. So what did Yahoo do next? You know what they did next because this is what almost all companies do next. They tried to expand the brand. More than a decade ago, Yahoo’s CEO said: “In online commerce and shopping you can expect to see us extend aggressively by broadening and deepening the range of consumer buying, transaction, and fulfillment services we provide across all major categories.”

Which is exactly what it did. Starting as a search engine on the Internet, Yahoo added a raft of features: auctions, calendars, chat rooms, classifieds, e-mail, games, maps, news, pager services, people searches, personals, radio, shopping, sports, stock quotes, weather reports, and yellow pages. And to further its goal of being all things to all people, Yahoo spent a small fortune on acquisitions: $5 billion for Broadcast.com, a service that delivers audio and video over the Internet. $3.7 billion for GeoCities, a home-page service. As a result, Yahoo lost its leadership in search to Google. Today, Yahoo is worth $29.9 billion on the stock market and Google is worth $297.8 billion, almost ten times as much. Furthermore, Yahoo revenues continue to fall. From $7.2 billion in 2008 to $5.0 billion last year.

What’s a wall, a spear, a snake, a tree, a fan, and a rope?

It’s an elephant groped by six blind men. As John Godfrey Saxe’s poem put it: “Though each was partly in the right, and all were in the wrong!” There’s a logic to a wall/spear/snake/tree/fan/rope approach. In certain circles, it’s called “market segmentation.” You market a brand with a different approach for each market segment.

One segment needs a wall. One segment needs a spear. Another segment needs a snake. And so on. Instead of one position for a brand, you have multiple positions. To the business community, Dell is a direct-to-business computer company. To consumers, Dell is a consumer computer. That was a strategy that was supposed to double sales. It didn’t work. Dell once had 17 percent of the global personal computer market. Today, Dell has 11 percent. Dell stock once sold for $60 a share. Today, it’s less than $14 a share. Everywhere you look, companies are racing to expand their brands when they should be doing exactly the opposite. Southwest Airlines used to be the low-cost domestic-only airline. After buying AirTran, the company is picking up AirTran’s flights to Mexico and the Caribbean. Not a good direction for a domestic-only airline. As USA reported, “It’s another sign that the one-time niche carrier is increasingly competing on the same turf as the big network airlines, the so-called legacy carriers, such as United, Delta, and American.” I hate to mention this, but all the so-called legacy carriers once went bankrupt.

What would Steve Jobs do?

Recently, Tim Cook, the new CEO of Apple, was asked, What did he learn from Steve Jobs? His reply: “I learned that focus is key, not just in running a company but in your personal life.”

How many other chief executives would haRecently, Tim Cook, the new CEO of Apple, was asked, What did he learn from Steve Jobs? His reply: “I learned that focus is key, not just in running a company but in your personal life.”

How many other chief executives would have launched new products like the iPod, the iPhone, and the iPad with new brand names when the company’s brand (Apple) was one of the best-known brand names in the world?

Not too many. I know the frosty reception I got from Xerox management when I suggested that Xerox computers be launched with a different brand name. There are two major themes in business today. One is line extension and the other is focus. But at most companies, focus is losing the battle. Hopefully, not at your company.

 

Al

Al Ries is chairman of Ries & Ries, an Atlanta-based marketing consulting firm he runs with his daughter and partner Laura Ries. Their website is: www.ries.com.

 

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