Wednesday, November 15, 2006

New Strategies on Brand Building - Al & 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 ’81 while Apple launched in ’84. Apple is better in hardware, software and other areas but has only 3% share while Microsoft has 94% share.

2. Inspite of this law, every company focuses on being better. The best voted Marketing book in America is titled “Simply Better”.

3. 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.

4. To win the battle in the market one needs to win the battle in the mind. Xerox invented the 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.

5. Instead of trying to build a better product win the ‘better perception’.

6. Another Law of Marketing is the Law of the Mind. First in the market is nothing. First in the mind is everything. Duryea was the first car in the market but Ford’s Model T was the first in the mind. Yuengling was the first beer in the market but Budweiser was the first beer in the mind. Similarly the first bookstore on the Net was Powell’ but is the first in the mind.

7. The first search engine was Alta Vista. But the first search engine in the 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.

8. 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.

9. Law of Profits. You can sell anything if it’s cheap enough. To make money you need a brand.

10. Motorola invented the cell phone. But Motorola put its name on a variety of products. In the last 10 years Motorola has achieved a 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 the last 10 years achieved a sales of $ 193 bn. And a net profit margin of 11%.

11. 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. U.S.A. 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.

12. The 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 the 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 the top 500 companies in the last 10 years has been $ 7 trillion and net profit margin 6%. The automobile market in Japan is more focused.

13. Japan has everything. Intelligent workforce, worldclass production facilities and so on. But no Marketing. In the last 15 years the 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 the 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.

14. 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.

15. 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. The 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.

1 comment:

Sri said...

Please let me know the author of "Law of Profits - You can sell anything if it's cheap enough. To make money you need a brand"