Tuesday, November 21, 2006

New Strategies on Brand Building - Al & Laura Ries 2 of 4

16. 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 five of the 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.”

17. Companies never give up. The first interactive TV was launched in 1977. It failed to take off. The first Web TV was launched in 1997. 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.

18. 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 have not been such a hit. ‘Trea’ the brand of such a convergence device has sold just 602,000 pcs.

19. The 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 .

20. 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 hamburghers.

21. 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.

22. 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.

23. 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. There are a variety of cats and dogs but no ‘catdog’.

24. 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.

25. Saturn was the only brand with one model, one price. It was very successful. In ’94 it was the 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.

26. 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.

27. 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 U.S.A with only one industry is Las Vegas.

28. Law of Opposites. Need to be the opposite of what got in the 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 the 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 the ‘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 the old generation. Pepsi came in and got itself associated with the ‘New Generation’.

29. Along the same lines Listerine was the 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 the 2nd largest and is on the West Coast. Malboro is the no.1 brand. It is Western and Macho. The no.2 brand is ‘Newport’ which is Eastern and Menthol. Hertz is the no.1 car rental for businessmen. So they have their outlets located outside the airport. ‘Enterprise’ took the opposite position of having outlets in the suburbs and serving the common man. Barbie dolls are good looking while Bratz dolls are ugly.

30. Law of the mushy middle. Nature favours the extremes. The perception is that the sweet spot lies in the middle of the market. The reality is that the center is the wrong place to be in. In the airlines industry the extremely expensive airlines are doing well. At the 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 the middle. There are cheap laptops and expensive full - feature lap tops but no market in the middle.

31. 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.

32. 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 the same name. Instead of basing strategies on exceptions base them on consensus work.

33. Law of 2nd brands. Introduce another brand for a different category. Toyota introduced a Lexus in an upmarket segment. It became the largest selling luxury brand in America. Customers don’t buy a Lexus because it is made by Toyota but inspite 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 cellphone viz. ‘Razr’.

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