Why the laws of duality, the opposite, and others no longer hold true. Second in a three-part series.
Let's continue a review of "The 22 Immutable Laws of Marketing," by Al Ries and Jack Trout, examining laws 8 through 15, and see if they fit in the golden age of the consumer. In my previous column that looked at laws 1 through 7, we saw that many were valid in the so-called golden age of advertising where advertisers could control the message and its delivery. But these same laws are no longer accurate or applicable in an age when consumers are empowered with information, able to share information with large numbers of fellow consumers, and have acquired new habits and expectations, such as search and real time, respectively.
It would be logical here to introduce a simple but useful construct that I learned while at McKinsey, called MECE (pronounced "mee-cee"). MECE stands for "mutually exclusive, collectively exhaustive" - for example "up/down, left/right, large/small" are mutually exclusive, non-overlapping pairs. And each pair - like "up/down" - taken together is exhaustive of the universe of possibilities. The best McKinsey 2x2 matrices would use MECE axes so it could take into account the whole universe, but each of the four quadrants would be non-overlapping with any other. We will see that this collection of immutable laws is not MECE and that some laws overlap or contradict others and some are essentially the same as others, have internal inconsistencies, or are different in scope (i.e., some are laws, but others are just observations or tactics that flow from laws).
8. The Law of Duality - In the long run, every market becomes a two-horse race
This was mostly true of the examples cited in the book - batteries: Eveready and Duracell; photographic film: Kodak and Fuji; rental cars: Hertz and Avis - and some recent examples. Who can name what retailer comes after Walmart and Target? Who can name what quick-serve fried chicken chain comes after KFC and Popeyes? There is usually no need for a third player in the same category selling roughly the same things.
But there are at least as many current examples where the law of duality does not hold true - for example - wireless: AT&T, Verizon, Sprint; soda: Coke, Pepsi, Dr Pepper; or airlines: American, Continental, United, Delta, etc. It is a flawed oversimplification to claim that every market becomes a two-horse race. It would be more accurate to say that for certain markets in which the goods or services are identical, undifferentiated, and commoditized, consumers don't need a lot of choice; but they need more than one. So we end up with examples like - search engines: Google (66 percent share) versus Yahoo (15 percent share); or operating systems: Microsoft Windows versus Mac OS.
In the offline world, the requirement for geographic proximity may allow more than two brands to survive overall - in other words, grocery store chains like Kroger and Tom Thumb may dominate in the South while other chains like Giant Eagle and Stop & Shop dominate elsewhere - so more than two chains can survive in the universe. Similarly, what are the two horses in the restaurant industry? How about gas stations? So, there's more evidence that the law of duality does not hold true. However, in the online world where geographic proximity is irrelevant, every site is competing against every other similar site on actual merits. So, their survival is even more Darwinian. In some cases where network effects are strong, there may be one player left standing - e.g., social networks (can you name a second social network after Facebook that people actually still use or is still at top of mind?).
Also, as more consumers get access to more choices online, some industries may end up having dozens and dozens of specialized players that serve niches, while others end with one dominant player. So, the "law of duality" is in the long run not applicable or accurate.
9. The Law of the Opposite - If you are shooting for second place, your strategy is determined by the leader
First of all, I don't know of any CEO of any company who would be shooting for second place. More often, I have seen startups deliberately enter a category where there is a seemingly dominant leader - they are not shooting for being opposite to the leader; they are shooting for out-innovating the leader. For example, Google launched its search engine at a time when Yahoo was dominant and within a few short years completely overtook it in the category of search engines. Now we are seeing dozens of startups focused on better search - they are not shooting for second place, they are shooting for "out-Googling" Google in providing better and more relevant search results. The examples cited by the book again are oversimplified exception cases. Scope positioned itself as good tasting, which is opposite to the "medicine breath" of Listerine, the category leader. But if the category leader McDonald's was "fast, burgers," then the opposite would have been "slow, non-burgers," not "flame broiled" (Burger King). What is really happening is innovation to differentiate from what the market leader is known for. Some innovations are significant enough to create new categories, as we will see in the analysis of law 10.
Also, consider generics and competitors from Japan and China. For decades, Japanese manufacturers have copied technologies and aggressively pursued innovations to ensure they were developing products faster and cheaper so the only dimension it was competing on was price. I'm not sure I can say they were trying to be "opposite" to the category leader, just sell it for less and win marketshare away from the leader. In fact, their products were never positioned as opposite to the category leader's DVD player, plasma TV, etc. The products were positioned as identical, perhaps even more full featured, and less costly.
And the examples of Lenox - "fine English china, manufactured in Pomona, New Jersey" and Smirnoff - "Russian vodka manufactured in Hartford, Connecticut" are not examples of "opposite" but rather examples of the need for being truthful. Royal Doulton china and Stolichnaya vodka could have made their claims legitimately and thus won share away from the then category leaders who could not.
10. The Law of Division - Over time, a category will divide and become two or more categories
As we saw above, some innovations can indeed create their own subcategories that grow into full-fledged categories. The example cited in the book may not be an accurate interpretation of reality - from mainframes to minis to personal computers that fit on a desk. That was the evolution of the technology at work, which made computers smaller and more powerful. What we were observing was innovation. For "division" to be accurate, the market would have had to remain the same, and the current customers split into two or more groups buying the new "divided" alternatives. Instead, we saw new and different customers enter the market to buy the new products - e.g., the personal computers became small enough to fit in a consumer's home, or they became affordable compared to a mainframe. The proliferation of types of cars, beers, television networks, and even music can be attributed to products and services better mapping to the needs and wants of smaller and smaller (i.e., more and more targeted) audiences.
The Volkswagen example was really an example for the "law of perception" (law No. 4) because people perceived it to be a small, ugly car making company; or an example of the "law of the line extension" (No. 12) because Volkswagen attempted to leverage its brand to sell other types of vehicles for which it was not known. When it tried to sell other types of cars, it failed. The types of cars also proliferated - luxury cars, super-premium, eco-friendly, etc. But these are attributes of cars (see law No. 14); the category is still cars.
In the digital landscape, perhaps "specialization" is a better label than "division." The speed of innovation and change continues to accelerate. The inevitable drive toward commoditization is also exceedingly accelerated. For companies to survive, they are forced to roll out new products or features to stay ahead and avoid being made a "me-too" or worse, inferior, to the next startup that comes along.
11. The Law of Perspective - Marketing effects take place over an extended period of time (which is too long for most CMO tenures)
The examples in the book for this chapter were mostly examples of line extensions that led to short-term sales gains but the category's long-term destruction. But the example of couponing is accurate - that repeated couponing/discounting leads to conditioning consumers to only buy when there's a sale. So, not only does it not achieve a temporary lift in sales, it has permanently damaged margins and harmed the business in the long run. Macy's is an example of such a victim of its own uncontrolled couponing. In the digital world this becomes even more dangerous because pricing is commoditized by price aggregators (consumers can look up pricing for an item from dozens of merchants and find the lowest price) and coupons can be instantly posted or shared to a far wider audience than intended (consumers can post a coupon code or even upload a scanned picture of a coupon for printing). So, it is easier than ever for advertisers to fall into the trap of couponing, but in this case, not only make zero margin (due to price commoditization) but perhaps even lose money with every coupon. What used to be a successful short-term gain is now a short-term money-loser that also jeopardizes long-term profits and even viability of the business model, category, or industry.
Yes, in the modern digital world, marketing effects do take place over an extended period of time. This is related to the new notion of advertising not being campaign-based any more; and that advertising is not what advertisers say it is but rather what people pass along to others. People's conversations happen over time and usually there is not enough volume of conversations to be treated as a media buy. People don't talk when advertisers want them to and they don't say what advertisers tell them to. So, the concept of a beginning and an end to a campaign is no longer valid. Marketing effects and word of mouth are continuous. Their positive or negative effect can be far more powerful and lasting than artificial incentives to buy - e.g., couponing.
12. The Law of the Line Extension - There's an irresistible pressure to extend the equity of the brand (related to the above law on focus)
A1 chicken sauce did not work. Levi's shoes, Pierre Cardin wine, and Coors water all didn't work. But that doesn't mean that line extensions don't work. More accurately, line extensions that are simply sticking a known brand on something else won't work. Line extensions that extend a brand into categories for which it has no credibility won't work. But, some actually do work - like Altoids. Altoids established its brand essence as "curiously strong," so when its line extended into fruit sours, the company succeeded. The brand essence remained intact and differentiated it from other fruit sours, just like it had previously differentiated it from other minty gums - it was the "curiously strong" minty gum.
Apple moved into personal music players successfully because its brand essence of great design and ease of use carried through. But even Apple fell down when its line extended into a host of other categories. Remember the Apple Newton (handheld personal assistant), Apple Pippin (video game console), or eWorld (graphical online virtual world)? Since line extensions usually don't work, the book suggests what is in the next law - the "law of sacrifice" or was it law No. 5, the "law of focus?"
13. The Law of Sacrifice - You have to give up something in order to get something
This law is pretty much the same as law No. 5 - "focus." Law No. 5 says a company should own a word in the prospect's mind. A company can do so by doing law No. 13 - sacrificing things like too many target customer groups, too many line extensions, etc. Specialty brands that were known strongly for singular things usually fared better and had a higher chance of owning a single word in the customers' minds.
We are also seeing a similar trend today - toward super high end, niche specialists like Jacques Torres, MarieBelle, Vosges, etc. (super high end chocolate). But it's not because of the "law of sacrifice." In the tough economy, I am observing a trend I call spend polarization. Customers will save as much money as possible by going with the low cost providers - Costco and Walmart. Then, on occasion, when they want to indulge, they will want something very special, super high-end, and rare. Anything in the middle and undifferentiated falls through.
14. The Law of Attributes - For every attribute, there is an opposite, effective attribute
This law is really not a law, as much as it is an observation. And it is pretty much the same observation as law No. 9 - "opposite." The example of Gillette spending its way into owning a category pioneered by a startup (disposable razors) is not really an example. And it's also a misinterpretation of innovation.
In the current marketing landscape, perhaps one of the most important attributes is that of usefulness. The product or service must be useful. But the marketing of the product or service could also be useful. For example, Behr Paint's Web site allows consumers to paint walls of virtual rooms to see what color combinations look best. A how-to video on YouTube which shows how to set up a home theater system could help one manufacture win the sale from another with an identical product at an identical price.
15. The Law of Candor - When you admit a negative, the prospect will give you a positive
In social channels, this is more like you have to be trustworthy. Once you lose trust you lose everything you have built up. The book said Listerine should admit it tastes bad; but there was not much evidence whether this worked against Scope's "better tasting mouth wash" - i.e., whether it recaptured share.
In the modern digital world, candor is not only the best policy, it's the only policy. Brands are often already mistrusted, so they have a long, hard road to earn trust. They need to be honest about their product and service so they can even have a dialogue with modern skeptical consumers.
In the next and final installment, we will examine the rest of the Immutable Laws and then wrap up with an analysis across the set of 22. As we saw above, some laws are not MECE and are duplicates of others. Some are tactics or observations and not laws. Finally, many of them have to be interpreted differently to be applicable in the modern digital landscape.
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Dr. Augustine Fou is the senior digital strategy advisor to CMOs, marketing executives, and global brands. Dr. Fou has over 15 years of Internet strategy consulting experience and is an expert in social media marketing strategy, data/analytics, and consumer insights, with specific knowledge in the consumer packaged goods, financial services/credit cards, food/beverage, retail/apparel, and pharmaceutical/healthcare sectors.
He is a frequent panelist, moderator, and keynote speaker at industry conferences. Dr. Fou is also an Adjunct Professor at NYU in the School for Continuing and Professional Studies and at Rutgers University at the Center for Management Development, where he teaches executive courses on digital strategy and integrated marketing.
Dr. Fou completed his PhD at MIT at the age of 23. He started his career with McKinsey & Company and previously served as SVP, digital strategy lead, McCann/MRM Worldwide and group chief digital officer of Omnicom's Healthcare Consultancy Group (HCG). He writes a blog "Rants, Raves about Digital Marketing" and can be found on Twitter at @acfou.
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Wednesday, July 23, 2014