Timeless Principles that Defy Management Logic while Winning in Prospects’ Minds
Guest Post by Al Ries
Positioning: The Battle for Your Mind, a book by Al Ries and Jack Trout, was published in the year 1980. Yet the book is still essential today. Why is this so?
Because managers are “logical” and Positioning is not.
Isn’t it logical for a company to be customer-oriented? Then why does Positioning recommend the opposite?
Isn’t it logical for a company to focus on its brands? Then why does Positioning recommend the opposite?
Isn’t it logical for a company to try to expand its operations? Then why does Positioning recommend the opposite?
Isn’t it logical for a company to put profits first? Then why does Positioning recommend the opposite?
Customer versus Competitor-Oriented.
Managers of almost every company are “customer-oriented.” They do extensive marketing research to find out what customers want in the products and services they sell.
As a result, most products in the same category are similar because they are all based on similar research. Then how does a company try to convince its prospects to buy its products?
They focus their marketing efforts on being better. This approach is also consistent with a company’s marketing research which suggests that consumers consistently try to buy brands that are better.
What is Positioning? It’s based on the simple principle that a company doesn’t win in the marketplace. A company wins in the minds of its prospects.
If you were able to look into the mind of a cola drinker, you might find a symbolic ladder with three brand names.
Coca-Cola would be on the top rung of the ladder. Pepsi-Cola on the second rung. And RC cola on the third.
For many years, Pepsi-Cola tried to increase its market share by running taste tests that showed that Pepsi tastes better than Coca-Cola.
That didn’t work. Pepsi-Cola continued to lose market share to Coca-Cola.
Why? Because consumers believe the better product wins in the marketplace. And since Coca-Cola is the leader, it must be the better product.
When you are customer-oriented, you always end up with a similar product to the market leader. And when you try to say that you’re better, the prospect thinks, if your brand was really better, it would be the market leader.
Because everybody knows, the better brand wins in the marketplace.
Great Wall Motors.
More than a decade ago, Great Wall Motors did some market research that showed that Chinese consumers preferred sedans, rather than SUVs. They thought sedans were more prestigious and SUVs were practical vehicles with no social status.
If Great Wall Motors was customer-oriented, it would have focused its marketing efforts on sedans. Instead, the company was competitor-oriented. It figured that its competitors had done similar research and would focus on sedans.
So Great Wall did the opposite. It focused its marketing efforts on SUVs and built its brand Haval into the largest-selling SUV brand in China.
Great Wall increased its turnover from 1.2 billion USD in 2008 to 14.2 billion USD in 2018. 11.8 times.
Brand versus Category-Oriented.
Managers of almost every company are “brand-oriented.” They focus all their efforts on building bigger brands. They prioritize brand management before category management.
When the electric vehicle was introduced, every major automobile company in the world saw the electric vehicle as a way to increase the value of its automobile brands.
So every major automobile company introduced an electric model using their most-important brands: BMW, Chevrolet, Fiat, Ford, Honda, Hyundai, Kia, Mercedes, Mitsubishi, Nissan, Volkswagen and others.
So which of these automobile brands became the market leader in electric vehicles? None.
Where do consumers put these brand names in their minds? Not under “electric brands,” but under “gasoline brands.” The only electric-vehicle brand in consumers’ minds is Tesla. That’s the major reason Tesla dominates the electric-vehicle market. You win in the mind, not the market.
The three major American automobile manufacturers are General Motors, Ford and Tesla. On the stock market this morning, General Motors was worth $36.76 billion. Ford was worth $23.95 billion. And Tesla was worth $181.46 billion.
In other words, Tesla is worth almost three times as much as General Motors and Ford on the stock market.
When the personal computer was introduced, every major high-tech company in the world saw the personal computer as a way to increase the value of their own high-tech brands.
AT&T, Burroughs, Digital Equipment, Dictaphone, Exxon, IBM, ITT, Lanier, Mitel, Motorola, NCR, NEC, Olivetti, Siemens, Sony, Toshiba and Xerox introduced personal computers using their existing brand names. None of these brands were successful.
The global market leader for several years was Dell, a personal computer company started by a second-year student at the University of Texas.
Why was Dell successful in personal computers when IBM, the world’s biggest mainframe computer company, was not?
Because Dell was category oriented and IBM was brand oriented.
A new category requires a new brand.
Expansion versus Focus-Oriented.
Managers of almost every company are “expansion-oriented.” They focus all their efforts on expanding their brands by introducing new products, new features, new distribution outlets, new price levels.
What do buyers want when they buy an automobile? They want everything:
Reliability: They read reviews of various brands in printed material and on the Internet.
Good gas mileage: They check the window sticker on a new car to see how many miles per gallon the brand claims to deliver.
Good looks: They walk around the car to see how it looks from all sides.
Nice interiors: They sit in the seats to check the upholstery.
The right size: They put the kids in the back seat to see if they have enough room.
Drivability: They ask to take a test drive to see how the car handles on the road.
That’s why the advertising of most automobile brands tend to cover these and many other features. That’s why they don’t stand for anything specific.
When BMW was introduced into the American market, it did the opposite. The brand focused on one feature, “drivability.”
The slogan: The ultimate driving machine.
BMW was enormously successful. It became the largest-selling luxury-vehicle brand in the world. Ahead of Mercedes-Benz, Audi, Lexus and Cadillac.
Then BMW changed its advertising to focus on “joy.” Slogan: The joy of driving. And promptly lost its global leadership to Mercedes-Benz.
Profit versus Leadership-Oriented.
Managers of almost every company are “profit-oriented.” They look for ways to increase the profits on their brands.
Not Amazon. The company started by selling the most-popular books on the Internet for 30 percent off the retail price. This was a money-losing strategy. In its first 10 years, Amazon lost $2.97 billion on revenues of $17.66 billion.
But this money-losing strategy has a purpose. It built Amazon.com into the largest-selling book company. Then Amazon used its leadership in books to introduce new products on its website. Today, Amazon sells about 500,000 products on its website which accounts for 42 percent of all Internet sales in America.
Currently, Amazon is worth $1.3 trillion on the stock market.
What if Amazon had started by trying to sell all those 500,000 products on the Internet? Would the company have been successful? We think not.
Amazon first built a leadership position in books before moving into other products.
Leadership first. Profits second.
If you could look into the minds of typical consumers, you would find that they know the leaders in almost every category they buy.
But they don’t buy the brand because it’s the leader. The buy the brand because it’s better. Everybody knows the better brand wins in the marketplace.
(1) Competitor-oriented, not customer-oriented.
(2) Category-oriented, not brand-oriented.
(3) Focus-oriented, not expansion-oriented.
(4) Leadership-oriented, not profit-oriented.