Introduction
You face an overcommunicated society where too many products and companies compete for limited mental space. Traditional marketing tells you to advertise heavily and expand your product offerings to capture every possible customer. This broad approach usually dilutes your identity and drains your resources.
Al Ries argues that you build a powerful brand by narrowing your focus rather than expanding it. You succeed when you own a single word in the consumer mind.
The book explains twenty-two immutable laws that govern how brands are created, structured, and maintained over time. You will discover answers to critical questions about your market strategy:
- How do you launch a new product successfully without a massive advertising budget?
- Why do line extensions ultimately destroy market share?
- How do you name your company and manage global expansion?
1. The Laws of Brand Creation
The Law of Expansion
The power of a brand is inversely proportional to its scope because expanding a brand dilutes its focus and weakens its image over the long term. You might yield to short-term sales gains by broadening product lines, launching line extensions, and using megabrand concepts. This milking strategy erodes the brand in the consumer mind over time.
Chevrolet once led American auto sales with ten separate car models, but Ford surpassed it with eight models. American Express introduced a blizzard of new cards and saw its market share fall from 27 percent in 1988 to 18 percent. Levi's saw its share of the denim jeans market drop from 31 to 19 percent over seven years. Crest reached 38 SKUs, or stock keeping units, when the marketing manager asked if it was too many. The authors responded that no toothpaste should have more SKUs than the 32 teeth in the human mouth, and Crest's market share fell from 36 percent to 25 percent today.
The Law of Contraction
A brand becomes stronger when you narrow its focus rather than expand it.
You grow by contracting your focus, stocking in depth, buying cheap, selling cheap, and ultimately dominating a category. Imitating rich companies by buying corporate jets or extending lines leads to failure, whereas doing what they did before they were rich builds powerful brands.
Howard Schultz narrowed his focus to coffee to create Starbucks, which is worth $8.7 billion on the stock market. Fred DeLuca narrowed a delicatessen menu to submarine sandwiches, naming his chain Subway and paying himself $27 million in salary in 1990, rising to $60 million in 1994, with 15,000 units in 75 countries. McDonald's menu grew from 11 items to 60 or 70 individual items. Toys "R" Us carries 10,000 toys in a typical store versus 3,000 in a large department store, selling 20 percent of all toys in the United States. Microsoft holds 95 percent of the worldwide market for desktop computer operating systems, Intel holds 80 percent of microprocessors, and Coca-Cola holds 70 percent of colas.
To build your brand:
- Narrow the focus
- Stock in depth
- Buy cheap
- Sell cheap
- Dominate the category
The Law of Publicity
The birth of a brand is achieved with publicity rather than advertising because consumers live in an overcommunicated society and respond to news about what is first. Advertising is often confused with brand building, but heavy ad budgets are actually for brand maintenance. Public relations has eclipsed advertising as the primary force in brand creation.
Anita Roddick built The Body Shop into a major brand with no advertising at all, relying instead on a relentless quest for environmental publicity. Miller Brewing spent $50 million to launch Miller Regular with no publicity and gained almost no sales. Starbucks spent only $10 million on advertising in its first ten years against $2.6 billion in annual sales. Wal-Mart achieves $200 billion in annual sales with very little advertising, and Sam's Club reaches $45 million average per store with almost no advertising. Americans send 65 billion pages of faxes in a single year, amounting to 230 faxes per person, with 50 percent of all international telephone calls made as fax calls. IBM paid $3.5 billion for Lotus Development Corp. to acquire groupware.
The Law of Advertising
Once a brand is born through publicity, it needs massive advertising to stay healthy and protect its market share from competitors. An advertising budget functions like a country's defense budget, keeping competitors from overtaking market share rather than buying brand creation. You should advertise brand leadership rather than product quality because claiming leadership prompts prospects to perceive the brand as better.
Xerox introduced the plain-paper copier with extensive publicity in 1959, but as publicity faded, it shifted to massive advertising to defend its leadership position against rivals. A thirty-second advertising spot costs $2 million during the Super Bowl and $620,000 on ER, with an average production cost of $343,000 per commercial.
The Law of the Word
A brand should strive to own a single, unowned word in the mind of the consumer to establish core differentiation.
Because the human mind can only process so much out of the 50,000 words known by the average adult and 2.5 million registered trademarks in the United States, your brand must sacrifice a laundry list of attributes to focus on a single word. Mercedes-Benz owns prestige, Volvo owns safety, driving belongs to BMW, and overnight belongs to Federal Express. Becoming generic by being first and establishing the category secures this mental ownership permanently.
Prego captured 27 percent of the spaghetti sauce market by narrowing its focus to thick spaghetti sauce and owning the word thick, whereas Ragú dropped from a 50 percent market share while offering many varieties and losing relative focus.
You can apply specific rules to secure your mental position:
- Make your product or service more expensive than the competition
- Find a code word for prestige
2. The Laws of Brand Mechanics
Long-term market leadership relies on authenticity credentials, perceived quality, category promotion, and the singular power of the brand name.
The Law of Credentials
The crucial ingredient in the success of any brand is its claim to authenticity and leadership credentials. Customers are suspicious of standard product claims like saving money or tasting great. Leadership or authenticity acts as collateral that guarantees performance and makes all other claims believable. When a brand is not the overall leader, it should create a new category in which it can legitimately claim leadership.
Patrick Sullivan launched Act as contact software for salespeople. He established the credential of being the largest-selling contact software. This strategy helped the brand capture 70 percent of the market.
In 1923, a study of 25 leading brands in 25 different categories showed that twenty were still leading 75 years later. Datastream initially held 32 percent market share in maintenance software.
The Law of Quality
Quality is important, but brands are not built by quality alone. There is almost no correlation between marketplace success and comparative objective testing. Quality or the perception of quality resides in the mind of the buyer rather than in showroom mechanics. This perception is built by following branding laws such as contracting the focus to become a specialist, using a better name, and setting a higher price to generate psychic satisfaction.
General Electric tried to compete in mainframe computers against IBM and lost about $300 million. This failure proved that omnibus brands and mile-wide brands cannot easily defeat focused specialists.
The Law of the Category
A leading brand should promote the category rather than the brand itself to expand the total market and increase consumer interest. The most productive aspect of branding is creating a brand-new category by narrowing the focus to nothing and starting something totally new. When competitors appear, leaders should resist the urge to panic or shift strictly to brand building. You should choose instead to increase the size of the overall market pie.
Americans spent $207 billion on restaurant meals last year. A total of 51 percent of total restaurant spending was used for takeout or home delivery.
You must follow specific practices in this area:
- Launch the brand in such a way as to create the perception that that brand was the first, the leader, the pioneer, or the original
- Promote the new category
EatZi's narrowed the restaurant focus to gourmet takeout only in the meal-market category. It generated an astounding average annual per-unit sales of $14 million, compared to $35 million a year done by Tavern on the Green in New York City's Central Park.
The Law of the Name
In the long run a brand is nothing more than a name because unique product features eventually disappear as competitors catch up. While short-term success requires a unique idea or first-mover advantage, long-term success relies entirely on the brand name and the perception of that name in the mind. Product campers and Asian corporate structures that rely heavily on megabrands or line extensions under names like Mitsubishi, Matsushita, Mitsui, or Hyundai often suffer in profitability compared to focused American firms.
Xerox started with a unique plain-paper copier. Today all copiers use plain paper, leaving the short-term technological difference behind while the Xerox name remains its most valuable asset.
In a recent year, the top hundred companies in the United States had $3.2 trillion in sales with a 6.2 percent average profit on sales. In the same year, the top hundred companies in Japan had $2.6 trillion in sales with a 0.8 percent average net profit on sales. The 63 largest Korean companies, known as a chaebol, had $409 billion in sales with a combined net loss of 0.4 percent of sales, while Hyundai alone recorded $71 billion in sales.
3. The Laws of Brand Extensions and Structure
Line extensions destroy core brands, whereas focused sibling families, distinct generic avoidance, and separate corporate names secure market dominance.
The Law of Extensions
Manufacturers use line extensions when volume is stagnant to maintain or increase sales. You copy competitors and measure results incorrectly. This practice shifts power to retailers who demand slotting fees and promotions. You starve categories that actually need new brands and send the wrong message that regular products are unhealthy or inferior.
Ninety percent of all new products introduced in the U.S. grocery and drug trade are line extensions. An average Kroger store in Columbus, Ohio, holds 23,000 items. One store sold 6,700 items in a day, 13,600 items in a week, and 17,500 items in a month. At the same time, 5,500 items sold nothing in an entire month. Budweiser and Marlboro each have about 30 percent of their respective markets, while IBM has 6 percent of the personal computer market.
Miller Lite triggered a massive wave of light beer line extensions. Bayer spent $116 million on Bayer Select aspirin-free products, which cannibalized regular Bayer aspirin sales while capturing only 1 percent of the market and selling $26 million the first year in a $2.5 billion market.
The Law of Fellowship
A dominant brand should welcome and tolerate competitors because choice stimulates category demand and increases overall consumption. Greed often drives you to broaden your appeal to capture 100 percent of the market, which weakens the brand. Competition increases the noise level and reassures suspicious customers who value comparison. Over a decade, 10,000 independent office stationery stores declined to 3,000. Fifty percent is about the upper limit of market share a dominant brand can realistically achieve. Federal Express has a 45 percent share of the domestic overnight package delivery market, and Coca-Cola has a 50 percent share of the domestic cola market.
Planet Hollywood found success by opening a restaurant directly across the street from its rival Hard Rock Cafe. Forty music theaters prosper together in Branson, Missouri.
The Law of the Generic
Giving a brand a generic name is one of the fastest routes to failure. The mind deals in sounds rather than written words, causing generic names to disappear. Nature's Resource spent $5 million a year, and Network General had a $1.3 billion acquisition. Network Associates spent $10 million on its first television campaign, and Service Merchandise is a $4 billion business.
You should follow specific naming methods:
- take a regular word and use it out of context to connote the primary attribute of your brand;
- carve out a brand name by cutting a generic in half.
The Law of the Company
Brands are brands and companies are companies. Brand names should take precedence over company names because consumers buy brands, not companies. Management is company-oriented because the company name is on the paycheck. Customers are brand-oriented and care about the physical product inside the packaging. You should ask these questions:
- ask what is the name of the brand;
- ask what is the name of the stuff inside the packaging.
Consumers ask for Excel or a Cadillac rather than Microsoft Excel or a General Motors luxury car.
The Law of Subbrands
Subbranding destroys what branding builds by trying to push a core brand into new, upscale, or downscale directions. Customers see these as models or extensions that dilute the core brand's singular meaning. Holiday Inn introduced Crowne Plaza and multiple other subbrands. Cadillac launched the Cimarron and Catera, and Donna Karan created multiple lines including DKNY.
The Law of Siblings
A company can dominate a category long-term by launching a family of separate, uniquely named sibling brands. You must make each sibling a unique individual brand with its own identity. Avoid a family look, alliteration, or shared corporate prefixes. DeWalt achieved a $350 million business in less than three years, and L'eggs captured 25 percent of the total panty hose market.
You must follow these rules:
- focus on a common product area;
- select a single attribute to segment;
- set up rigid distinctions among brands;
- create different, not similar brand names;
- launch a new sibling only when you can create a new category;
- keep control of the sibling family at the highest level.
General Mills created Olive Garden as a separate brand rather than an Italian Red Lobster. Sara Lee launched L'eggs in a plastic egg instead of using the Hanes name.
4. The Laws of Visual Identity and Borders
A brand's visual identity must respect human eye mechanics and oppose competitor colors, while global expansion requires leveraging the perception of your home country.
The Law of Shape
A logotype should be designed horizontally to fit side-by-side human eyes. This shape gives maximum impact at roughly two and one-fourth units wide and one unit high. Legibility matters more than artistic typefaces or complex visual symbols like crests and shields.
Arby's suffers from the penalty of verticality with its cowboy-hat logo. Nike links its Swoosh symbol to a powerful brand name.
The Law of Color
You should choose a signature color that is the opposite of your major competitor's color. This strategy secures a unique visual identity and helps you stand out from market clutter.
Colors carry established meanings, with red acting as an energetic retail color and blue acting as a stable corporate color. Exactly 45 percent of all national flags use red as the dominant color, whereas less than 20 percent of all flags are dominated by blue.
Leaders get first choice of the most symbolic category color. Competitors must then select opposing colors to build a separate identity rather than mimicking the leader.
Avis picked red because Hertz used yellow. Fuji picked green because Kodak is yellow, and Tiffany & Co. stands out by sticking to its signature robin's-egg blue.
The Law of Borders
There are no barriers to global branding. Value lives in the consumer mind regarding where a product comes from, such as watches from Switzerland or cars from Germany. English has become the second language of the world, making English-sounding names highly effective for global brands.
Heineken became the second-largest brewery by going global, starting from a home country population of 15 million in the Netherlands. Corona Extra leveraged Mexican cuisine imagery to become a massive global import. Coca-Cola generates 62 percent of sales and 76 percent of profits outside of North America.
You must follow these rules:
- keep the brand's narrow focus in its home country;
- go global.
5. The Laws of Consistency and Mortality
Markets may change, but successful brands should remain absolutely consistent over decades, because changing them to follow fads destroys their core position in the consumer's mind. Brand building is boring work requiring absolute consistency over a long period rather than chasing market trends.
Successful brands maintain absolute consistency over decades, carefully managing change while allowing dying brands to die a natural death.
Tanqueray introduced Tanqueray vodka to follow the trend toward high-end vodkas, which undermined its core gin market. Little Caesars abandoned its takeout and two-for-one pizza strategy to offer delivery and larger sizes, which caused sales to drop. Volvo has been selling safety for 35 years. BMW has been the ultimate driving machine for 25 years.
Brands can be changed only infrequently and very carefully, focusing on the consumer's mind rather than internal company procedures. Changing is only feasible if the brand is weak or nonexistent, if it is moving down the food chain with permanent price drops, or if it operates in a slow-moving field where the natural process of forgetting can occur over a long period. Kentucky Fried Chicken tried to walk away from the word fried by changing its name to KFC and promoting rotisserie chicken, but customers still went there for fried chicken, forcing the chain to return to promoting its original recipe. Citicorp was about 80 percent corporate and 20 percent consumer 25 years ago, and today the numbers are almost reversed at 30 percent corporate and 70 percent consumer.
No brand lives forever, and companies should let dying brands die a natural death instead of wasting money trying to keep them on life support. Brands are born, grow, mature, and eventually die as new categories emerge. Kodak dominated conventional film photography, but as the market shifted to digital, it tried to protect its past by investing heavily in the Advanced Photo System and using the Kodak name for digital products. Venture capitalists doled out $275 million to launch Webvan, an Internet grocery company that ultimately failed.
The most important aspect of a successful brand is its single-mindedness, owning a singular idea or proper noun concept inside the consumer's mind. Panasonic lost its singularity when it tried to be a computer, printer, fax machine, scanner, telephone, television, and copier all at once. Atari lost its life as a leading video game brand when it tried to become a computer.
10 Key Ideas
- The power of a brand is inversely proportional to its scope because expanding a brand dilutes its focus and weakens its image over the long term.
- A brand becomes stronger when you narrow its focus rather than expand it.
- The birth of a brand is achieved with publicity rather than advertising because consumers live in an overcommunicated society and respond to news about what is first.
- A brand should strive to own a single, unowned word in the mind of the consumer to establish core differentiation.
- Quality is important, but brands are not built by quality alone, as there is almost no correlation between marketplace success and comparative objective testing.
- In the long run a brand is nothing more than a name because unique product features eventually disappear as competitors catch up.
- Manufacturers use line extensions when volume is stagnant to maintain or increase sales, but this practice ultimately destroys core brands.
- A dominant brand should welcome and tolerate competitors because choice stimulates category demand and increases overall consumption.
- Successful brands maintain absolute consistency over decades, carefully managing change while allowing dying brands to die a natural death.
- The most important aspect of a successful brand is its single-mindedness, owning a singular idea or proper noun concept inside the consumer's mind.