Introduction
You spend immense budgets on better features and superior quality, yet your products still fail in the marketplace. You assume that marketing is a creative contest of product superiority where the best offering inevitably wins.
Marketing is not a battle of products, but a battle of perceptions governed by immutable laws that you ignore at your own peril.
Jack Trout and Al Ries argue that success depends on aligning your strategy with the way human minds actually work. The book reveals why conventional wisdom often leads to expensive failures. You will learn how to build lasting advantages by working with mental laws rather than fighting them.
- How do you claim a permanent position inside the prospect mind?
- Why do line extensions ultimately destroy brand strength?
- Which natural rules dictate whether your marketing campaign succeeds or fails?
1. The Fundamental Laws of Market Entry
Being first in the prospect's mind creates an enduring advantage that superior products rarely manage to overcome later.
Most companies use the better-product strategy, entering a developed market with a me-too product. However, leading brands in any category are almost always the first to arrive in the consumer's mind.
Charles Lindbergh was the first person to fly the Atlantic Ocean solo and became world-famous, while the second person, Bert Hinkler, was a superior pilot but remains unknown.
Heineken holds 30 percent of the market as the No. 1 imported beer among 425 brands of imported beer sold in America. USA Today lost 800 million dollars with never a profitable year, while Chrysler holds 50 percent of the minivan market.
Category Creation
If you cannot be the first brand in an existing category, you must set up an entirely new category in which you can be first.
When prospects are evaluating established brands, they are on the defensive regarding claims of superiority. But when a brand creates a new category, prospects have an open mind because everyone is interested in what is new.
Anheuser-Busch did not launch an imported beer to rival Heineken, but instead launched Michelob as the first high-priced domestic beer, which outsells Heineken two to one.
Digital Equipment Corporation reached 126,000 employees and 14 billion dollars in sales. Tandem built a 1.9 billion dollar business in fault-tolerant computers, while Stratus reached a company size of 500 million dollars.
You should apply this rule through a specific question:
- Ask yourself what category the new product is first in instead of asking how it is better than the competition.
Mental Real Estate
It is better to be first in the prospect's mind than it is to be first in the actual marketplace.
Being first in the marketplace only matters to the extent that it allows you to get into the customer's mind first. Once a consumer makes up their mind, it is nearly impossible to change it, making attempts to alter an established mental perception the most wasteful activity in marketing.
Remington Rand was first in the marketplace with the UNIVAC mainframe computer, but IBM got into the prospect's mind first through massive marketing and won the computer battle.
Xerox spent 2 billion dollars and twenty-five years trying to get into the computer business without success. Mike Markkula contributed 91,000 dollars to get Apple off the ground.
Perception vs Reality
Marketing is not a battle of objective products or facts, but a battle of perceptions that exist inside the customer's mind.
There is no objective reality or universally agreed-upon best product in marketing. Consumers filter all experiences through their existing perceptions, which they treat as absolute truth, often relying on second-hand assumptions.
The Coca-Cola Company conducted 200,000 taste tests proving New Coke tasted better than Pepsi and original formula, yet New Coke languished in third place while Coca-Cola Classic stayed first.
Audi sold 60,000 units in America in 1986, which dropped to 12,000 units in 1991 following negative publicity.
2. Focus, Position, and the Product Ladder
The most powerful concept in marketing is owning a single, simple word or concept in the prospect's mind. A company must narrow its focus to burn its way into the consumer's consciousness. If a brand strongly establishes one benefit, the human mind applies a halo effect, granting the brand other related benefits automatically.
You must own a single word in the consumer mind and position your brand accurately on their mental product ladder.
Federal Express achieved massive success by narrowing its entire product line and focusing exclusively on overnight package delivery.
Prego captured a 27 percent share in the spaghetti sauce market with the word thicker. Heinz maintains a 50 percent market share using the word slow for thickness.
Focus and Ownership
Two different companies cannot own the exact same word or core position in the prospect's mind. When a competitor already owns a specific word or position in the consumer's mind, trying to run campaigns using that same concept is futile. Such attempts only reinforce the leader's position by making their concept even more prominent.
Volvo successfully owns safety in the automobile market, and other major manufacturers like Mercedes-Benz and General Motors have failed entirely to dislodge that association.
To apply these principles to your operations:
- Narrow the focus of your operations to a single word or benefit.
- Protect your word in the marketplace once you own it.
Exclusivity and Ladders
The marketing strategy a company must use depends directly on which specific rung of the mental product ladder it occupies. Consumers maintain a mental hierarchy or ladder of brands for every category. The human mind generally rejects new data that does not fit its existing ladder, and the average mind cannot retain more than seven brand units.
Avis lost money for thirteen years trying to claim top quality, but finally became profitable when it explicitly acknowledged its position on the ladder by running the campaign admitting it was No. 2.
Acura sold 143,708 cars, Lexus sold 71,206 cars, and Infiniti sold 34,890 cars.
You must follow specific practices for your market standing:
- Determine your exact position on the product ladder in the prospect's mind before starting any marketing program.
- Ensure your marketing program deals realistically with your specific ladder rung.
Duality and the Opposite
In the long run, every mature marketing category inevitably evolves into a two-horse race between two major players. While a developing market may initially feature many rungs and competitors, consumer education and consolidation ensure that the market ultimately becomes a titanic struggle between an old reliable brand and a strong upstart.
The photographic film market narrowed down permanently to Kodak and Fuji, rent-a-cars to Hertz and Avis, and mouthwash to Listerine and Scope.
In 1969, the market leader held a 60 percent market share, which dropped to 45 percent twenty-two years later. During that same period, the No. 2 brand rose from a 25 percent share to 40 percent, while No. 3 dropped from 6 percent to 3 percent.
If you are aiming for second place in a market, your strategy is entirely determined by the leader. Where the market leader is strong, there is a hidden weakness that a challenger can exploit. Rather than trying to be a better version of the leader, you must discover the essence of the leader and present consumers with the exact opposite.
Coca-Cola established itself as the old, traditional beverage choice with a 100-year-old product history. Pepsi-Cola used the law of the opposite to position itself successfully as the choice of a new generation.
Concentrate your strategic efforts on securing and holding the top two rungs of the market. You should study the leader to find where they are strong and turn that strength into a weakness. Present the prospect with the opposite of the leader rather than trying to emulate them.
3. Long-Term Dynamics and Brand Sacrifice
Markets expand and break up as time passes, much like an amoeba dividing. Leaders of original categories rarely lead the new segments. Corporate leaders often believe categories are converging through synergy and alliances instead of recognizing this division.
Markets inevitably divide over time, requiring strict sacrifice and long-term perspective rather than reckless line extensions.
Division and Perspective
Computers started as a single category, then divided into mainframes, minicomputers, workstations, personal computers, laptops, notebooks, and pen computers. ABC, CBS, and NBC once accounted for 90 percent of the viewing audience. In 1776, about 35 empires, kingdoms, countries, and states existed in the world. Today, 190 countries are generally recognized as sovereign nations.
Marketing effects take place over an extended period, and long-term effects are often the exact opposite of short-term effects. Short-term gimmicks like sales, coupons, and line extensions boost business immediately. They educate consumers to wait for deals and eventually undermine the core brand over the long run.
Miller High Life sales tripled in five years after introducing Miller Lite. Long-term line extension caused High Life to decline 13 years in a row. Miller High Life averaged annual sales increases of 27 percent in the early seventies, reaching a high-water mark of 23.6 million barrels in 1979. By 1991, sales dropped to 5.8 million barrels.
Line Extension Traps
There is an irresistible corporate pressure to extend the equity of a brand, which ultimately leads to dilution and failure. Management tries to be all things to all people by putting a successful brand name on multiple new products. In the mind of the prospect, a brand name stands for a specific product or concept, not for everything.
Volkswagen leveraged the success of its small Beetle to launch a family of big cars under the same brand name, watching its U.S. market share drop from 67 percent to under 4 percent. IBM lost $2.8 billion in 1991 despite revenues of $65 billion.
You have to give up something in order to get something, which requires sacrificing product line, target market, or constant change. Generalists who try to sell everything struggle, while narrow specialists succeed. Companies must sacrifice breadth of product, broad target demographics, or annual strategy shifts to own a distinct position in the mind.
Federal Express concentrated exclusively on small packages overnight and built a massive position before losing its focus by buying Tiger International's cargo line. Federal Express paid $880 million for Tiger International's Flying Tiger cargo line and lost $1.1 billion in international operations in 21 months. Smucker's maintains a 35 percent market share in jellies and jams compared to Kraft's 9 percent through disciplined focus.
Attributes, Candor, and Singularity
For every attribute, there is an opposite, effective attribute that allows a brand to play off against the leader. Once a leading competitor successfully owns a key attribute like size or cavity prevention, it is gone. Trying to emulate the leader fails, so you must seek a distinct, opposite attribute to focus your efforts around.
When IBM dominated computers with the attributes of big and powerful, an upstart went for the opposite attribute of small and created the minicomputer.
When you admit a negative, the prospect will instantly give you a positive and open their mind. Admitting a flaw disarms consumers because negative statements are immediately accepted as truth, requiring no proof. Once the mind is open, you can drive in your positive selling idea.
Listerine invoked the law of candor by advertising the taste you hate twice a day, setting up the positive benefit that it kills a lot of germs. Grape-Nuts saw a 23 percent sales increase after General Foods admitted it was a learned pleasure and advised consumers to try it for a week.
In each situation, only one bold stroke will produce substantial results, rather than a sum total of small efforts. Trying harder is not the secret of marketing success. History and military strategy show that success comes from finding the single, unexpected line of least expectation where a competitor is vulnerable. General Motors faced flanking moves when the Japanese attacked the low end with small cars and the Germans attacked the high end with super premium cars.
4. Unpredictability, Resources, and Corporate Reality
Unless you write your competitors' plans, you cannot predict the future. Attempting to forecast specific market conditions years in advance fails because it ignores competitive reactions and relies on extrapolating trends or assuming the present will repeat. Organizations must remain flexible to change quickly.
Unless you write your competitors' plans, you cannot predict the future, meaning marketing plans must build in flexibility.
ConAgra introduced Healthy Choice frozen entrées to capitalize on a long-term health trend, but then violated the law of sacrifice by extending the brand into wide arrays of non-entree items. Domino's Pizza grew to $2.65 billion while holding a 4 percent share of the home delivery business. Success often leads to arrogance and ego, causing executives to lose objectivity and fall into the line extension trap. Successful executives mistakenly believe their corporate name made the brand famous rather than correct marketing moves.
DEC founder Ken Olsen saw his company grow into a $14 billion giant, but his success caused him to dismiss personal computers, open systems, and RISC architecture. The average CEO spends 18 hours a week on outside activities, 17 hours a week attending corporate meetings, and 6 hours a week preparing for corporate meetings.
Failure is to be expected and accepted, and companies must recognize mistakes early and cut their losses rather than reorganize. Clinging to failed projects due to personal agendas or ego damages companies. An egoless approach allows teams to admit mistakes, fix them, and move forward without fear of career destruction.
Hype and Acceleration
The actual situation in a market is often the exact opposite of the way it appears in the press. When a company is doing well, it rarely holds press conferences or generates massive hype. Heavy media attention usually signals that a product or company is in serious trouble, and real market revolutions arrive quietly rather than with marching bands.
The actual situation in a market is often the exact opposite of the way it appears in the press.
New Coke received $1 billion worth of free publicity and heavy spending, but classic Coca-Cola outsells it by a 15 to 1 ratio. Only 51 units were built of the heavily hyped Tucker 48 automobile. Successful marketing programs are built on long-term trends rather than short-term fads. A fad is like a wave that goes up and down rapidly, generating high visibility and heavy hype while leaving a company financially vulnerable when it collapses.
Coleco racked up $776 million in sales from Cabbage Patch Kids, generating $83 million in profits during its peak fad period before the bottom dropped out and the company went into Chapter 11. Halley's Comet serves as an example of fashion with its 75 years return period. When faced with a rapidly rising business that resembles a fad, you must dampen it.
- Never totally satisfy market demand
- Dampen a hot fad to stretch it out into a trend
Colonel Parker deliberately restricted Elvis Presley's appearances and records to ensure every single appearance became an enormous, impactful event.
Resources and Corporate Resistance
Even the greatest idea cannot succeed without adequate financial backing to get it into the prospect's mind. Marketing is a battle fought inside the mind, which requires large amounts of capital both to enter the mind initially and to maintain that position over time. A mediocre idea backed by ample funding will always outperform a great idea that has no money.
Even the greatest idea cannot succeed without adequate financial backing to get it into the prospect's mind.
World War II cost $9,000 a minute to fight, while the Vietnam War cost $22,000 a minute. Companies spent $1.5 million for a one-minute Super Bowl commercial. Mike Markkula invested $91,000 into Apple to help put it on the map in exchange for a one-third stake. Publicity is not free advertising and requires substantial monthly retainers for professional agency support. Small public relations agencies charge $5,000 a month, medium-size agencies charge $10,000 a month, and big-time agencies charge $20,000 a month.
A&M Pet Products launched clumping cat litter as Scoop Away, only to face heavy competition from Golden Cat Corporation's Tidy Scoop due to a lack of equivalent financial resources. Entrepreneurs with limited capital must find alternative ways to secure funding before attempting to scale marketing efforts. Because outside venture capital and large corporations rarely fund unproven external ideas, you must rely on personal networks or specific funding shortcuts.
- Marry the money
- Divorce the money
- Find the money at home
- Share your idea by franchising it
Frances Lear allocated $25 million of her $112 million expected total settlement from television producer Norman Lear to launch Lear's magazine for women over forty. Georgette Mosbacher paid $31.5 million to buy La Prairie. Applying the laws of marketing within an existing large organization frequently clashes with corporate ego and conventional wisdom. Management structures are typically built on philosophies like trying to be better rather than first, offering everything to everyone, and continuously expanding product lines through line extensions, making immutable laws difficult to implement.
10 Key Ideas
- Being first in the prospect's mind creates an enduring advantage that superior products rarely manage to overcome later.
- If you cannot be the first brand in an existing category, you must set up an entirely new category in which you can be first.
- Marketing is not a battle of objective products or facts, but a battle of perceptions that exist inside the customer's mind.
- You must own a single word in the consumer mind and position your brand accurately on their mental product ladder.
- Rather than trying to be a better version of the leader, you must discover the essence of the leader and present consumers with the exact opposite.
- Markets inevitably divide over time, requiring strict sacrifice and long-term perspective rather than reckless line extensions.
- Management tries to be all things to all people by putting a successful brand name on multiple new products, which ultimately leads to dilution and failure.
- Unless you write your competitors' plans, you cannot predict the future, meaning marketing plans must build in flexibility.
- The actual situation in a market is often the exact opposite of the way it appears in the press.
- Even the greatest idea cannot succeed without adequate financial backing to get it into the prospect's mind.