Introduction
You invest heavily in product quality, superior features, and aggressive advertising, yet your market share stagnates while inferior competitors thrive. You assume that better products automatically win, but the market operates according to hidden rules that punish conventional thinking. Al Ries and Jack Trout argue in The 22 Immutable Laws of Marketing that marketing is not a battle of products, but a battle of perceptions in the human mind. You cannot change minds once they are made, so you must align your strategy with these unyielding laws. The book reveals how to build lasting market leadership by understanding fundamental principles of positioning, focus, and consumer psychology.
- Why do better products frequently lose to inferior ones?
- How do you establish a permanent position inside the prospect's mind?
- What causes successful companies to fail through line extension and over-diversification?
1. The Fundamental Laws of Positioning
To succeed in marketing, you must be first in the prospect's mind or create a new category where you can be first.
The Law of Leadership
It is much better to be the first brand into the prospect's mind than to try to convince people that you have a better product. Most companies use the faulty strategy of waiting for a market to develop and then jumping in with a me-too product claiming superior quality. However, consumers and the human mind naturally stick with the first brand they encounter, making the leader almost always the first brand into the mind.
There are 425 brands of imported beer sold in America, yet Heineken remains No. 1 with 30 percent of the market. Advil holds 51 percent of the ibuprofen market as the first brand, followed by Nuprin at 10 percent, Medipren at 1 percent, and prescription-name Motrin IB at 15 percent. Adelphi University compared itself to Harvard, failing to attract top students because it is not on the college ladder.
Charles Lindbergh was the first person to fly the Atlantic Ocean solo and became world-famous, whereas the second person, Bert Hinkler, was a better pilot who flew faster and used less fuel, but is completely unknown.
The Law of the Category
If you cannot be the first brand in an existing category, you must set up a new category where you can be first. Traditional marketing asks how to make a product better than the competition, which is brand-oriented and faces defensive prospects. Instead, you should ask what category your product is first in, because prospects have open minds toward completely new categories.
- Ask yourself "First what?" when launching a new product.
- Promote the new category itself rather than your brand name when you are first.
Anheuser-Busch observed Heineken succeeding as an expensive imported beer and created Michelob as the first high-priced domestic beer rather than copying the import. Digital Equipment Corporation built a massive business as the first in minicomputers. Commodore achieved over $500 million in annual sales by positioning the Amiga as the first multimedia computer. Dell reached a $900 million company by being the first to sell personal computers by phone.
The Law of the Mind
It is better to be first in the prospect's mind than it is to be first in the marketplace. Being first in the physical marketplace matters only to the extent that it allows you to enter the customer's mind first. Once a consumer's mind is made up, it rarely changes, making the single most wasteful marketing activity an attempt to change an established mind.
Remington Rand introduced the UNIVAC as the first mainframe computer, but IBM executed a massive marketing effort to get into the mind first and won the computer battle. Xerox spent 25 years and $2 billion trying to enter the computer business after starting in copiers, with no success. Apple started its computer operations with $91,000 contributed by Mike Markkula.
2. Perception, Focus, and Exclusivity
There are no objective facts or best products in marketing. All that exists are perceptions that function as absolute reality for the buyer. Consumers often make purchasing decisions based on second-hand perceptions and what they believe everybody knows.
Marketing is not a battle of products based on objective reality, but a battle of perceptions in the minds of consumers.
The Coca-Cola Company conducted 200,000 taste tests proving New Coke tasted better than Pepsi and original Coke. Yet New Coke ended up in third place while Coca-Cola Classic stayed first because of consumer perception.
Audi U.S. sales dropped from 60,000 in 1986 to 12,000 in 1991 following a CBS 60 Minutes report on unintended acceleration.
The Law of Focus
The most powerful concept in marketing is owning a simple, single word in the mind of the prospect. You burn your way into the consumer's consciousness by narrowing your focus to a single, dictionary-defined word or benefit. Establishing one strong benefit creates a halo effect where the prospect attributes other positive traits to your brand.
Federal Express owned the word overnight by sacrificing its general product line and focusing entirely on overnight package delivery.
Prego captured a 27 percent share in the spaghetti sauce market by owning the word thicker. Nintendo secured 75 percent of a multibillion-dollar market after Atari walked away from its video game position.
- Narrow your operational scope and focus on a single word or benefit.
- Protect your word in the marketplace once you own it.
The Law of Exclusivity
Two separate companies cannot own the same exact word or position in the prospect's mind. When a competitor successfully owns a specific position or word in the consumer's mind, attempting to adopt that same word is completely futile. Heavy advertising spend cannot override the fact that another brand got there first, and trying often only reinforces the competitor's established concept.
Volvo successfully claimed safety in the automotive market, making it impossible for other companies like Mercedes-Benz and General Motors to run successful marketing campaigns based on safety.
Burger King market research identified fast as a top attribute, but failed because McDonald's already owned the perception of speed.
3. Mental Ladders and Market Duality
Consumers maintain a mental hierarchy or ladder of brand names for every category. The human mind rarely remembers more than 7 brands in a high-interest product category. Your marketing strategy must depend directly upon which specific rung of the product ladder your brand occupies in the mind.
Your marketing message must relate honestly to your current ladder position.
Avis suffered losses while advertising high-quality service. The company turned profitable immediately upon acknowledging its exact ladder position with the campaign stating, "Avis is only No. 2 in rent-a-cars. So why go with us? We try harder."
You must take these practical steps regarding your position:
- Determine your precise position on the mental ladder before launching any marketing program.
- Relate your marketing message honestly to your current ladder position.
Acura sold 143,708 cars, Lexus sold 71,206 cars, and Infiniti sold 34,890 cars. This reflects a mathematically consistent 4-2-1 market ratio.
The Law of Duality
In the long run, every established market inevitably turns into a two-horse race between the market leader and an upstart. Early categories feature multiple rungs, but maturing markets gradually shake out smaller players until only two major competitors remain.
Coca-Cola dropped from 60 percent to 45 percent over 22 years while No. 2 Pepsi-Cola grew to 40 percent, leaving Royal Crown at 3 percent. Procter & Gamble commands No. 1 or No. 2 positions in 32 out of its 44 U.S. product categories.
The Law of the Opposite
If you are aiming for second place, your strategic positioning is completely determined by the market leader.
Instead of trying to be better than the market leader, you must find the weakness inherent in the leader's strength and present the exact opposite. By positioning yourself as the alternative to the leader, you capture business from all remaining market alternatives.
Pepsi-Cola positioned itself as the choice of a "new generation" to counter Coca-Cola's image as an old, established product. The domestic photographic film market consolidated into a long-term race exclusively between Kodak and Fuji.
4. Division, Perspective, and Line Extension
Categories continuously divide over time, short-term actions produce opposite long-term effects, and line extensions dilute brand identity.
The Law of Division
Over time, a single product category continuously divides and fractures into two or more distinct sub-categories. Rather than combining as corporate planners often believe, industries multiply into separate segments with their own unique reasons for existence. Leaders maintain dominance in new segments by introducing entirely different brand names rather than using line extensions.
Billboard music charts feature 11 separate hit lists, each with its own distinct category leader. Computers started as a single category and eventually fractured into mainframes, minicomputers, workstations, personal computers, laptops, notebooks, and pen computers.
You must follow a specific practice to handle market fragmentation:
- Launch a completely different brand name when addressing an emerging category.
Volkswagen experienced this shift when its market share in the United States dropped from 67 percent down to less than 4 percent after attempting to sell varied large models under the same brand name.
The Law of Perspective
Marketing actions often produce long-term effects that are the exact opposite of their short-term effects. While sales, coupons, and discounts boost revenue immediately, yo-yo pricing trains consumers to buy strictly on deals and erodes long-term brand equity.
Miller introduced Miller Lite in 1974, which initially caused Miller High Life sales to triple to 23.6 million barrels by 1979. This action ultimately led to High Life declining 13 straight years down to 5.8 million barrels by 1991.
The Law of Line Extension
Companies face constant internal pressure to push a brand name into new categories, a strategy that creates a strategic tent and dilutes brand identity. Management assumes that a famous name guarantees success everywhere, but trying to be all things to all people causes a brand to stand for everything and therefore nothing.
IBM expanded from mainframe computers into personal computers, workstations, printers, and copiers, resulting in revenues of 65 billion dollars and a loss of 2.8 billion dollars in 1991. Donald Trump accumulated 1.4 billion dollars in debt due to continuous line extensions across his real estate and business ventures. Microsoft paid 170 million dollars to buy Fox Software while competitors stumbled over bloated product lines.
5. Sacrifice, Attributes, and Candor
To build a powerful position in the prospect's mind, you must give up product lines, target markets, or constant change.
Generalists trying to cover the entire market lose to narrow specialists who focus intensely on owning a single word or concept in the consumer's mind. The author calls a full line a luxury for a loser.
Interstate Department Stores went bankrupt, refocused exclusively on toys, and changed its name to Toys R Us, eventually capturing 20 percent of the retail toy business with 5.5 billion dollars in sales and 326 million dollars in profit. Federal Express spent 880 million dollars to buy Flying Tiger and lost 1.1 billion dollars in international operations in 21 months by abandoning its pure focus on overnight package delivery.
The Law of Attributes
If the primary attribute in a category is already owned by the leader, you must find and seize a distinct, opposite attribute. Trying to copy the market leader or claim the same attribute fails. Brands must occupy an alternate position to successfully play off against the leader.
When IBM dominated mainframe computers through the attributes of big and powerful, an upstart successfully introduced small computers, creating the minicomputers category.
The Law of Candor
Admitting a negative upfront disarms the consumer and allows you to immediately pivot to a powerful positive selling idea.
Positive advertising claims are met with skepticism and require proof, whereas negative admissions are instantly accepted as truth and open the consumer's mind.
Listerine embraced its terrible taste with the campaign stating the taste you hate twice a day, successfully pairing the honesty with its germ-killing benefit. General Foods saw a 23 percent increase in sales after admitting Grape-Nuts is a learned pleasure. Joy perfume was marketed as the most expensive in the world, commanding 375 dollars an ounce.
6. Singularity, Unpredictability, and Failure
Only one bold stroke produces results, long-term prediction is impossible, and corporate failure must be corrected early.
The Law of Singularity
In any given marketing situation, only one single bold stroke or move will produce substantial results. Spreading resources across many different programs or trying harder with incremental adjustments fails. History proves that only unexpected, focused flanking moves break through along the line of least expectation.
German and Japanese automakers bypassed General Motors through flanking attacks at the high end and low end. General Motors weakened its middle market with look-alike cars.
The Law of Unpredictability
Because competitors' plans cannot be known in advance, long-term market prediction is impossible. You must maintain organizational flexibility instead. Companies must separate short-term financial panic from long-term strategic direction. You should track underlying trends rather than relying on unreliable market research or rigid 10-year forecasts.
ConAgra successfully leveraged the long-term health trend by introducing Healthy Choice frozen entrees with a simple, direct concept. Domino's Pizza achieved 2.65 billion dollars with a 4 percent market share.
The Law of Success
Early market success breeds ego and arrogance. You can easily lose objectivity and fall into the trap of reckless line extension. Successful executives mistakenly believe their corporate name guarantees expansion. They isolate themselves in headquarters and ignore front-line realities.
Digital Equipment Corporation reached 14 billion dollars before ignoring major market trends. Founder Kenneth Olsen dismissed personal computers, open systems, and RISC architecture, which led to his eventual ouster. The average CEO spends 18 hours a week on outside activities and 17 hours a week in internal corporate meetings.
The Law of Failure
Failure must be expected, accepted, and corrected early through swift loss-cutting. Endless corporate reorganization only delays the inevitable. Personal agendas and career protection often prevent executives from admitting mistakes, whereas egoless management styles encourage fast pivots and experimentation.
Wal-Mart encourages continuous tinkering and learning through its trial approach. The company uses a ready fire aim approach and a champion system, holding employees accountable only for repeating the exact same error twice.
7. Hype, Acceleration, and Resources
The Law of Hype
The public image of a situation presented in the press is frequently the exact opposite of economic reality.
Companies with failing products rely heavily on press conferences and media hype. Real market revolutions arrive quietly without fanfare.
New Coke received 1 billion dollars of free publicity and massive launch funding. Yet the company was forced to bring back the original formula within 60 days.
IBM, Ross Perot, and Canon invested 130 million dollars in the Next computer. Meanwhile, only 51 units were built of the heavily hyped Tucker 48 automobile.
The Law of Acceleration
Successful marketing programs are built on long-term trends rather than short-lived fads. A fad is like a visible wave that spikes and crashes quickly. A trend is like a powerful, nearly invisible tide.
Fads can cause financial shock when you overinvest in staff and facilities assuming the fad is permanent. You should actively dampen fads to stretch them out into trends, and never completely satisfy market demand.
In 1983, Cabbage Patch Kids hit the market. Coleco Industries heavily merchandised these novelty items, reaching $776 million in sales and $83 million in profits in two years. The market then collapsed, landing Coleco in Chapter 11 by 1988 before Hasbro acquired the line in 1989.
The Law of Resources
Even the best idea in the world will fail without adequate financial resources to get it into the prospect's mind and keep it there.
Marketing is a battle fought in the human mind. Acquiring and maintaining space in that mind requires money. You will get further with a mediocre idea and a million dollars than with a great idea alone.
Rich companies must front-load their investments by plowing all earnings back into marketing without taking profits for the first few years. Mike Markkula provided $91,000 in early funding to secure one-third of Apple Computer, putting the company on the map.
Publicity is not free advertising. Small public relations agencies charge $5,000 a month, medium-size agencies charge $10,000, and big-time agencies charge $20,000 a month. When outside capital and venture capitalists are inaccessible, you can utilize specific funding shortcuts:
- Marry the money
- Divorce the money
- Find the money at home
- Share your idea by franchising it
Georgette Mosbacher paid $31.5 million for La Prairie, achieving a 30 percent sales increase in the first year. Frances Lear arrived in New York in 1985 at age 61, using $25 million from her $112 million divorce settlement to launch Lear's magazine for women over 40, reaching 350,000 readers by its fifth issue.
10 Key Ideas
- To succeed in marketing, you must be the first brand into the prospect's mind or create a new category where you can be first.
- Marketing is not a battle of products based on objective reality, but a battle of perceptions in the minds of consumers.
- You burn your way into the consumer's consciousness by narrowing your focus to a single, dictionary-defined word or benefit.
- In the long run, every established market inevitably turns into a two-horse race between the market leader and an upstart.
- If you are aiming for second place, your strategic positioning is completely determined by the market leader.
- Over time, a single product category continuously divides and fractures into two or more distinct sub-categories.
- Marketing actions often produce long-term effects that are the exact opposite of their short-term effects.
- To build a powerful position in the prospect's mind, you must give up product lines, target markets, or constant change.
- Admitting a negative upfront disarms the consumer and allows you to immediately pivot to a powerful positive selling idea.
- Even the best idea in the world will fail without adequate financial resources to get it into the prospect's mind and keep it there.