Al Ries who (along with Jack Trout) pioneered the concept of Positioning in marketing was interviewed recently by Vinita Bali in New York. Here are excerpts from the interview:
One of the points you have made in your book “Marketing Warfare” is that the true nature of marketing today is not necessarily serving the customer, but it is outwitting, outperforming, and outflanking competition. Is it possible to survive in the long run without serving customer needs?
You are assuming that if you are outperforming competition, you are not serving the customer, you are assuming that it is a black and white situation. Actually, it is very analogous to the free enterprise system itself. Free enterprise companies are set up to make money, they are not set up to serve the customer. If they were really there to serve the customer…if in $6500 you could make an automobile, they would sell it to the customer at $2000…that’s serving.
What I’m saying is that the customer is served better if companies see the true nature of marketing, which is avoiding the competition. If companies focus on serving the customer, you’ll find that everybody produces the same product, and there is disastrous competition, lots of losses, evolving monopolies…But if each company finds a separate position, not only are the companies healthier, but the customers have more different products to choose from.
What do you think makes a corporation create and maintain market leadership? What should the corporation do?
The way to be a market leader is to do it first. The history of marketing shows that most companies that are market leaders got into the business first. The principle of warfare is to seize the territory first, then it becomes very difficult for a competitor to take the business away. However, we are now showing companies that the way to go against leaders is by segmenting the market, finding a niche or small opening against the leader.
You can be a successful no. 2 or no.3 company by operating against the leader. This kind of strategy produces more products, and definitely more choice. Fundamentally, when you ask customers what they want, they don’t know. They tend to decide what they want by looking at what’s available. If companies are serving the customer, and the customers tend to play back ‘I want what’s available’, then all companies tend to produce more or less the same thing.
If you go into a supermarket, most companies are producing very similar products. As a result, to move the products, they go into deals, with coupons; pay the store to put it on the shelf, and pay the customer to take it off the shelf.
In warfare you try to avoid that, you try to avoid losses. You don’t die for your country -- that’s stupid. You don’t win a war by dying, you win a war by living. The people who live are the winners, not the people who die.
Some people have the mistaken idea that warfare is sacrifice. Warfare is winning. Why fight a war you are going to lose? What we are suggesting is that each company look for a territory that they can own, and focus in on that territory…I think that’s more choice to the consumer, lower prices, and a more efficient system.
In your book, you’ve said that most battles are fought in the mind of the consumer. Are companies today doing anything different, in order to understand the consumer better, as compared with what they did earlier?
I don’t think so. Marketing per se is getting worse, not better. While companies are interested in reading about Marketing Warfare, when they actually draw up marketing programs they don’t practice the principles. One of the fundamentals of war is that you concentrate your forces. But the biggest single infatuation of business today is line extension, to take the same name and use it for a lot of products, which are the same as everybody else’s products…so we have an economy that’s flooded with a lot of products that are very similar.
The customer is confused, the customer is unserved. The cost of the products is higher because if products are similar, people say: why should I buy your product? so what do companies do? They give you discount, a coupon. They raise the prices and then they give you a coupon. Too much marketing today is trying to figure out how to give the products away, instead of truly differentiating the product so that it occupies a unique position…Line extension is the opposite of concentration. We believe companies should concentrate on narrow product lines, and state the difference. We are saying that you can’t make the same shampoo and get away with it…the only way it works is to separate it, to differentiate it.
You have also said that the power of the product is not drawn from the power of the organisation, but that it’s the other way around. Would you say that a brand like Pampers would have been so successful if Procter and Gamble had not launched it?
That’s a good example, because Kimberly Clarke have been making progress with their brand recently. Our research shows that big companies -- Nabisco, General Foods, Kellogg’s, P&G, Kraft -- are interchangeable. To most people it’s just another big, enormous company. People don’t differentiate them, they differentiate between the products. The only thing consumers see are the products. Consumers can’t evaluate companies…
What then is the role of corporate advertising?
The role of corporate advertising is to sell a corporation. Where you sell a corporation is the stock market. Most management people today are compensated much more by stock options than by salaries. It is in the self-interest of the management of major corporations to do corporate advertising to raise the stock prices.
Would you then say that corporate advertising doesn’t make any impact on the consumer? One of the examples that comes to my mind is IBM.
Let’s differentiate…In some cases, like in computers, you are not just buying the product. You’ve got to trust the fact that the company that sold the product is going to be around for a while to service it. In the case of high tech products, you are definitely not just buying the product, but you are buying the company. When there is a product like the computer where long term service is important, new developments, new peripherals are important, you do buy the company.
In that case, IBM advertising suggests why they are a good company to buy from. On the other hand, if I buy a shampoo, even if the stuff is terrible it’s not worthwhile for me to send it back to the company … you’ll take it back to the supermarket. So you are much more interested in not who made it, but who sold it. If I buy a drug…you want to feel that the pharmacist who mixes the prescription is reliable. So the pharmacist that you buy from is an important element in the picture, but not the manufacturer. Most people don’t know who makes Tylenol.
One of the other subjects in your work on Marketing Warfare is strategy and tactics. Would you like to talk a bit about the purpose of strategy and the role of tactics?
A strategy is a generalised scheme for achieving certain objectives, and tactics are the specific means for achieving those objectives. For example, in the military, the strategy is: we are going to invade Southern France. The tactics are we are going to use airplanes, we are going to use tanks, ships. It seems logical in marketing that a company decides strategy first and tactics second. It seems logical, and yet that is a fallacy. Xerox decided strategically that they wanted to be in the computer business. They lost billions of dollars. They should have reversed the process. They should have tried to find tactics that worked first.
The point is that strategies are useless unless they work. There is no such thing as a good strategy per se. There are only strategies that work, and strategies that don’t work. The ultimate test of a strategy is whether it’s going to work or not…and you never know that until you work out the tactics. A lot of times what happens is that the people who work on the tactics know that it’s not going to work, but their management has said, do this, and being good soldiers, they go out and do it and get killed.
Marketing history is filled with the Charge of the Light Brigade…That’s not the way a good general does it – he doesn’t sit in headquarters and decide what to do. A good general goes down to the front to figure out what you can do. And when you know what you can do, you build a strategy exploiting that. Most management people don’t know how to use the tactical weapons. You’re better off reversing the process…
What implications does this have for marketing planning?
After you do this process of “bottom up” marketing, then to be effective you have to keep it consistent on the way down, you can’t delegate it to ten different executions. We believe in bottom up planning, but top down operation. Most companies do exactly the opposite. They do top down planning, and bottom up execution. Once the plan is set, they let the guys run off in 57 directions. That’s not going to work. And yet most businesses today don’t have any notion of this need for top down execution.
That’s an interesting distinction you’ve made. A lot of marketing literature talks about strategy being long term and tactics being short term, and that you employ tactics to deliver strategy.
We think long term planning is a total waste, for reasons very, very simple. You don’t know what your competition is going to do. It’s easy for me to say that five years from now I want to have 30% more sales…and do all this planning. Then your competition introduces a new product at half the price. Five years of planning…out of the window. So what we’re saying is: how can you do long term planning for your company unless you can also do long term planning for your competitors? All you can do is what they do in war. You take a direction, and you modify the direction depending upon what the competitor does, depending on the resistance that the competitor gives you…You launch a low price product. If the competitor doesn’t do anything, you’ll grow like crazy. If the competition blocks you by reducing their price, then you have to change your tactics.
So to have a long term plan that says the competitor’s not going to do anything therefore we’re going to get 100% of the market, and as we now have only 10% of the market, we have to build ten times as many new plants…That’s silly, but that’s in the essence of long term planning, without thinking about the reactions of competitors. Any good tactical move will cause a reaction form a competitor. And unless you know that reaction, you can’t really thing long term.
Is it possible to anticipate reactions from competition, and build that into the direction that you’ve laid down for yourself?
To a certain extent, you can do that, and that gives the strategy some degree of longevity. Some, but certainly not five years. In five years, you can have new products, you can have raw material cost increases, you can have a hundred different things happening. The longer the time cycle, the less sure you are of…For example, when you play chess, you say: If I move this pawn, my competitor will move that…then I might do that by the fourth or fifth move.
But in the eighth move, the tenth move, the twentieth move from the first move, you’d be less and less sure of what you’re going to do, less and less sure of what the competitor reaction is. So in a strategic plan, you can be sure of what you’re going to do, next week, quite sure of next month, less sure of two months from now, and less and less as time goes on, purely because as more and more time is dropped into the situation, you give the competitors more opportunities to do more different things.
In your earlier book on “Positioning” you had alluded to the role of communications in an over communicated society. How do you see the role today, and has it changed in any significant way?
Yes, a number of things have been happening. The volume of advertising keeps going up. The cost of advertising keeps going up. One of the reasons for line extension has been the high cost of advertising. People feel that since it costs so much to launch a new product with a new name, we’ll just launch the new product with our old house name. So the high cost of advertising is inducing companies to do things that are wrong. Our answer to the over communicated society -- an answer that a lot of people don’t feel comfortable with -- is that you’ve got to say less, and say it louder, instead of trying to say more. You’ve got to have the oversimplified message. Every year there is a need to make the advertising and communication simpler. What can and cannot be done today has more to do with what can be communicate and what cannot be communicated. An idea that may be powerful on its own is useless if it can’t be communicated. When someone sits in a meeting and says we should have a 30 day money back guarantee on this product, we say: No, it complicates the advertising message, and it won’t get through. People won’t remember that. After you watch 500 commercials and read 15 magazines and someone says to you, who has got the 30 day money back guarantee. The answer is: I don’t know. A lot of ideas in marketing -- price, discounts, whatever -- are good ideas in themselves, but they are useless in marketing terms because you can’t drive them into the market. So you discard perfectly good ideas if they can’t be communicated.
I believe that in the US, the advertising agency commission of 15% is becoming more and more of an exception. What implications is this likely to have for the advertising industry here?
I think there’s a lot of pressure on advertising agencies to reduce their costs. As the commission has gone down, agencies compensate by reducing the staff. A lot of services have been thrown out. Ad agencies used to have big research departments, big marketing departments, big promotion departments, big publicity departments, a lot of people, a think tank here, and a think tank there. They do away with them. Agencies today are staffed by executioners. They are not staffed by thinkers…it’s accepted in business today that the client does the strategy, and the agency does the tactics. The agency has to accept that because of cost pressures…
Doesn’t that affect the quality of the end product that the agency is delivering?
Of course...When the advertising doesn’t work, the agency says your strategy was wrong. It all happens when you start with the idea that strategy comes first, tactics come second. The client thinks of the strategy, turns it over to the agency for tactics. And when the ads don’t work, it’s not the agency’s fault, it’s the strategy’s fault. That’s traditional thinking. In our view, tactics dictate strategy. The agency should suggest what the tactics ought to be, what will work, and the client should build a strategy to exploit those tactics.
One final question: this has to do with the spate of advertising agencies buying other agencies. It seems to me that when a client acquires another client, the motives are clear --- they acquire the equity of a strong brand and the consumer franchise that goes with it. But what is the motivation for agencies to merge or acquire each other?
A very good question --- it reflects exactly what we were talking about before. As the pressure from clients to reduce their commissions grow, it encourages agencies to merge to reduce overheads, to reduce the staff operations, the legal department, the production department…Mergers allow agencies to accept lower commissions and still make money.