The law of leadership

• The basic issue in marketing is creating a category you can be first in
• It’s better to be first than it is to be better
• Regardless of reality, people perceive the first product into the mind as superior
• It’s much easier to get into the mind first than it is to try and convince someone you have a better product than the one already there
• People tend to stick with what they’ve got
• Marketing is a battle of perceptions, not products

The law of the category

• If you can’t be first in a category, set up a new category you can be first in
• Sometimes you can turn an also-ran into a winner by inventing a new category
• When you launch a product, don’t ask “How is this product better than the competition?” but rather “What category is this new product first in?”
• Charles Schwab didn’t open a better brokerage firm. He opened the first discount broker.
• Forget the brand. Think categories. Everyone is interested in what’s new, few are interested in what’s better.
• When you’re first in a new category, promote the category – you have no competition. In the early days Coca-Cola sold refreshment, not Coke.

The law of the mind

• It’s better to be first in the prospect’s mind than first in the marketplace
• The law of the mind modifies the law of being first
• Being first in the mind is everything in marketing
• If marketing is a battle of perception, not product, then the mind takes precedence over the marketplace
• You can’t change a mind once it’s made up
• Xerox was the first in copiers and then tried to get into the computer business – 25 years and $2bn later, Xerox is nowhere in computers
• The single most wasteful thing you can do in marketing is try to change a mind
• People don’t like to change their minds – if you want to make a big impression on another person, you have to blast your way into that mind
• Apple got into people’s minds early because of it’s simple, easy to remember name – it wasn’t the first.

The law of perception

• Marketing people are preoccupied with doing research and “getting the facts” – analysing the situation to make sure truth is on their side
• This is an illusion – there is no objective reality, there are no facts, there are no best products
• All that exists in the world of marketing are perceptions in the minds of the customer – the perception is the reality, everything else is an illusion
• Most people think they are better perceivers than others – they have a sense of personal infallibility – their perceptions are always more accurate than those of others
• Most marketing mistakes stem from the assumption that you’re fighting a product battle rooted in reality
• Must study how perceptions are formed in the mind and focus marketing programmes on those perceptions
• Minds of customers are very difficult to change – with a modicum of experience in a product category, a consumer assumes that he or she is right
• A perception that exists in the mind is often interpreted as a universal truth
• People are seldom, if ever, wrong. At least in their own minds
• 3 largest selling Japanese imported cars in America are Honda, Toyota and Nissan
• Most marketing people think the battle between these three brands is based on quality, styling, horsepower and price
• Not true – it’s what people think about the brands that determines which brand will win
• Japanese manufacturers sell the same cars in the US as they do in Japan – if marketing were a battle of products then, sales orders should be the same
• But, in Japan, Honda is nowhere near the leader. People in Japan perceive Honda as a motorcycle manufacturer, while people in the US see Honda as a great car producer.
• You believe what you want to believe (Coke example)
• And, people frequently make decisions based on second-hand perceptions – the “everyone knows” principle (“everyone knows Japanese make higher quality cars than Americans do”)

The law of focus

• Burn your way into the mind by narrowing the focus to a single word or concept
• A company can become incredibly successful if it can find a way to own a word in the mind of the prospect
• The most effective words are simple and benefit oriented
• Volvo – safety
• Domino’s – home delivery
• It’s always better to focus on one word & you can’t take someone else’s word
• The essence of marketing is narrowing the focus
• You can’t stand for something if you chase after everything
• You can’t narrow the focus an idea that doesn’t have proponents for the opposite point of view (i.e. quality/honest politician)
• Worth remembering nothing lasts forever, there comes a time when you have to change words

The law of exclusivity

• Two companies cannot own the same word in the prospect’s mind
• You cannot change people’s minds once they’re made up
• Burker King – a market study showed that the most popular attribute for fast food was “fast”
• So Burger King decided to run its advertising around the concept of “fast”
• What they overlooked was that McDonald’s was already perceived as being the fastest – fast belonged to McD’s
• BK’s “Best food for fast times” was a disaster

The law of the ladder

• Being first should be the primary objective, but there are strategies for No. 2/3 brands
• All products are not created equal – there’s a hierarchy in the mind that customers use in making decisions
• For each category, there is a product ladder
• The mind is selective – customers use their ladders in deciding which information to accept and which to reject
• In general, a mind accepts only new data that is consistent with its product ladder in that category
• Number of rungs on the ladder depends on whether the product is high or low-interest
• High interest (coke, cereal) – many rungs
• Low interest (furniture, luggage) – few rungs
• There’s a relationship between market share and your position on the ladder
• You tend to have twice the market share of the brand below you
• Max number of rungs – seems to be a rule of 7 in the customer’s mind
• According to psychologists, the average human mind cannot deal with more than seven units at a time
• Sometimes your own ladder is too small – it’s better to be No. 3 on a big ladder than No. 1 on a small ladder
• Cola ladder much bigger than lemon-lime soda ladder – 7-Up climbed up the cola ladder with a marketing campaign called “The Uncola”
• Before starting any marketing programme, ask yourself:
• Where are we on the ladder in the customer’s mind
• Then make sure your programme deals realistically with your position

The law of duality

• Over time, a ladder becomes a two-rung affair
• When you take the long view of marketing, you find the battle usually winds up as a titanic struggle between two major players – usually the old reliable brand and the upstart
• If you’re not 1 or 2, you should carve out a profitable niche for yourself (law of focus)
• Often happens that there isn’t a clearcut No. 2 – what happens next depends on how skilful the contenders are
• Successful marketers concentrate on the top two rungs
• As time goes on, customers get educated and want the leading brand, based on the naïve assumption that the leading brand must be better

The law of the opposite

• If you want to establish a firm foothold on the second rung of the ladder, study the firm above you
• Where is it strong? And how do you turn that strength into a weakness?
• You need to present the customer with the opposite of the leader – don’t try to be better, try to be different
• When you look at customers in a given product, there seem to be 2 kinds of people
• Those who want to buy from the leader, and those who don’t want to buy from the leader (a potential No. 2 has to appeal to the latter group)
• Don’t simply knock the competition, you have to hone in on a weakness that your prospect will quickly acknowledge
• Scope, the good tasting mouthwash, hung the “medicine breath” label on its Listerine competition
• There has to be a ring of truth about the negative if it is to be effective
• A good No. 2 can’t afford to be timid. When you give up focusing on No. 1 you make yourself vulnerable to everyone

The law of division

• Over time, a category will divide and become two or more categories
• Beer for example – now we have, imported and domestic, premium and popular-priced, light, draft, craft and dry beers as well as many more
• Each segment is a separate, distinct entity with its own reasons for existence
• Each segment has its own leader, which is rarely the same as the leader of the original category
• Instead of understanding this concept of division, many directors hold the naïve belief that categories are combining – this isn’t true
• The way for the leader to maintain its dominance is to address each emerging category with a different brand name
• Companies make a mistake when they try to take a well-known brand name in one category and use the same brand name in another category
• VW Beetle was a big winner in the small-car category in the US
• So it shipped all models from Germany to US and used same name, VW
• The only thing that kept selling was the Beetle – in the US VW meant small and ugly, nobody wanted to buy a big, beautiful VW
• Honda on the other hand set up the Acura in the luxury car market
• What keeps leaders from launching a different brand to cover a new category is the fear of what will happen to their existing brands

The law of perspective

• Marketing effects take place over an extended period of time
• The long-term effects are often the exact opposite of the short-term effects
• A sale for example has been shown to increase business in the short term but decrease business in the long term by educating clients not to buy at regular prices
• Take line extension – in the short term, it invariably increases sales
• E.g. the beer industry – Miller High Life very successful, then they introduced Miller Lite (line extended name)
• In the short term the two Millers could coexist but in the long term, line extension was bound to undermine one or the other brand
• The high water mark for High Life was 5 years after the introduction of Lite – annual sales almost tripled, but then declined for 13 straight years

The law of line extension

• By far the most violated law in the book
• One day a company is tightly focused on a single product that’s highly profitable, the next day it’s spread thin over many products and is losing money
• When a company becomes incredibly successful, it invariably plants the seeds for its future problems
• In a narrow sense, line extension involves taking the brand name of a successful product and putting it on a new product you plan to introduce
• It sounds so logical
• But marketing is a battle of perception, not product and in the mind your brand stands for a specific thing
• In the long run and in the presence of serious competition, line extensions almost never work
• Wherever you look, you’ll find line extensions – one reason why supermarkets are full of brands (lots of shampoos, cereals and soft drinks)
• Management often believe it works because in the short term, it can be a winner
• Less is more – if you want to be successful, you have to narrow the focus in order to build a position in the prospect’s mind
• For many companies, line extension is the easy way out – launching a new brand requires not only money, but also an idea or concept
• The antidote for line extension is corporate courage, a commodity in short supply

The law of sacrifice

• If you want to be successful today, you should give something up
• There are 3 things to sacrifice: product line, target market and constant change
• Product line: The world of business is populated by big, highly diversified generalists and small, narrowly focused specialists. If line extension and diversification were effective, you’d expect to see the generalists riding high. They are not – take Kraft, for example. Everyone thinks it’s a strong brand name but Kraft means everything, so has a smaller market share in most products (apart from Philadelphia)
• The second sacrifice: target market: Coca-Cola got into the prospect’s mind first and built a powerful position, outselling Pepsi 5-1. Pepsi finally developed a strategy of sacrificing everything but the teenage market and closed the gap to Coke. They then succumbed to temptation and cast the net wider – a drink for the masses – didn’t go well. There’s almost a religious belief that the wider net catches more customers, despite many examples to the contrary. The target is not the market. The apparent target of your marketing is not the same as the people who will actually buy your product. Even though Pepsi’s target was the teenager, the market was everybody
• The third sacrifice: constant change. Don’t change your strategy at budget review time each year

Somewhere, I lost my notes for laws 14 through 22. I will try to find them, or re-do them, if I can’t.