A Conversation With Marketing Strategists Al Ries And Jack Trout

 

INC.: What's the most common mistake you see in the way companies position themselves?

RIES: Most companies change things too frequently, which means they lose their focus, their identity. If we have one bit of general advice, it's this: when you've got a product or you've got a product identity that works, don't change it. Keep going.

TROUT: When a company gets into trouble, more times than not you discover it is because of problems having to do with expansion. And in most instances, expansion was unnecessary. The people at the top of the company -- often on the advice of professional marketing people -- figured that in order to grow, the company had to use its good name to extend itself into new lines -- and that means new competition, a new identity, tremendous development costs. Big problems.

INC.: An example?

TROUT: People Express. A small, successful guerrilla operation flying to places that nobody else wanted to fly to. And what did they do? As soon as they reached a certain level of success, they instantly left their protective enclave and said, "We're going to go to the big places now and be with the big guys, flying big airplanes." They wanted to go big time -- and, of course, they got killed. Don Burr, the chief executive officer, said it wonderfully. He was quoted as saying, "I knew I was in trouble when my mother was coming up to visit me and she said, 'I hope you don't mind but I'm flying American. Just a few dollars more." And that's why they're gone today. This was a very well-focused, defensible idea they had, and they expanded it. And that's what happens to a lot of companies.

INC.: So then, the whole concept of diversification and trading on a name -- you think that is misguided?

TROUT: Absolutely. If you look at what is happening among big businesses right now, the restructuring on Wall Street, you realize that diversification has been widely discredited. Everybody is getting back to basics. The name of the game is dominance -- owning an industry or a market niche, or, if you're lucky, two.

INC.: How much of your industry or your niche do you have to control in order to own it?

RIES: Most people think they own a market if they are the leaders, which is way, way, away from where they really ought to be. And that's particularly true of small businesses. Most small companies ought to dominate their market segments the way IBM used to dominate the computer business. Don't be content with 20% market share. Think about 70%. Think about being Kodak in photographic film, with 85% market share.

INC.: And if you get there?

RIES: You know, we have yet to see a company that has fully taken advantage of its own dominant position. Nine times out of 10, companies miss very lucrative opportunities for capitalizing on what they already have. One thing is to try to expand your market: if you make envelopes, ask yourself if there is a way to get businesses to use more envelopes; if you're Kodak, switch from advertising film to promoting photography. But perhaps even easier than all that is to take the product global, which very few businesses have done. I mean, if it works in the United States, with 7% of the world's population, why not take it to the other 93%?

INC.: And what if you're not even close to dominating a market, which is probably the more common situation?

RIES: That's right. Most businesses today don't fall into the category of the Big Success or the Big Failure. They're in the frustrating middle somewhere. They don't have one dominant product, but they have five products -- none of them strong enough to really dominate a market, but none of them losing money, either. So what do they do? They cross their fingers and hope that next year somehow is going to be better. And yet, from a strategic point of view, they would probably be better off to wipe four of the products off the board and focus on one.

INC.: Have you had any experiences -- successful ones, unsuccessful ones -- that fall into that category?

RIES: Royal Crown Cola. You probably don't remember this, but that company had the first diet cola. And, at that point, they should have dropped their regular cola, which wasn't going anywhere, in order to focus all of their energies on the diet drink. They didn't. So now they've got a regular cola still competing with Coke and Pepsi, a diet cola that also trails far behind, and just recently they came to us with the idea of competing with Slice, Pepsi's juice soda. Forget it!

INC.: So you never took it on?

TROUT: Oh, we took it on, but we don't have good feelings about it. When they first contacted us, they were primarily interested in a name for their product, something that capitalized on the fact that this new drink would have 20% or 25% juice, which was at least twice what Slice was offering. And we came up with what we considered a very powerful name . . .

RIES: . . . Squeeze . . .

TROUT: . . . And they said something like, "That's interesting, but we don't know if we really want to spend the kind of money it will take to promote it." So what did they do? Well, this same company also had this other line -- Nehi -- a golden oldie that nobody buys and nobody drinks. And what they decided was to take one of the alternative names we gave them -- Froot -- and tack it onto Nehi: Nehi Froot. And this, they thought, was going to be cheap -- they wouldn't have to advertise because of the Nehi name. So we said, "Thank you very much and good luck."

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