A Conversation With Marketing Strategists Al Ries And Jack Trout

 

INC.: Pizza, hamburgers, airplane tickets -- these are all consumer items. What about companies selling products or services primarily to other businesses?

RIES: The fundamentals are essentially the same. Right now, for example, we're working with a guy who's come up with a new heating system for apartment buildings, an alternative to gas or oil or electricity. And even though this new system has enormous efficiencies, this entrepreneur has had a hard time cracking the market and getting the contractors to take him seriously.

TROUT: It's a classic positioning problem. The guy's been at this stuff for 15 or 20 years now, and he doesn't even have it named yet. His system uses a variety of heat sources, so his first challenge is to incorporate the concept into the language. Never mind the name of the company. How about just a generic name for the type of heating system it is, which is the step lots of inventors, lots of entrepreneurs, forget.

INC.: What else does this company need other than a name?

TROUT: Money. Because the only thing that is eventually going to crack the marketplace is to make the generic a big deal, and to make the generic a big deal requires a lot of aggressive advertising. Even though this is only one industry -- the building industry -- it's a big trade with big shows and lots of money spent promoting different products. And this guy didn't have the kind of dough to create any momentum in a market like that. He has now solved that problem by being acquired by a larger company.

INC.: Take us through it, step by step. Do you start with full-page ads in the top contracting magazines?

RIES: No, you start with publicity, because editors don't want to write about anything that is advertised. Editors like to run pieces about new things -- that's why they call it news.

TROUT: So what you do is organize a tour for the industry press -- put them on airplanes and let them see one of these heaters, talk to the contractor, the building owner, the tenants. And you set up pilot systems around the country. Only then do you follow up with the advertising and the trade-show booths and the new presentations for the salespeople to take on the road. Is all that expensive? You bet -- which is why a small company really isn't in a position to do it.

INC.: If there is a single message aimed at small businesses, in your books it seems to be that there is really no safe haven from competition, that all marketing must be viewed in terms of the competition or the potential competition.

TROUT: The number-one trend in the marketplace right now is competition, no doubt about it. We have never seen such a competitive business environment. A few years ago, you could open up a market and have a couple of years to fool around before somebody else was on to you. Today, it's a matter of months and you've got competition -- it's incredible. And that's why a company just has to be much more strategic to survive.

The other thing, of course, is that strategic mistakes can wind up being very costly. I remember in the '60s when RCA dropped a couple of hundred million dollars in computers before getting out, it was thought of as a major corporate debacle -- unheard of up to that time. Today, it happens every week. AT&T dropping over a billion on personal computers -- lousy strategy. General Motors losing market share by putting out cars that all look alike, muddying up their brands, losing their focus -- these are all fundamental strategic issues. IBM, the vaunted IBM, by ignoring the minicomputer market, is getting killed. I mean, you make a strategic mistake today and you've got 16 guys climbing right up your back. That didn't exist 10 years ago. And if you make a mistake like that, you're going to pay. Nobody gets away with anything anymore, even the biggest and the richest.

INC.: How much of this -- your ideas about competition and strategic position -- how much influence have they had on your colleagues in advertising?

TROUT: I think our ideas have had enormous impact on managers and, to an extent, on the marketing industry. But advertising agencies have elected -- purposely, I'm sure -- not to get into the strategy game. It's safer that way, because if something goes wrong, the agency can always say, "Hey, the ads were terrific, B.J., but your strategy, you know, was a little wanting."

RIES: Look, you hold out a $100-million ad budget to an agency and you can be practically guaranteed they won't give you any strategic advice. They're so enchanted with the $15 million they can make on commissions for that $100 million worth of billings that they don't want to say anything you might disagree with. So they're more like short-order cooks. What is it you want today, pal? You want six television spots -- you got 'em. Billboards? We got billboards. And it seems that the bigger the ad agency, the less strategically they think.

TROUT: What the agencies want to do is technique -- singing and dancing. The problem with ad guys is that they sometimes forget they're selling products, not tickets. They want to do movies.

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