Enemies, a Love Story

Why the rivalry between two test-prep services makes them both more competitive.

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The test-prep-industry catfight between onetime upstart the Princeton Review and longtime leader Kaplan Educational Centers proves one thing above all else: a hated competitor can be a company's best friend

In the middle of a meeting, John Katzman glances out his third-floor window to see a city bus roar down Broadway. The ad on its flank announces, "Take Kaplan and Get a Higher Score." Katzman glares and then takes a deep breath to collect himself. "It makes me crazy to see that," says the chief executive and founder of the $50-million Princeton Review, a test-preparation company based in New York City. Katzman's arch rival, Kaplan Educational Centers, has a knack for needling him, he admits. But plastering its logo on the bus that drives up and down his avenue all day long is downright cruel.

"I don't like to see their advertising. I don't like to read their press. I don't like to see or hear the word Kaplan," he explains. "It's like an irritant. I have a bad reaction."

This from the man whose company once advertised that "friends don't let friends take Kaplan," who appropriated Kaplan's name on the Internet so he could post "horror stories" about his competitor, who just recently faxed questionnaires to Kaplan offices around the country goading Kaplan partisans with questions like "Why do you think the Princeton Review is beating Kaplan so badly?"

Of course, Katzman's counterpart, camped little more than a mile away in midtown Manhattan, just beams to hear that his ads have riled his rival. "If seeing the Kaplan name makes him angry, he must spend a lot of his waking hours in a rage," says Jonathan Grayer, the 30-year-old marketing whiz appointed Kaplan's CEO last year. An aggressive ad campaign in New York has the Kaplan name bedecking billboards, buses, and subways all over the metro area. As Grayer sees it, Katzman's company is getting its comeuppance. "They've spent years getting in our face, running rude ads like 'Stanley's a wimp' or 'Stanley's finally lost it" -- taking in vain the name of industry father and company progenitor Stanley H. Kaplan. "They've run ads that made my blood boil," notes Grayer. "Now the battle is engaged. We're mad as hell, and we're not going to take it anymore."

"He's whistling past the graveyard," counters Katzman, "and wasting his money."

"No, he's in denial," snaps Grayer.

The two sides do agree on one thing: in this battle of the testmasters, a truce is nowhere in sight. There will be no strategic alliances or joint ventures or pseudopartnerships here, thank you. "They have only utter loathing for each other," comments one former instructor. "And they like it that way."

The simple truth is that their mutual contempt may be the best thing that ever happened to either company. Despite the animosity -- Katzman refers to Kaplan's management as "those humorless cheeseballs"; Grayer dismisses Katzman as a "rebel at any cause" -- this is a regular bowl game to watch and perhaps the best evidence yet that having a nemesis can be a beautiful experience. An honest-to-God gift. Not just to customers, the obvious beneficiaries, but to the warring parties themselves: what team, after all, doesn't play better against an opponent it positively despises?

Let's forget for a moment the minor inconveniences that result from fierce competition: the churlish ads, the spying, the bad-mouthing, the talent stealing. Trash talk is all in a day's work. OK, so maybe there's the occasional ambush, although Princeton denies ever sending operatives to disrupt a Kaplan class. ("Even if we did, who would notice?" Katzman speculates.) Let's overlook the issues of Dumpster security: Kaplan refutes the suggestion that its employees ever picked through its competitor's trash in search of customer names. So there's a little price pressure? And a chronic tug-of-war over market share? Quit whining. A competitor that stalks you also spurs you on. In a heated rivalry, you finally find that special someone -- to copy, to conquer, to kvetch about. With enemies like this, who needs friends?

"Our company invented the industry, and we're back to claim what's rightfully ours," explains Kaplan's Grayer. Founded by Stanley H. Kaplan in 1938, the company Grayer now runs spent nearly half a century developing the market for its test-coaching services and building a national chain, to become the country's largest test-prep business. Then a young punk, not long out of Princeton University and packing a 1500 SAT score of his own, burst onto the scene to steal a slice here and a slice there from Kaplan's previously uncut tart.

Throughout the 1980s Katzman's new company posted runaway sales growth (landing on the Inc. 500 four times). By 1986 the Princeton Review had chipped away at Kaplan's near-monopolistic reign and had grabbed as much as half of its SAT business.

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