The trials and tribulations of Donald Trump.

October 1, 2004

Recently Trump Hotels & Casino Resorts announced that it would file for bankruptcy. According to executive vice president Scott Butera, shareholders will face “significant dilution.”

What went wrong? If you listen to The Donald, the Trump brand is one of the strongest brands in the world. How could three Atlantic City casinos bearing the powerful Trump name wind up in the Chapter 11 dumpster?

Conventional wisdom always focuses on operating errors. He paid too much for

the Taj Mahal; he didn’t renovate his facilities fast enough to keep up with the competition; he didn’t spend enough on advertising; he lost market share to the more luxurious Borgata Hotel Casino and Spa.

All of these errors probably played a role in his downfall, but what about his marketing strategy? Seriously flawed, in my opinion.

(Disclosure: Like most of the participants on his television show, I was also fired by Donald Trump. But more on that to come.)

Years ago, my advertising agency worked for Holiday Inns, owners of Harrah’s Marina in Atlanta City. The company wanted to build another casino in Atlanta City, but on the Boardwalk instead of in the Marina area. So they struck a 50-50 deal with The Trump Organization.

The name they selected: Harrah’s Boardwalk.

Wait a minute, we said. That’s a classic line extension mistake. There are a certain number of loyal Harrah’s customers and now you are going to take that number and divide it by two. Half to Harrah’s Marina and half to Harrah’s Boardwalk.

Furthermore, “The Other Atlantic City,” our positioning strategy for Harrah’s Marina, emphasized the difference between the two locations. Presumably the Marina customer was more laid-back and refined than the Boardwalk customer. (One ad headline we considered, but finally decided not to use: “At Harrah’s Marina, the animals are in the show, not in the audience.”)

We prevailed and finally both sides settled on the name “Trump Plaza.” Our advertising strategy for the second casino also used a positioning strategy, “Atlantic City’s centerpiece,” taking advantage of Trump Plaza’s location in the middle of the Boardwalk.

Later, Holiday Inns sold its half of Trump Plaza to Donald Trump who proceeded to make the same line extension mistake that we had warned Holiday Inns’ management about. Eventually he put the Trump name on three Atlantic City casinos, dividing his loyal customers into thirds.

Why are the dangers of line extension so hard to understand? You can’t stand for something if you put your name on everything.

Could it be a clash of logic versus emotion? Line extension can work, of course, if competition is weak or non-existent. (Which is the case for Trump’s condominiums in Manhattan.)

But in the presence of strong competition, line extension is the road to disaster.

Emotionally, it’s another matter. Who wants to tell Donald Trump not to put the Trump name on a second and third Atlantic City casino? That’s not a job for the faint of heart.

Who wants to tell Mercedes-Benz not to put the Mercedes name on cheap cars? (The brand, in case you haven’t noticed, is taking a beating in the media. “Mercedes’ head-on collision with a quality survey” was a recent headline in Business Week.)

Who wants to tell Volkswagen not to put the Volkswagen name on expensive automobiles costing $67,000 to $98,000? (A recent review of the Phaeton in Business 2.0 points out that the car has two minor faults: a Volkswagen badge on the front grille and another on the trunk.)

Who wants to tell IBM not to put the IBM name on personal computers? (It must be discomforting for the corporation that pioneered the 16-bit serious business personal computer to get beaten by a kid who starts a company out of his dorm room at the University of Texas.)

Who wants to tell Xerox not to put the Xerox name on a line of mainframe computers? (This is the same company that ran the announcement ad “This Xerox machine can’t make a copy.” Any Xerox machine that couldn’t make a copy wasn’t going to go anywhere.)

Who wants to tell Polaroid not to put the Polaroid name on regular photographic film? (Is it any surprise that Polaroid also went bankrupt?)

Who wants to tell Kodak not to put the Kodak name on digital cameras? (The company is in trouble and you are hearing the usual excuse; they didn’t move fast enough into digital photography, when in truth they invented the digital camera.)

Who wants to tell Motorola not to put the Motorola name on cellphones? (It must be embarrassing for the inventor of the cellphone to be overtaken by a then unknown company from Finland.)

So why did Donald Trump fire us, after we fought so hard to get his name on that casino in Atlanta City?

I don’t know. Maybe he was just practicing for his future TV show.