Apple’s iPod.

September 1, 2005

Marketing people spend 95 percent of their time on brand maintenance when the real opportunities lie in brand creation.

Look what the iPod has done for Apple Computer. In the first quarter

of 2005, Apple sold 5.3 million iPods. This year alone, iPod sales should reach $5 billion. The iPod brand dominates its market segment, accounting for 91 percent of all MP3 players with disk drives.

The iPod brand has also greatly benefited Apple shareowners. In the last two years, Apple Computer’s share price has quadrupled.

How do you create a brand like the iPod? It’s simple and at the same time difficult.

You become the first brand in a new category. No other strategy is as effective as this fundamental law of brand creation. Be first.

• Coca-Cola, the world’s most valuable brand, was the first cola.

• McDonald’s, the world’s largest fast-food company, was the first hamburger chain.

• Nescafe, the world’s largest-selling coffee, was the first instant coffee.

Yet where in the lexicon of marketing is the idea of being first ever mentioned? I have read every issue of Advertising Age since 1952 and except in the articles written by my daughter, myself or my former partner Jack Trout, I have never read an article about the importance of being first.

Quite the contrary. The emphasis is always on creativity, research, sales promotion, media spending and especially “the big idea.” Or perhaps the fad of the moment, be it the Internet, one-to-one marketing or the latest fad, branded entertainment.

I have attended numerous industry meetings and have heard numerous industry spokespeople make numerous speeches and except in the speeches given by my daughter, myself or my former partner Jack Trout, I have never heard someone say, the secret to creating a powerful brand is to be first.

It’s a message that marketing people don’t want to hear. They think that it downgrades the marketing function. They think it implies that marketing doesn’t matter. That all you need to do to be successful is to be first.

Too many marketing people hear only the first half of the message. The importance of being first. They don’t hear the second half. What we mean by being first. What we mean is being first in the mind, not in the marketplace.

Anybody can be first. It takes good marketing thinking to get into the mind first.

As a matter of fact, being first is worth nothing. Being first in the mind is worth everything. This is the essence of creating a brand.

In our investigation of brands, very few leading brands were literally ever first. Usually there were a few mis-starts before someone figured out how to get into the consumer’s mind.

Duryea built the first automobile in America, but the brand never got into the mind. Ford was the first brand in the mind (and is still the leading automobile brand in America today.)

Du Mont built the first television set in America, but the brand never got into the mind.

Hurley built the first washing machine in America, but the brand never got into the mind.

When you look around the world, you find many brands like Duryea, Du Mont and Hurley. First in their categories, but not first in the mind. What could have been big winners turn out to be modest successes at best.

Take Krating Daeng, a popular health tonic in Thailand. The product is a lightly-carbonated, highly-caffeinated concoction containing liberal quantities of herbs, B-complex vitamins and amino acids. But it wasn’t anyone in Thailand that took the concept and built a worldwide brand. It was an Austrian named Dietrich Mateschitz who discovered the drink and saw its potential.

A temptation that’s hard to resist is to give a new category an “exotic” name. Mateschitz could have bought the rights to the name “Krating Daeng,” for example. Or perhaps he could have called the new drink, “Thailand Tea.”

What Mateschitz actually did was to call his Asian compound, “an energy drink.” As it happens, the first energy drink. As a brand name, he picked Red Bull, an English variation of Krating Daeng.

Simple names work best when defining a new category. Not only is “energy drink” a simple name, it also benefits from an analogy with PowerBar, the first “energy bar.”

Marketing can be visualized as “filling an empty hole in the mind.” If there’s a category called “energy bar,” the consumer thinks, there must be a category called energy drink (Red Bull.) Or sports drink (Gatorade) or fitness drink (Propel.)

Energy drink works as a category name even though there is little relationship between the ingredients in a can of Red Bull and the ingredients in energy bars like PowerBar, Balance bar, Clif bar and Atkins bar.

Marketing people are sometimes too literal when they try to dream up a name for a new category. What matters most is not describing the benefits of the new category, but expressing the essence of the new category in as simple a way as possible.

After all, Red Bull became a powerful brand because it is perceived as a drink that improves performance especially during times of increased stress or strain, which some people take to mean sexual performance. (“Energy” is just a way of expressing that idea in a socially-acceptable way.)

Red Bull has become a runaway success. Worldwide sales are now than $2.1 billion a year.

The real question is, why didn’t somebody in Thailand do what Dietrich Mateschitz did? Or somebody at Coca-Cola in Atlanta? Or somebody at PepsiCo in Purchase, New York?

The truth is, the folks at the established soft-drink companies were too busy trying to squeeze the last ounce of value out of their existing brands. That’s why there are now 14 different varieties of Coca-Cola. (Marketing people spend 95 percent of their time on brand maintenance when the real opportunities lie in brand creation.)

Then there’s the iPod, the brand that turned around Apple Computer.

But Apple wasn’t the first MP3 player with a disk drive. The iPod was first sold in retail stores in America on November 11, 2001. More than a year earlier (in July 2000), Creative Technology Ltd., a Singapore company, was selling the Creative Nomad Jukebox, an MP3 player with a disk drive, in the U.S. market. Furthermore, the Jukebox had a 6-gigabyte hard drive versus only 5 gigabytes for the initial iPod.

The Creative Nomad Jukebox got into the market first, but not into the mind first.

It didn’t have a chance to get into the mind because the company made a number of marketing mistakes. Let’s look at some of them.

1. Line extension. Creative Technology was already selling two other MP3 players. The Creative Nomad II and the Creative Nomad II MG (magnesium case.)

Both of these products had a 64-megabyte flash memory which meant they could hold only about 20 songs instead of the thousands that a disk drive could hold.

In other words, the disk-drive MP3 player is a totally separate category. Using the Creative name on both categories causes confusion that undermines the brand-building process.

2. A generic name. Even worse, “Creative” is a descriptive, generic name. You can’t build a brand with a generic name. You need a brand name.

What’s a brand name? It’s a manufactured name like iPod, or a generic name used out of context. (Apple doesn’t sell apples.) And there are a host of other criteria to determine whether or not a given name would make a good brand name or not.

3. A long, complicated name. Compare “Creative Nomad Jukebox” (7 syllables) versus “iPod” (2 syllables.)

If you want to build a worldwide brand in today’s overcommunicated marketplace, you need a short, simple brand name. (Red Bull is also two syllables.)

Keep in mind that for a brand name to become truly successful, it needs to become the nickname for the category. Nobody calls the category “hard-disk-drive MP3 players.” They call them “iPods,” even the iPods are made by other manufacturers. That’s another reason a name like Creative Nomad Jukebox would never work.

4. A lack of focus. In addition to making MP3 players, Creative Technology also makes a host of other products. The Creative Zen Portable Media Center (another terrible brand name), digital cameras, graphic accelerator cards, modems, CD and DVD drives, PC speakers, audio chips and electronic musical instruments.

Did Creative Technology see the potential of the disk-drive MP3 player? Probably not, or they would have dropped everything to focus on this product.

Look at Nokia, the world’s eighth most valuable brand. Nokia wasn’t the first company to introduce a cellphone. The first company to introduce a cellphone was Motorola.

Nor was Dell the first company to introduce a 16-bit business personal computer. The first company to introduce such a product was IBM.

Yet Motorola lost out to Nokia in cellphones for the same reason that IBM lost out to Dell in personal computers. Nokia meant cellphone and Motorola meant a wide range of products from communications equipment to global satellite systems.

Oddly enough, Nokia used to make a wide range of products: paper, rubber products including tires & boots, electronics, machinery and personal computers. But Nokia dropped everything in order to focus on cellphones.

Creative Technology should have done the same.