The classic 1-2-3

March 20, 2006

Strategy is strategy. Tactics are tactics.

A strategy should never change. Tactics should be changed frequently to adopt the new ideas, new concepts, new opportunities and new media that are constantly coming into the market.

But guess what? Company after company tries to win their marketing wars by constantly changing their strategies. The latest example is General Motors.

Years ago, General Motors had a brilliant strategy. Chevrolet was the entry-level car. Pontiac was the youth-oriented car. Oldsmobile was the high-technology car. (No really, the now defunct brand was cutting edge at one time. In fact, it was the first high-volume front-wheel-drive car.) Buick was the conservative car. (Bankers drove Buicks.) And Cadillac was the high-end, expensive car.

Today, everything is a mess at General Motors. Nobody knows what the individual brands stand for.

What is GM’s entry-level car? Is it Saturn or Chevrolet?

What’s the difference between a Chevrolet, a Pontiac and a Buick? Not much since the brands share many models with the only difference being the nameplates.

In Friday’s New York Times, Ryndee Carney, GM’s manager for advertising and marketing communications said that the divisions “operate independently.”

A big mistake. Strategy should be dictated by the corporation. The divisions should only have the freedom to determine their individual tactics.

If a company wants to be successful with a multiple-brand approach, it should set rigid rules for the strategy of each brand and then let each brand manager determine the appropriate tactics to execute the strategies dictated by the company.

In many categories, a company can be successful with what we call a one-two-three approach.

1. An inexpensive brand.

2. A popular-price brand.

3. An expensive brand.

Today, Toyota is a company flying high. Toyota has built the classic 1-2-3 strategy with

1. Scion

2. Toyota

3. Lexus.

You can distinguish by skills. Black & Decker is the consumer brand. DeWalt is the professional brand.

Or you could distinguish by distribution. L’eggs is the panty hose brand sold in supermarkets. Hanes is the brand sold in department stores.

If you appeal to no one, you are forced to sell your product on price. Not a very efficient or profitable way to run a business. A strong narrowly-focused brand helps to differentiate your product and makes the selling process easier. Strong brands attract consumers; weak brands need to be forced upon consumers with advertising and low prices.

Toyota is has done a brilliant job of building distinct brands. Toyota’s latest brand winner is Scion. In 2005, Scion spent the fewest in media dollars for each new vehicle sold at $284. Toyota was $422 and Lexus was $875. Compare those numbers to some of GM’s cars and you see the power of strong branding. Buick was $751, Saturn was $1012, Saab $2,116.

Scionlogo_1 The introduction of Scion in 2003 has been brilliant. Toyota made great use of viral marketing and event sponsorships instead of advertising to build the brand the buzz surrounding it. Other brands have tried viral marketing, but the technique only works if you have a credible brand, a unique message and can target a narrow audience. Scion has all three and the brand completes the Toyota trifecta.

Read more on how to fix GM in Al’s column.

As well as Stuart Elliott’s New York Times’ GM article on Friday.

Other companies with 1-2-3 strategies:

  • Busch – Budweiser – Michelob
  • Old Navy – Gap – Banana Republic

Price isn’t the only way to build a unified company strategy. You can distinguish your brands using age, MTV is for hip teens, and VH1 is for hip adults (or hope they are still hip.)