Do it better or do it different?

February 1, 2007

“If you build a better mousetrap,” wrote Ralph Waldo Emerson, “the world will make a beaten path to your door.”

Marketing managers are quick to spot the weak link in Emerson’s log ]]>

Both approaches ]]>

The current videogame dogfight between Sony, Microsoft and Nintendo illustrates what’s wrong with these two approaches.

Both Sony’s PlayStation 3 and Microsoft’s Xbox 360 are the result of a better-product approach. Compared to previous iterations of these videogame consoles, PlayStation 3 and Xbox 360 are faster, more powerful and contain more features. (Sony’s PS3 can even play Blu-ray high-definition movie disks.)

Nintendo did it differently. The Wii is perhaps one-tenth as powerful as its two rivals, yet its motion-sensitive wireless controller allows you to produce action on the screen by tilting and waving your hand. You don’t just sit on the couch and move your thumbs.

Wii has been winning the battle in the marketplace. In November and December of last year, Nintendo sold 1,100,000 Wii consoles while Sony sold only 687,000 PS3 machines. (In Japan, Wii outsold PS3 more than two to one.) Wii has also been winning the battle in the media.

“Nintendo’s Wii, radiating fun, is eclipsing Sony.” The New York Times.

“. . . we found the more modest Wii to be the more exciting, fun and satisfying of the two new game machines.” Walter S. Mossberg, The Wall Street Journal.

“Gamers: Wii has PS3 beat.” USA Today.

My prediction: Nintendo’s Wii will wind up outselling Xbox 360 and PlayStation 3 combined.

This would not be the first time Nintendo has won big with a “different” strategy. In 1989, the company introduced Game Boy, the first portable videogame player. Since its introduction, the company has dominated the portable category, selling more than 70 million units.

Two years ago, Sony struck back with the PlayStation Portable, a portable videogame player with a “better” approach. With the bigger, more powerful PSP, you could also play movies and music on a new propriety format, the Universal Media Disk.

Sony had high hopes for PSP. “The Walkman of the 21st century” is how Sony Computer’s CEO described the new machine at the time.

Nintendo did it differently. Instead of just introducing a bigger, more powerful Game Boy, Nintendo introduced the DS, a dual-screen portable videogame player. One screen is a regular LCD and the other screen is a touch-sensitive screen, allowing for a new breed of games.

So far Nintendo DS has sold 26.8 million units versus 22.9 million for Sony’s PSP. No surprise to me.

Another Nintendo innovation in the portable category is DS Lite. While the name is weak, the idea is strong. DS Lite is a smaller version of the DS, much like the iPod Nano (a better name) is a smaller version of its bigger brothers.

If you want to compete with an established leader, do the opposite. In Sky magazine, Steven L. Kent wrote: “Wii compares to 360 and PlayStation 3 in about the same way that a motorcycle compares to an automobile.” A Sony spokesman said essentially the same thing, Wii did not belong in the same category as the more powerful PlayStation 3. (That’s good, Sony. Not bad.)

Marketing is more a battle of categories than it is a battle of  brands. The brand is only a marker for the category itself. People who want to buy an expensive watch go shopping for a Rolex. People who want to buy a high-capacity MP3 player go shopping for an iPod. People who want to buy an expensive Japanese car go shopping for a Lexus.

In other words, a powerful brand owns its category. Red Bull in energy drinks. Silk in soy milk. Netflix in rental DVDs by mail. EBay in Internet auctions. Amazon in Internet books.

Creating a new category and then branding that category in such a way that your brand is perceived as the innovator and category leader (in both senses of the word) is the essence of marketing today. To create a new category, however, you have to think “different,” not “better.” Pepsi-Cola tastes better than Coca-Cola, but it’s not different and therefore can never become the cola market leader.

Many companies that strive to become market leaders ignore this fundamental principle. They focus all their efforts on building better products rather than on building different products. This is especially true of smaller companies.

Even when a company does think different, it often misses the opportunity to become a market leader by giving its brand a line-extension name.

A new category needs a new brand name. But a smaller company thinks, we can’t afford the costs of launching a new brand. So let’s use our existing name.

Furthermore, thinks the company, we already have some good consumer recognition. With a new brand, we’d have to start all over again. We don’t have the resources to launch a new product and a new brand name.

Conventional wisdom tends to focus on developing better products, not different products or even different brands. Recently, the publisher of an automotive magazine wrote: “It’s still product, product, product . . . in the automobile business nothing matters except the product.”

(Hmmm. Brands like Mercedes-Benz, BMW, Toyota and Lexus don’t matter?)

The better product wins is the accepted dogma of many managers. And it’s easy to prove by circular reasoning.

Since the better product always wins, the leading brand in a category must be the better product, proving once again that the better product wins in the marketplace.

Even the magazine publisher completes the circle by stating: “Winners and losers are decided in dealership showrooms across the nation when the prospect walks through the door. Nothing else matters.”

Translation: How do we know which products are better? The ones that win in the showrooms.

In a perfect world, perhaps the better product would always win. But the reality of everyday life undermines this goal of perfection. With thousands of products to chose from in hundreds of different categories, are consumers going to actually buy and compare all the available products in any one category? I think not.

The average supermarket in America has some 30,000 individual products for sale. How many of these will the average consumer buy over the course of a year. A hundred? Two hundred? Maybe 300 at most. (That’s still only 1 percent of the items for sale.)

Very, very little comparison actually takes place. Most consumers buy the leading brands. Some buy the cheapest brands. Some buy brands with unique positions.

In most categories consumers are primarily influenced by the power of the brand itself. What the brand stands for is more important than the quality of the product.

Many private-label products are made by the same companies that make the leading brands. In many cases, the products are the same, the only difference is that private-label products are cheaper. And consumers still prefer the leading brands. The power lies in the brands, not in the products.

Consumer behavior is not as irrational as it might seem. Buying leading brands assures consumers of high-quality products without the need for constant testing and analysis. Life is short.

Ironically, there are many categories where the better product does win. These are categories with few or no brands. Notice, for example, how consumers will take their time to pick and choose the better apple, the better orange, the better lemon in the produce section of a supermarket.

The number of these “better-product-wins” categories keep declining because these are the best categories to launch new brands. In the produce section, a company called Fresh Express introduced the first brand of “packaged salad,” a typical think-different approach.

Naturally the big produce companies jumped into the market with their big brand names: Dole and Del Monte, to name two.

So who’s the market leader? Fresh Express with 40 percent of a $3 billion market.

Two years ago, Fresh Express was bought by Chiquita Brands for $855 million, a nice package of dough.

Think different and get rich.