The TGIF revolution is only half the story.

November 1, 2009

If you were a first-time visitor from Mars and you happened to drop into a marketing meeting somewhere in the United States, you might assume that marketing people do nothing but talk about “TG ]]>

That’s Twitter, Google, the Internet and Facebook.

There’s no question these four revolutionary developments have forever changed the marketing function. Word of mouth has now become word of finger.

A key difference: Word of mouth leaves an invisible trail in the ethe ]]>

In the past, nobody paid much attention to word of mouth, even though by some estimates it accounted for a majority of brand impressions. Today, however, the visibility of word of finger has mesmerized the marketing world.

B ]]>

I think not. TGIF is only half the story.

Linens ‘N Things didn’t go bankrupt because they didn’t make effective use of Twitter. They went bankrupt because they were a knockoff of Bed Bath & Beyond without a unique identity.

DHL didn’t pull out of the U.S. market because they didn’t buy enough AdWords from Google. They pulled out of the U.S. market because they violated a basic law of marketing, the law of duality. DHL was the No.3 brand in a category dominated by UPS and FedEx.

Kmart didn’t go bankrupt because they couldn’t figure out how to use the Internet to promote the brand. They went bankrupt because they were squeezed between Walmart at the low end of the mass merchandiser category and Target at the high end.

Coca-Cola didn’t fail to build a leading energy-drink brand in three tries (KMX, Full Throttle and TAB) because they forgot to use Facebook to ignite the brands. They failed to build a leading energy-drink brand because they waited too long after the launch of Red Bull.

Marketing can be divided into two parts: (1) marketing strategy and (2) marketing tactics. What’s more important? I don’t think there’s any question that strategy is by far the most important half of a marketing program.

It’s like warfare, also a mixture of strategy and tactics. The weapons of war are equivalent to the media used in a marketing campaign. How often has an army won a war with better soldiers, better guns, better tanks, better aircraft?


What wins wars are better strategies. In World War II, the Germans had the advantage of the better weapons, the better discipline, the most experience. Yet their leader, Adolph Hitler, was a rank amateur when it came to military strategy.

Operation Barbarosssa, the code name for Germany’s invasion of the Soviet Union, was launched on June 22, 1941. Over 4.5 million troops invaded the USSR along a 1,800-mile front, the largest military operation in human history, in terms of manpower and casualties.

By January 1942, it was obvious that the Soviet Union had repelled the invaders. Although the war dragged on for another three years, the Germans were never able to achieve the expected victory.

The Germans’ strategic error was trying to fight on two fronts. On the West with the English and the Americans. On the East with the Russians.

Ironically, 129 years previously, Napoleon made exactly the same mistake. He invaded Russia with 690,000 men, the largest army assembled up to that point in European history.

It was the same old story. Trying to fight on two fronts (the English to the West and the Russians to the East) ultimately cost Napoleon his crown and his empire.

Then there’s Japan which attacked the United States while still fighting a war in China.

You might think that no intelligent business person would make the same mistake. But they do all the time.

Take Lenovo, the Chinese company that bought IBM’s personal-computer operations. Now they’re trying to fight Hewlett-Packard and Dell at the high end of the PC market and Acer and Asustek at the low end. Not a good strategy.

Take Citigroup, one of our largest financial institutions with assets of $1,938.5 billion. Yet Citigroup managed to lose $27.7 billion last year and needed $45 billion in government bailout money to stay afloat.

What happened at Citigroup? Same old story. They started with Citibank, its consumer banking operation. Then they bought Travelers (insurance), Smith Barney (stock brokerage) and Salomon Brothers (investment banking.)

In other words, Citigroup started as a bank in competition with the other major banks in America and then tried to fight on four fronts: banking, insurance, stock brokerage and investment banking. Not a good strategy.

Getting bigger is not a marketing strategy. Yet it’s the only strategy many companies seem to be using today. Line extensions, mergers, acquisitions, multiple price points and other techniques are obviously designed to bulk up a company’s sales. But how do these techniques affect the brand’s position in consumers’ minds? In general, they weaken it.

Citigroup got bigger and weaker because the brand was stretched in so many directions. As a result, the brand lost its meaning.

General Motors made the same mistake. Every one of its brands was stretched to encompass a wide range of vehicles. As a result, the brands lost their meanings and the corporation went bankrupt.

I repeat. Bigger is not a strategy. In the past four years, General Motors sold more than 35 million vehicles worldwide, more than any other automobile producer. Yet in the last four years, General Motors lost $82.1 billion.

If your brands don’t stand for anything, you have to sell your products on “price.” And it’s very difficult to make money by selling your products cheaper than the competition.

In our work with many companies, we find similar thinking. Almost every company wants to get bigger in order to increase sales and profits. And they take steps in that direction by branching out into many different businesses and many different markets.

That’s not a strategy. That’s a road to mediocrity.

What does work in marketing? Dominating a category. Nothing is as effective in marketing as dominating a category.

Take Coca-Cola, which has dominated the cola market ever since the product was launched in 1886. (The No. 2 brand, Pepsi-Cola, was launched in 1903.)

For 106 years, Pepsi-Cola has been trying to overtake Coca-Cola without success. It’s extremely difficult to overtake an established leader. That’s why the most important objective of any brand is to establish a clear-cut leadership position in consumers’ minds.

In China, according to the research firm, Euromonitor International, Pepsi-Cola has 23 percent of the soda market versus Coca-Cola’s 22 percent. In other words, the two brands are neck and neck.

That’s an unstable situation. There are very, very few hydra-headed categories. That is, categories that have two dominant brands with virtually identical market shares. Sooner or later, one brand will get its nose in front and the battle will be over.

That’s likely to happen in China. Sooner or later, either Coca-Cola or Pepsi-Cola will get out in front and the battle will be over. From that point on, consumers will perceive one cola brand to be the “leader” and the other cola brand to be an “also-ran.”

That would be devastating for the loser. It would forever condemn the losing brand to a second-place position.

Look at the fast-food business. McDonald’s is perceived as the leader with 13,918 outlets in the United States. Burger King is buried in second place with only 7,207 outlets.

Furthermore, McDonald’s has taken its leadership position in the United States to build a large, profitable global corporation. Last year, for example, McDonald’s had $23.5 billion in sales. $4.3 billion in net profits. And a net profit margin of 18.3 percent.

Burger King, on the other hand, had just $2.5 billion in sales. $200 million in net profits. Or a net profit margin of 7.9 percent.

Conventional wisdom says that McDonald’s is more successful than Burger King because they have better products and better service.

Nonsense. McDonald’s is more successful than Burger King because it is perceived by consumers to be the leader. And consumers always associate the leader with better products and better service.

What should Burger King do? Too many marketing gurus have only four answers to that question: Twitter, Google, the Internet and Facebook.

Actually, Burger King has had a number of widely-admired TGIF successes, including the Subservient Chicken and the Facebook Whopper sacrifice.

But why doesn’t Burger King consider a change in strategy? Why doesn’t Burger King use one of the most powerful of all marketin g strategies for a No.2 brand: Be the opposite of the leader.

Year after year, Burger King has violated this powerful principle. Instead of being the opposite, they emulated the leader.

• McDonald’s introduced Ronald McDonald. Burger King introduced the King.

• McDonald’s introduced Chicken McNuggets. Burger King introduced Chicken Tenders.

• McDonald’s put in playgrounds to attract kids. Burger King put in playgrounds to attract kids.

• McDonald’s added a dollar menu. Burger King added a dollar menu.

In spite of all this emulation, Burger King keeps falling behind McDonald’s. Ten years ago, the average McDonald’s in America did $1,514,400 in sales versus $1,117,200 for the average Burger King. In other words, McDonald’s had a lead of 36 percent.

Last year, McDonald’s lead was 68 percent. $2,158,900 versus $1,288,600 for Burger King.

Why not be the opposite of McDonald’s? Look at In-N-Out Burger, a West Coast hamburger chain.

McDonald’s has 81 food items on its menus. In-N-Out Burger has just four: hamburger, cheeseburger, double-double and French fries.

You might think the average McDonald’s would greatly outsell the average In-N-Out Burger unit, but it doesn’t. Last year the average In-N-Out Burger unit did $2,252,300 in sales.

In business, there’s never any one way to do anything. Take Walmart, the most successful retail chain on the planet. The average Walmart unit in the United States stocks some 150,000 items and does $72 million in annual sales.

The average Costco unit stocks some 4,000 items.

The full line or the narrow line? Which is the better strategy? They’re both equally valid. What doesn’t work is trying to stay somewhere in the mushy middle.Nor does a narrow line necessarily mean lower sales. The average Costco unit last year did $129 million in annual sales, almost 80 percent more than the average Walmart.

Too many companies emulate the leader and try to be better, when they should avoid the leader and try to be different.

It takes a storm to determine which boats are seaworthy and which boats are not. It takes a recession to determine which brands are strong and which brands are not.

Chevrolet, Ford, Chrysler, A.I.G., Citigroup, American Airlines, United, Delta, U.S. Airways, Sears and dozens of other brands are weak. And the skillful use of Twitter, Google, the Internet and Facebook won’t make a weak brand strong.

First things first. And the first thing is to do is to get your strategy right.