Strategy, markets and mushy middles (Q&A with Al and Laura Ries)

In this segment I'm speaking with Al and Laura Ries, the father-daughter marketing team whose thought leadership has counseled--or perhaps the apt word is "focused"--many companies in the Fortune 500. After scores of bestsellers (Al has written or co-authored eleven books, Laura has co-authored four), one could assume their best material is behind them. Not a chance. Tireless in their pursuit to make us all better marketers, there's fresh thinking below (a special takeaway, too). Here's the Q&A:

In your latest book, The Origin of Brands, you advocate the more proactive method of creating markets vs. the traditional practice of serving them. Why is this a crucial change in mindset for today's marketers? It's the difference between being a follower and a leader. When you serve a market that already exists, you are automatically a follower because some other company created that market. When you create a new market, you are automatically the leader. (Intel in microprocessors. Red Bull in energy drinks. Starbucks in high-end coffee shops.) It's an enormous advantage to start off as the leader because it is very difficult for someone else to take your leadership away from you. When you start off as a follower, it is extremely difficult to ever become the leader.

When creating and maintaining brands, you warn marketers to beware the "mushy middle". What's with all this mush and why do marketers need to heed this call? As a market matures, it tends to fragment into two different markets, usually at opposite ends of the scale. In razors, expensive multi-blade razors like Mach 3 and Fusion are big sellers as are cheap disposables like Bic. There just isn't much action in the middle of the market. Red wine is a big seller as is white wine, but rose wine is nowhere. Regular Coke is a big seller as is Diet Coke, but the company's mid-calorie brand, C2, was a disaster. Many industries are in trouble today, including the automotive industry, the airline industry and the supermarket industry because companies in these industries are focused on the mushy middle instead of the high and low ends of the markets.

But if examples old and new prove the money is in the extremes, why do so many marketers stick to the mushy middle? Is it peer pressure? Risk aversion? Inertia? A market starts off as a single market without extremes. So naturally the brands that create the markets are initially positioned in the middle. As time goes on, the market fragments creating opportunities at both ends of the market. It's difficult to reposition existing brands to take advantage of this fragmentation. The best strategy to use is to launch new brands. (Gillette has done this to great success in the wet-shaving market). Most companies, however, are reluctant to launch new brands. They would rather line-extend existing brands.

In navigating the social media environment--providing new ways to listen, communicate and connect with audiences--what is the single most important action point for marketers? Mastering the new media won't make a company successful. What makes a company successful is a good strategy. Sure, you need to execute that strategy and you will be more successful if you take advantage of the Internet and other ways to communicate with customers and prospects. But strategy is still more important than execution.

End Note: When I conducted my first interview with Al and Laura last year, I knew they would be insightful. What I didn't know is that they would be so generous with their knowledge. They supported my idea of holding a "Great Debate" so readers could weigh-in on the article's controversial topic--namely, divergence vs. convergence as the better branding strategy--with the three of us addressing comments from the marketing community. And debate we did.

We also invite your feedback--feel free to post any questions you have for these masters of marketing! Al and Laura will be checking back to respond. As for the special takeaway: click here for 17 chapters' worth of branding and innovation best practices from Ries' & Ries' most recent book, The Origin of Brands.

Comments? Post 'em! Ideas for an upcoming segment? Send 'em on!  Want to be pinged when new interviews are released? e-mail me. Access all interview segments here. For info. on this series: go here.

Al Ries Laura Ries Branding marketer interviews marketing best practices Christina Kerley CK

Comments

[John]

Dear Mr. Ries,
I'm new to the marketing/branding world - my profession lies elsewhere, but i've had to learn this stuff quickly and it totally fascinates me. Luckily, your book "22 Immutable Laws," was one of my first reads. Now, I'm currently enjoying, "Origin of Brands."

Question: large companies such as Coca-cola can and do spend millions on marketing and can hire the best firms. Knowing that, why do they continually make the mistake of brand extension instead of creating new categories? It seems to me that they of all companies have the resources to create new categories. Do they just get risk-shy as they get larger? Wouldn't a good marketing firm steer them away from being a follower (e.g., Mellow Yellow vs. Mountain Dew) instead of a creator?

It seems too easy to me to avoid these mistakes, but I see large, successful companies make this mistake all the time (Mercedes buying Chrysler, Volkswagen creating a high-end luxury car, Coke creating an energy drink, etc, etc). But, I'm new to all of this.

John

[John]

Dear Mr. Ries,

Another quick question: what's the difference between finding a new niche and creating a new category?

Thanks,
John

[Monica Powers]

I'm loving your blog and thank Mack Collier of The Viral Garden for bringing your website to my attention.

My question to Al Ries and Laura Ries:

When is it better to create a new brand rather than invest in, say, elevating the perception of your existing brand to the high end of the spectrum--and safely away from the mushy middle? I know a brand's perception can change over time and perhaps it's been done before, but breaking away from the undifferentiated middle may be too much of a stretch for many companies. Should mushy-middle brands just be left to die a slow death?

Thanks,

Monica Powers
BrandIsLanguage.com

[CK]

Here's Al & Laura's response to John's question of why so many companies continue to line-extend (instead of launching a new brand)when they've witnessed so many large-scale, expensive mistakes by others--and many times have made this mistake themselves. According to Ries & Ries:

There are two reasons why big companies consistently launch line extensions instead of new brands. One is market research. Most big companies would never launch a new product without doing marketing. When asked, consumers invariably prefer a name they know (Toyota Supreme, for example) rather than a name they
don’t know (Lexus). Why did Toyota launch a second brand rather than a line extension? We don’t know, but it doesn’t happen that often.

The second reason is that line extensions usually do better in the short term than a new brand. Initially a company is pleased with the results of a line extension, but as time goes on,the extension usually causes problem. (A good example is the IBM PC which initially had a 50 percent market share.) When the line extension goes bad, the company doesn’t usually blame the name, the company usually blames the
product management, the marketing, etc.

[CK]

Here's Al & Laura's response to John's question
regarding the difference between "categories" and "niches". According to Ries & Ries:

A niche and a category can be similar, of course, but generally a category is much larger than a niche. The energy drink category, for example is enormous. (Red Bull alone did $2.6 billion in worldwide sales.)

One might consider Monster energy drink a niche product because it comes in a 16-oz. can instead of the traditional 8.3-oz cans. Arizona ice tea is another example of the “oversize can” niche.

If you’re first, you want to create a new category. If you’re not first, you want to be the first to create a new niche.

[CK]

Here's Al & Laura's response to Monica's question of when it's better to create a new brand vs. investing in elevating the perception of your existing brand to the high end of the spectrum. According to Ries & Ries:

When do you launch a second brand and when do you reposition an existing brand to move upmarket or downmarket? Obviously every situation is different, but two of the more important considerations are the size of the company and the intensity of the competition. In general, big companies should launch second brands. They have the money and the market position to do so.

Smaller companies should try to reposition their existing brands which oddly enough is easier if you are a smaller company because your brand is not so strongly identified in the mind. Then there’s the issue of competition. Second brands should be launched when there is little or no competition. If the competition is too strong, it’s going to be extremely difficult.