Cliff Notes: 22 Immutable Laws of Marketing by AL RIES & JACK TROUT

By March 11, 2017cliff notes
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1. Law of leadership

  • Creating a category you can be first in is the basic issue in marketing
  • Much easier to get into the mind first than to convince someone you’re better than the one that got there first
    • Heineken first imported beer in America, some beer tastes better but Heineken still no. 1 imported beer
    • first domestic light beer was Miller Lite, now best-selling light beer in America
    • Gillette first safety razor, Tide first laundry detergent
  • People tend to stick with what they’ve got
  • Brands keep leadership by becoming generic
    • Kleenex, Xeroz, Jello
    • If you’re introducing the first brand in a new category, select a name that works generically.
  • Sales order of follow-up brands often matches the order their introductions
    • Advil was first, Nuprin second, Medipren third. Now Advil 51%, Nurpin 10%, Medipren 1%
  • Benchmarking on “better-product” doesn’t work.
    • People perceive the first product into the mind as superior.
    • Think of 5-Hour energy, first energy shot, fighting against energy drink giants
  • Marketing is a battle of perceptions, NOT PRODUCTS.

2. If you can’t be first in a category, make a new category that you can lead.

  • After Heineken’s success, Anheuser-Busch said they should import beer, too. 
    • That didn’t work, but when they made the first high-priced domestic beer, Michelob, it succeeded.
  • When you launch a product, don’t think “How is this better?” but “What is this first in?”
  • How do I get people to prefer my brand? Forget the brand, think of categories
    • Prospects feel defensive about brands.
    • Everyone wants what’s new, few people want what’s better.
  • When you’re first in a category, promote the category.
    • In essence, you have no competition.
    • DEC told prospects why they ought to buy a minicomputer, not a DEC minicomputer.
    • Hertz sold a rent-a-car service
    • Coke sold refreshment

3. Better to Be First in the Mind than to be First in the Marketplace

  • Being first in the mind is everything in marketing
    • being first in the marketplace is only good if it allows you to get in the mind first
    • if mind a battle of perception, not product, then the mind takes precedence over the marketplace
  • once a mind is made up, it rarely changes 
    • biggest waste in marketing is trying to change the mind
  • if you want to make a big impression on someone, you can’t worm into their mind over time
    • you have to BLAST your way into the mind
    • reason you blast instead of worm is because people don’t like to change their minds
    • once they perceive you one way, that’s it
  • have a simple and easy to remember name
    • Apple vs. IMSAI 8080, MITS Altair 8800

4. Marketing is Not a Battle of Products, but a Battle of Perceptions

  • marketers believe that in the long run the best product will win it’s an illusion, there is no objective reality, there are no facts all that exists in the world are perceptions in the minds of customers the perception is the reality
    • People cling to the belief that reality is the world outside of the mind and that the individual is one small speck on a global spaceship the only reality you can be sure about is in your own perceptions if the universe exists, it exists inside your own mind and the minds of others you won’t win on the merits of the product only by studying how perceptions are formed in the mind
    • Focusing your marketing programs on those perceptions can you overcome your basically incorrect marketing instincts truth is nothing more or less than one expert’s perception and who is an expert? someone perceived to be an expert in the mind of somebody else.
    • Perception in the mind is considered universal truth people, in their own minds, are never wrong
      b/w Honda, Toyota, and Nissan, quality, styling, horsepower or price won’t win
      it’s what people think  of those brands that will determine the winner
  • Honda dominates the US market, if qualities are what determine winners, why is it doing so poorly in Japan?
    In Japan, Honda is considered a motorcycle company, and people don’t want to buy cars from a motorcycle company

    • New Coke is No. 1 in taste
      Coke did research and thousands of surveys and discovered that people prefer New Coke to Pepsi and Old Coke
      but people don’t believe it is, they prefer Coke Classic
  • What makes it difficult is that people buy off second-hand perceptions5. Own a word in the customer’s mind

5. Own a word in the customer’s mind

  • the leader owns the word that stands for the category
    • IBM owns computer 
  • smart leaders try to own the most important attribute of their category
    • Heinze owns ketchup, but also wants to own thick 
  • if you’re NOT the leader, your word needs to be completely available and focused
  • most effective words are simple and benefit oriented
    • no matter how complex the product or needs or market is, best to use ONE word that communicates an important benefit
    • BMW = driving
    • Domino’s = home delivery
    • Pepsi-Cola = youth
  • words can be benefit related (cavity prevention), service related (home delivery), audience related (youth), or image related, (cowboy)
  • Sometimes companies need to change words
    • Lotus owned spreadsheets but that became too crowded, then began to focus on groupware 
      • first in that category and tried really hard to own that word
  • You can’t take someone else’s word, doesn’t work
  • You can’t stand for something if you chase after everything
  • People won’t believe you if they see that you’re doing things with other words
    • BMW means driving, but then did SUVs… sales went down, got rid of the SUVs, made faster smaller cars, sales back up
  • Everybody stands for quality, you can’t stand for quality, is there anyone out there not standing for quality?
  • Your word needs an opposite
    • BMW is not safe, it’s driving 
  • Abortion sides have gone: pro-life and pro-choice
    • Anti-drug campaign hasn’t picked a word
    • Should pick loser, like anti-smoking picked gross 

6. Two companies cannot own the same word in the prospect’s mind

  • you can’t change people’s minds once they are made up
    • when you compete for the same word, you reinforce your competitor’s position by making its concept more important
  • You put together a list of things people want, but you can’t have all of them
  • You can’t own the idea from someone else by spending a lot of money
    • Burger tried to take fast from McDonald’s and wasted a bunch of money
  • If the leader owns the most important word, take the second most important
    • if the leader ever tries to leave that word, take it then

7. Your strategy depends on which rung you occupy on the ladder

  • marketing strategy should depend on how soon you got into the mind and consequently which rung of the ladder you occupy
  • Take Avis, for a long time it said “Finest in rental cars.”
    • Didn’t work because people considered Hertz top
    • Then it went with “We try harder” acknowledging its place on the ladder, sales went up
    • didn’t do better because it all of a sudden actually started to try harder, but because it acknowledged its place
  • the mind only accepts new data if its consistent with its product ladder in that category
    • it ignores everything else
  • products you use every day (cigarettes, cola, cereal) have many rungs
  • products you purchase infrequently (ladders, lawn mowers, luggage) have few rungs
  • products that involve personal pride (automobiles, watches, cameras) have many rungs even though they’re sold infrequently
  • products that are bought infrequently with an unpleasant experience (coffins, life insurance, plan B) have few rungs
  • there’s a relationship between market share and position on ladder
    • tend to have twice the market share of company below you and have half of the one above your
  • seven rungs probably the maximum number of rungs someone can have in their mind
  • sometimes your own ladder is too short
    • 7-up was leading in the lemon-lime ladder, but 2-3 of soda products bought are cola products
    • so it put itself on that ladder with “Uncola”
  • before starting any marketing campaign, consider:
    • where are we on the ladder in the prospect’s mind?
    • then make sure your campaign acknowledges that and makes it known that you acknowledge that

8. In the long run, every market becomes a two-horse race

  • in rent-a-cars it’s hertz and avis, in sneakers it’s Nike and Reebok
  • usually two front-runners, if one company controls the market share, it’ll come close to evening out with the second place
  • the customer believes that marketing is a battle of products
    • it’s that thinking that keeps the two brands on top: “if they’re the leaders they must be the best.”
    • we know it’s a battle of perceptions though

9. If you’re shooting for second place, your strategy is determined by the leader

  • Discover the essence of the leader and present yourself as the opposite
    • there are two types of people, the people that like the leader and that don’t, be the opposite of the leader
  • Don’t try to be better, try to be different
  • Coca-Cola is the old, established product
    • using the opposite theory, Pepsi reversed the essence of Coca-Cola to become the choice of the new generation
  • don’t try to copy them, don’t try to be them, be the opposite
  • Time built a reputation with colorful writing, Newsweek turned that around by writing with a straightforward style
  • Don’t just knock on the competition, but pick a weakness even they’d acknowledge
    • Scope went with good-tasting because Listerine tasted like crap
  • you can’t be timid, when you stop focusing on No. 1, you become vulnerable to not only the leader but also to the rest of the pack
    • Burger King was doing well when it attacked McDonald’s with “Have it your way” attacking McDonald’s mass-production technique
    • than it went with Herb the Nerd and it went downhill, even tried to target little kids, which was McDonald’s mainstay
    • should have gone with “Burgers for Grown Ups”

10. over time, categories divide into more categories

  • the computer category broke into personal computers, laptops, notebooks, etc.
  • cars broke into luxury cars, fast cars, adventurous cars
  • each new category has its own reason for existence and each segment has its own leader
    • which is rarely the leader of the original category
  • categories are dividing, not combining
  • American Express thinks its selling financial services, but what customers actually buy are stocks and bank accounts
    • and customers prefer buying each category from different brands
  • for a leader to maintain dominance in different categories is to use different brands
    • General Motors uses Chevrolet, Pontiac, Buick and Cadillac
  • Using a well-known brand in one category for another category is a HUGE MISTAKE
  • Volkswagen did well with its beetle, but then tried to do different types of cars, and Volkswagen means small and ugly, so it didn’t work
    • In contrast, Honda decided to go upmarket and used the brand name Acura
  • Although you can be too early, better to be too early than too late

11. Marketing effects happen over time

  • the long-term effects are often the exact opposite of the short-term
  • in the short term, a sale increases business
    • but studies show customers get used to sales and stop buying during normal times
    • this forces businesses to make constant sales
    • Seamans, largest furniture store in the country runs sales every day, it went bankrupt
    • so companies give sales not to increase them, but to keep them from falling
  • wal-mart keeps the prices low everyday
  • proctor & gamble stick with uniform pricing
  • line extension increases business in the short term but decreases in the long
    • Miller High Life went from from 27% because introduced Miller Light, the first light beer
    • great idea and first in the category, but should have used a different brand name
    • normal miller went up for 5 years for Miller, but then decreased, so helps in short term, hurts in long
    • sales may have gone done, but did profit go up? 
    • same with Michelob, when Michelob Genuine came out, regular Michelob increased for 5 years then went down
    • they didn’t have to line-extend because light beers were taking over the market, even now regular beer sells the most out of anything
    • Donal Trump put his name on everything, what’s a Trump? A hotel, a casino, a bank? he’s in debt now.

12. Don’t extend your brand

  • one day company tightly focuses on a single profitable product, next day it spreads thin over many products and loses money
  • when you try to be all things to people, you end up in trouble
  • line extension means taking the successful brand of one product and putting it on another
  • but marketing is a battle of perceptions, not products
    • the name of that successful brand becomes the product, and people can’t separate the two
    • “pass the A1” means pass the steak sauce
    • so A1 chicken sauce doesn’t work
  • creating flavors seems to be a popular way to grab market share
    • more flavors = more share, seems to be the thought process
    • 7up had 5.7% of soda market, then did gold, cherry 7up, assorted diet versions, and went down to 2.5%
  • leader in any category is the leader that isn’t line extended
    • Gerber owns 72% of baby food market, and only does baby food
    • Chanel for men?
    • Coors beer, Coors water?
    • Adidas running shoes, Adidas cologne?
  • line-extension loses in long-term, but helps in short-term, like couponing
  • if you want to be successful, you need to narrow your focus so you can build a position in the prospect’s mind
  • for a new brand to succeed, needs to be first in the prospect’s mind it its category, or position itself as the alternative to the leader

13. Sacrifice to get something

  • if you want to be successful, you should give something up
  • three things to sacrifice: product line, target market, and constant change
    • where is it said that the more you have to sell, the more you sell?
      • Kraft lost the mayonnaise market to Hellman’s because that’s all they make
      • kraft lost jelly market to Smucker’s because that’s all they make
      • Kraft won the cream cheese market, because it uses the brand name Philadelphia
      • Interstate Department stores went bankrupt, so it looked in its books to see what it sold most, toys, and focused on that. Called itself Toys R Us, now owns 20% of that market
      • Lots of stores sell lingerie, but think of Victoria’s Secret
    • where is it said that you have to appeal to everybody?
      • Pepsi sacrificed everything except the teenage market and closed the market share gap by 10%
        • but then it began referring to itself as the drink for the masses
        • now it doesn’t have an image, LOTS of people think they’re young, or want to be young, not just teenagers, and lost that now
      • Marlboro focused on the cowboy, the lone ranger, but its also the top selling cigarette for women, lots of women like to feel like rebels
  • the apparent target of your marketing is not the same as the people who will actually buy your product
    • there are no more cowboys, but LOTS of people that want to feel like a cowboy
    • not many teenagers, but LOT of people that want to feel like teenagers
  • stop changing your strategy when you become successful
    • White Castle has the same menu as it did 60 years ago, just as successful as ever

14. For every attribute, there is an opposite effective attribute

  • in Ch. 6, we made that point that you can’t own the same word as your competitor
    • you must find your own word
    • much better to search for an opposite effective word that will help you play off your leader
      • key is OPPOSITE, not similar
  • some attributes are more important than others
    • you must try to own the most important attribute
    • if your competitor owns the most important, take the second most important
    • seize that attribute, dramatize its value, and increase your share
  • Gillette never laughs at new attributes
    • made high tech razors, but saw the opportunity in disposable razors when they saw an entrant
    • they jumped into that market with a separate brand name for the disposable razor
  • you can’t predict the size of a new attribute’s share, so never laugh.
  • if McDonald’s owns kids, Burger King could own adults, which includes every kid that doesn’t want to be perceived as a kid
    • to make this work, Burger King would have to focus exclusively on adults, give up the kid market to McDonald’s
    • Its word could be “Grow Up”, Grow up to a flame-broiled Whopper.

15. When you admit a negative, the prospect will give you a positive

  • Admit an obvious negative, but then twist it into a positive. 
    • “With a name like Smucker’s, it has to be good.”
    • “The 1970 VW will stay ugly longer.”
  • Every negative statement you make about yourself is taken as true.
    • positive statements are looked at dubiously
  • marketing searches for the obvious
    • because you can’t change a mind once it’s made up, your marketing efforts have to be devoted to using ideas and concepts already installed in the brain
  • when a company begins a message by stating a problem, the public open their minds
  • Scope entered the market with a “good-tasting” mouthwash
    • Listerine could have tried to convince people that its taste wasn’t that bad
    • but that would have been fighting against the obvious and against already installed notions in the mind
    • so it went with “The taste you hate twice a day.”
      • anything that tastes like disinfectant must work
  • First, your negative has to be an obvious negative. Has to resonant with the public.
    • next, shift focus to its positive aspect
  • the point of candor isn’t to apologize, but to set up a benefit that will convince your prospect.

16. In each situation, only one move will produce substantial results.

  • many marketing people seem to believe that the best way to grow is to get into everything
  • the only thing that works in marketing is the single, bold stroke
  • most often, there is only one place where a competitor is vulnerable
  • for a long time, GM, a titan, stood strong with the middle of the line cars
    • but BMV  came to take the top and Toyota came to take the bottom
  • Coke needs to bite the bullet and let go of New Coke , bring back the concept of “The Real Thing” and use it against Pepsi
    • they say to teens, alright kids, we won’t push you, but when you’re ready, we have the real thing for you.
  • to find that singular idea, marketing managers have to know what’s happening in the marketplace.
    • they have to be down at the front in the mud of the battle.
    • hard to find the single broad stroke if you’re in headquarters or delegating important marketing decisions.

17. You won’t predict the future.

  • all marketing plans based on what will happen in the future are usually wrong
  • Most problems not related to short-term marketing thinking, but SHORT-TERM FINANCIAL THINKING.
    • most companies live from quarterly report to quarterly report, that’s their focus
    • General motors was fine until the financial folds took over and put the focus on the numbers instead of the brands
  • Good short-term thinking is coming up with a word that differentiates your company, focusing on the best available attribute, and picking products to drop
    • then you make a long-term plan to maximize on that word
    • THAT’S NOT A LONG-TERM PLAN, THAT’S A LONG-TERM DIRECTION
  • Although you can’t predict the future, you can get a handle on trends, which is a way to take advantage of change
    • People wanted to become healthier, Healthy Foods frozen entrees became big
      • when it came into the market, there were plenty of healthy brands, but none of them focused on the health, Healthy Foods came up with a new brand name for it and owned the word
  • Market research can be more of problem than a help.
    • Research does best at measuring the past
    • new ideas and concepts are impossible to measure, no one has a frame of reference
    • PEOPLE DON’T KNOW WHAT THEY’LL DO UNTIL THEY FACE AN ACTUAL DECISION.
      • the research showed that no one wanted a 5 cent Xerox copy when they could have a 1 cent Thermofax copy
  • One way to cope with an unpredictable world is to build a flexible organization
    • Don’t be GM, couldn’t adjust to the small-car trend.
    • A COMPANY HAS TO BE FLEXIBLE ENOUGH TO ATTACK ITSELF WITH A NEW IDEA.

18. Success leads to arrogance, and arrogance to failure

  • Ego is the enemy of successful marketing, Objectivity is needed.
    • when companies become successful, they substitute their own judgment for what the market wants
  • when a brand is successful, the company assumes the name is the reason, so it plasters the name everywhere
  • but the brand got famous because you made the right marketing moves
    • you got into the mind first
    • you narrowed the focus, picked a word that represents an important attribute or played off the leader
  • the more you identify with your bran, the more likely you are to fall to the trap of line extension
    • “It can’t be the name, we have a great name.”
  • Brilliant marketers have the ability to think like a prospect thinks.
    • they put themselves in the customer’s perspective and does what the customer does
    • remember, marketing is a battle of perceptions, so important to understand what and how the customer perceives
  • the bigger the company, the more likely the CEO has lost touch with the front lines
    • Ross Perot of GM spent his weekends visiting dealers and buying cars, the follow up CEO didn’t do the same
  • As CEO, how do you get the bad news as well as the good? Because no one wants to tell the CEO the truth
    • go in disguise
  • Allocation of time is another problem for CEOs
    • CEO’s time is taken up with too many meetings, too many industry activities, too many outside board meetings, too many fancy dinners
      • learning too much from second-hand perspectives
    • have the VP do a lot of the fancy stuff, you go to the front-lines
    • cut back on the meetings, instead of talking things over, walk out and see for yourself

19. Expect and accept failure

  • too many companies try to fix things rather than drop them
  • Wal-Mart doesn’t punish people if their experiments don’t work
    • if you try something new and learn something, then you get credit for it.
    • but woe to who makes the same mistake twice
  • marketing decisions are often made first with the decision maker’s career in mind and second with the impact on competition
    • leads to failure at risks
    • when a senior exec has a high salary  and a short time to retire, bold moves are highly unlikely
    • even junior execs make “safe” calls to not disrupt their progress up the ladder
  • sometimes ideas get rejected not because of its merit but because no one in top management will personally benefit from its success
    • the ideal environment allows managers to judge a concept on merit and not on who will benefit
    • this takes a sacrificing leader

20. Situation often opposite how it appears in the press

  • when IBM was successful, they hardly talked. Now, they throw a lot of press conferences
    • when you need hype, you’re in trouble
    • inexperienced reporters tend to be more impressed by what they read in other publications than by what they gather personally.
      • once the hype starts, continues because it increases readership and provides topics for writers
    • New Coke got over a billion in free publicity and Coca-Cola spent hundreds of millions marketing it, and still failed, should have been best drink by that standard
    • Next computer got most hype of any laptop
      • didn’t win, Next is the first in a new category of what?
  • the hype not only says that the new product is going to be awesome, but that it’ll render others obsolete
    • these predictions violate the law of unpredictability, no one can predict the future, even a reporter for the Wall Street Journal
    • only revolutions you can predict are the ones that have started
  • forget the front page, if you’re looking for clues to the future, look in the back of the paper for those innocuous little stories.
    • capturing the imagination of the public is not the same as revolutionizing a market
    • over the years, greatest hype has been for developments that promise to single-handedly change an entire industry
      • creates interesting read
  • hype is hype
    • real revolutions arrive unannounced

21. Build on trends, not fads

  • a fad gets a lot of hype, and a trend gets very little
  • fad is a short-term phenomenon that might be profitable, but too short to do a company any good
    • a fashion is a fad that repeats itself
  • if faced with a rapidly rising business, with all the characteristics of a fad, best thing you could do would be to dampen the fad
    • by dampening, you stretch the fad and it becomes more like a trend
  • some owners of hot toys want to put their toy name on everything
    • results in an enormous fad bound to collapse
    • when everyone has a ninja turtle, nobody wants one anymore
  • barbie doll is a trend
    • never heavily merchandised into other areas
  • most successful entertainers control their appearances
    • they don’t overstay their welcome
    • Elvis’s manager deliberately restricted his appearances
  • one way to maintain a long-term demand for your product is to never totally satisfy the demand

22. Without adequate funding, an idea won’t get off the ground

  • even the best idea won’t go very far without money
  • marketing is fought in the mind of the prospect
    • you need money to get in the mind
    • and you need money to stay there
  • use your idea to find the money, not the marketing help
  • entrepreneurs believe they can use publicity and live without other promotions
    • publicity isn’t free, opportunity and labor costs, or PR firm costs
  • the rich get richer because they have the resources to drive their ideas into the mind
    • their problem is separating the good ideas from the bad, and avoiding spending money on too many products
  • unlike a consumer product, a technical or business product has to raise less marketing money because the prospect list is shorter
  • more successful marketers front load their investment
    • take no profit for two or three years as they reinvest all earnings into marketing