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JUNE 12, 2000


Jack Trout: Differentiation Often Requires Sacrifice

From "Differentiate or Die: Survival in Our Era of Killer Competition"

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As you read in the prior chapter, wanting too much can be bad for your business. Well, here's the flip side: Giving up something can be good for your business. Once upon a time there was a company called Emery AirFreight. They were the biggest freight forwarders and their strategy was to offer overnight delivery, two-day delayed delivery, small-package delivery, and large-package delivery. (Whatever you want delivered, we'll deliver it.) Then along came Federal Express. They sacrificed a lot of business and offered only small packages overnight. Their difference: overnight. FedEx became a well-differentiated success. Emery went bankrupt.

MORE IS LESS.
When you study categories over a long period of time, you can see that adding more can weaken growth, not help it.

In its heyday, (about 1980), Miller beer had two brands: High Life and Lite. Their sales ran about 35 million barrels of beer. Then they added Genuine Draft. By 1990, sales had slipped to 32 million barrels. Undaunted, they continued to add more and more Miller brands. Sales continued to go nowhere as Budweiser got stronger and stronger.

WHAT DO COWBOYS SMOKE?
Philip Morris should know a "more is less" problem when they see one. The same thing happened to their flagship brand, Marlboro.

In an effort to maintain growth, Marlboro introduced Marlboro Lights into Marlboro Country. Then they introduced Marlboro Mediums, then Marlboro Menthol, and even Marlboro Ultra-Lights. Suddenly, for the first time in memory the brand started to turn down.

It's obvious what the problem was about: Real cowboys don't smoke menthols and ultra-lights.

Philip Morris isn't stupid. They are back in Marlboro Country with the red-and-white package. There's not a menthol or medium in sight.

THE BASIC PROBLEM

The more you add, the more you risk undermining your basic differentiating idea. If, as in Marlboro's case, they stand for full flavor, how can that attribute hold up when you start to offer other flavors or weakened flavors?

Michelob was once a very successful, expensive full-flavored beer. Then it introduced Michelob Light and Michelob Dry. The brand went downhill. Heineken, another expensive full-flavored beer, obviously learned from that mistake. Their light beer was called Amstel Light, which is doing very nicely with the brilliant differentiating idea: "95 calories never tasted so imported."

Once upon a time a company called Eveready had a strategy to offer whatever kind of battery you wanted. Then along came Duracell. They sacrificed a lot of business and offered only alkaline batteries.

Duracell became the specialist in long-lasting alkaline batteries and a differentiated success. But they were not the leader and had nothing to lose. As you saw in an earlier chapter, the need for growth tends to make market leaders vulnerable. Rather than give up anything, they kept adding more. Most failed brands once had a differentiating idea that they destroyed by adding more and more versions. Chevrolet was once a good-value family car. Now what is it? (No one knows.)

WHAT'S A PORSCHE?

When you ask that question, what comes to mind to most people is a mental picture of the famous 911, which is a rear-engine, air-cooled, 6-cylinder, cheap/expensive car. Or, to be more accurate, confusion. The result was that sales plummeted to a point that by 1993 the three Porsches were selling about one-tenth of what the 911 sold in 1986.

Luckily, sales are rebounding, thanks to an updated, less expensive version of, you guessed it, the 911.

CONVERGENCE: THE LATEST "MORE"

Convergence is the opposite of sacrifice, as it is all about products that do more.

And it's hard to avoid predictions about converging products in the worlds of computing, communications, consumer electronics, entertainment, and publishing.

These predictions go way back. A July 18, 1993, cover story in Newsday predicted that convergence will cause the eventual demise of videotapes, video stores, newspapers, TV channels, telephone operators, Yellow Pages, mail-order catalogs, college textbooks, library card catalogs, beepers, VCRs, checkbooks, and cassette players.

(We suspect you've noticed that all those things that were predicted to go away are still alive and well. So much for that prediction.) The latest predictions have telephones, video, and the Internet all converging at out television sets. Even the cartoonists are getting into the act. Our favorite has a gentleman, with his large-screen Sony on his shoulders saying hello into it.

If you study history, convergence rarely happens. Products that do more than they should are quick to die.

OLD AND NEW CONVERGENCE DISASTERS

In 1937, we had the convertoplane, a combination of helicopter and airplane that never got off the ground. Neither did the 1945 Hall Flying Car or the 1947 Taylor Aerocar.

In 1961, Amphicar was the first combination boat and automobile. The idea sank. (People figured they could park their boat at the marina and get into their car and drive home.)

In recent times we had AT&T's EO Personal Communicator, a cellular phone, fax, electronic mail, personal organizer, and pen-based computer. Then there was Okidata's Doc-it, a desktop printer, fax, scanner, and copier. Finally we were introduced to a PDA, or Apple's Newton MessagePad a fax, beeper, calendar keeper, and pen-based computer.

All of these are no longer with us. In this case, more is dead.

WHY CONVERGENCE DOESN'T WORK

Creating products that do more than one thing requires sacrifice of a different kind. Designing multifunctional products forces your designers to give up what could be an outstanding single-function design for a lesser design that accommodates the extra functions.

Can a great car be a great boat at the same time? Of course not. If you want a really fast car, get a Ferrari. A fast boat? Get a Cigarette boat. Can a great Formula One racing tire be a great passenger car tire at the same time? Of course not. (Racing tires don't have any tread.)

People want the best of the breed, not a mutt that contains several breeds.

People don't want to give up important features so that they can do other things with it. Just because you can build it is no insurance that people will buy it.

If your difference is that your product can do a lot of things not very well as opposed to a product that does one thing exceptionally well, you haven't got much of a difference.

A FUTURE BANK?

First Union National Bank is a regional bank that's into financial convergence. (Maybe you've seen their strange surreal commercials.) Their strategy is to become a financial supermarket offering a "full range of traditional and nontraditional products and delivery channels." (What does all that mean?)

They call this supermarket a "future bank," and they've redesigned its branches to feature telephone kiosks, PCs, and ATMs. Employees will instruct customers on how to use the new machines in a future-bank mode. In other words, "Come in and use a machine." Unfortunately, their future is off to a bumpy start, as they've had to hire 2,000 tellers in an admission of how they misjudged how much customers want to see real people for their banking needs.

Do people's habits change slowly? Absolutely. Do people want a high-tech financial supermarket? We're not sure. Will the "future-bank"tend to stay out there in the future? Probably. Will all their grand plans work out? Not likely.

MICKEY D WAKES UP

McDonald's has recently invested, for the first time, in another restaurant company. Named the Chipotle Mexican grill, it is a tiny but rapidly growing chain that charges $5 apiece for enormous meat-, rice-, and bean-filled burritos. (You won't find Ronald McDonald eating one of these.)

The investment is probably a tacit demonstration that in today's crowded restaurant field, even the biggest player may not be able to appeal to everyone.

Convergence in fast food just never happened. People go to whom they think does the best job in whatever food they are after. And if we want a pizza, we're sure not going to a hamburger place to get it. And McDonald's McPizza proved that without a doubt.

DIFFERENT KINDS OF SACRIFICE

Over the years, we've seen three different kinds of sacrifice that are required in the game of differentiation:

Product sacrifice.
Staying focused on one kind of product is far superior to the everything-for-everyone approach (unless you use multiple brands): Duracell in alkaline batteries, KFC in chicken, Foot Locker in athletic shoes, White Castle in small hamburgers, Subaru in four-wheel-drive cars, Southwest Airlines in short-haul air travel. You can become different as the expert and the best of the breed in this kind of product.

Attribute sacrifice.
Staying focused on one kind of product attribute is superior to telling a multiple attribute story. It enables you to be different by taking ownership of a perceived benefit. Volvo took ownership of "safety"in automobiles. Crest took ownership of "cavity prevention." Nordstrom took ownership of "service." Dell took ownership of selling "direct." Your product might offer more than one attribute, but your message should be focused on the one you want to preempt.

Target market sacrifice.
Staying focused on one target segment in a category enables you to be different by becoming the preferred product by the segment: Pepsi for the younger generation, Corvette for the generation that wants to be young, Corona beer for the yuppies on their way up, Porsche for the yuppies who have made it.

When you chase after another target segment, chances are you'll chase away your original customer.

Whatever you do, you should not get greedy but stay true to your product type, your attribute or you segment.

HOW TO FEEL GOOD ABOUT SACRIFICE

When companies are told they have to sacrifice, they often get very upset with the idea. After all, no one really wants to give up anything or get locked into what they feel is a limited market.

But then we let them in on the good news. It goes like this: What you advertise, what you sell, and what you make money on can be three different things.

Let's take Burger King as an example. They should advertise "Broiling, not frying," because that makes them different from McDonald's. Once people arrive, they can sell them chicken or fries or whatever. Who cares? And as for making money, that comes from selling soft drinks, which certainly doesn't need advertising.

You get the idea? In many cases, the sacrifice is found primarily in how you communicate or craft your message to the marketplace as to why you're different. Once you capture those prospects, you're free to sell them what ever. And how you make you money is yet another issue.

So while "sacrifice" limits you in how you present yourself to attract customers, you're not really limited in what you sell them once they are in the door. (Federal Express does handle packages that don't just go overnight.)

Now, don't you feel a little better?

Excerpted from DIFFERENTIATE OR DIE by Jack Trout.  Copyright 2000 by Jack Trout.
Reprinted by permission of the publisher John Wiley & Sons, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical or otherwise without prior permission from the publisher.  To order a copy of this work call 1-800-225-5945, or visit the Wiley web site at www.wiley.com.


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