Jack Trout the author
Jack Trout begins his book by stating that the success it does not depend on having the right people, adopting the right attitude, using the tools right, follow the right models or have the right organization. All this helps, but it is not what makes an excellent company. In his opinion, it all comes down to one word: Strategy.
In the last 30 years, 21.955 books have been written about marketing y strategic planning and a host of technical terms have been invented that, in Trout's opinion, they have done nothing but generate more confusion. For some, strategy is one thing and marketing another, and yet the truth is that they have to be combined. Marketing guides business strategy.
Marketing is what drives the business, and a great business strategy without proper marketing will fail in a world as competitive as it is today.
So far Trout had written quite a bit about success and failure, but he had never defined what a good strategy consists of. For this reason, he decided to return to what he had written and extract the main lines that define a good strategy. In Trout on Strategy, work considered by his Author as a short course of what I learned On strategy in his long journey through the business world, seven principles of business strategy are enunciated, illustrated with some succinct examples.
Strategy is a matter of survival
In a world where competition is deadly, strategy becomes a way of survival. The great difference between today's society and any of its predecessors is that, due to the proliferation of products in all categories, there has been an explosion of choice. It is estimated that in the United States, the country with the widest choice, there are a million different individual stock units (SKUs or Stock Keeping Units). On average, in a supermarket you can find around 40.000 SKUs, which an average family only uses 150 SKUs. In other words, 39.850 of the supermarket's merchandise go unnoticed.
The same is true of the automotive market: in the 140s the number of models was limited and all brands were American. In the early XNUMXs there were already XNUMX models from manufacturers, both American, Japanese, French and German.
Today, Americans have a choice of 260 models. This example illustrates another difference between today's society and previous ones: what used to be national markets in which local companies competed, has become a global market in which all companies compete in all categories and throughout the world. . If the possibilities of choice have multiplied, it has been as a consequence of the law of division, stated in 1993 by Ries and Trout in The 22 Immutable Laws of Marketing. The car, like the computer, started as a single category and three brands dominated the market, but later the category was divided.
Division is a process unstoppable whose immediate consequence is a proliferation of choice possibilities. And the more possibilities to choose, the more complicated it is for consumers to do so. For this reason, a series of magazines have emerged that evaluate the products and publish the results to help them in their difficult work. Consumer psychologists say that this universe of choices is driving shoppers crazy, so tired they have stopped paying attention to an excess that bores them and makes them lose their ability to choose.
With so much competition, markets today are driven by choice. TheConsumers have so much to choose from that manufacturers pay dearly for even the slightest mistake. If the consumer is not satisfied with the product, they switch to the competition without any remorse of conscience, and once they have changed their choice, there is no going back. Choice can be so cruel that, referring to its absolute and ruthless power, Trout speaks of a tyranny of choice.
It is foreseeable that in the future the situation will worsen, since the election generates more choice. The only way to survive is to outline a strategy and constantly communicate it to customers, employees, and shareholders. It is something simple, a simple value proposition that synthesizes the reason why consumers they must choose our product and not that of the competition.
Strategy is a military term that could be defined as “the science of to plan and directing large-scale military operations, placing forces in the most advantageous position before engaging in combat with the enemy ”. And, as we will see later, the similarities between the market and the battlefield, between marketing and war, are enormous.
Strategy is purely a matter of perceptions
Since positioning is the way to differentiate yourself in the minds of consumers, the success or failure of your business strategy essentially depends on your good or bad understanding of the five most important elements that make up the positioning process. Firstly, brain capacity is limited, since like the memory of a computer, in the human mind there are stripes in the ones that fit the pieces of information you decide to retain. Also, the mind rejects the data that it is not able to compute and accepts only the information that fits with your mood at the time. Since the midbrain cannot process more than seven units at a time, the way to remember brands and products is to sort them mentally in the form of a ladder. Therefore, a competitor who wants to increase his market share, has no choice but to unseat the brand that is in the number one position or manage to relate his brand to the other positions of his company, because the mind does not It has room for what's New or Different unless you can connect it to an existing item. Thus, for example, when new products emerge, they are related to other existing ones, such as unleaded gasoline.
Second, we must keep in mind that brains hate confusion. Too much information makes people bored and stops paying attention; therefore, the simpler the message, the better. Products are also unnecessarily complicated: an example of this is the convergence of technology, which means that products with more functions appear periodically. Bill Gates imagines the wallet of the future as an instrument that will replace keys, credit cards, identification cards, cash, and even photos of children. Will such a contraption succeed? In the author's opinion, surely not. If half the people still don't know how to schedule video to record, how are they going to handle such complex and confusing articles? The same goes for product concepts that are as complicated as they are useless, such as the deodorant with Vitamin E. In short, people hate the complicated and love the simple. They like to press a button and the device starts up.
Third, minds are insecure. The logic It does not guarantee that we will win over consumers, as they do not know why they buy and, even if they did, they could not put it into words. Minds are guided not by logic, but by emotion. As if they were part of a herd, people buy what everyone else buys. Consumption is in a way a gregarious behavior, since consumers justify the social acceptance of their actions because "others do too". Therefore, one of the oldest advertising methods is to use testimonials from people who recommend the product. Another recurring technique for insecure minds is that of the "best-selling" and "fastest growing" product. Likewise, the weight of tradition is also effective: Coca-Cola calls itself the original (The Real Thing).
Fourth, minds do not change because human beings have an innate resistance to change. Human beings have a belief system and to change an attitude (the surface) it is necessary to first modify the underlying information, that is, to change their beliefs. However, changing a person's beliefs is really complicated and while some can do it, in the case of others it is mission impossible.
Fifth, minds increasingly lose their perspective on brands. Although in the past the image of a brand was almost photographic sharp, today the image appears blurred because line extensions are proliferating. The more extensions of a brand there are, the more chances that the mind will blur. And it is that, basically, the best way for ideas to be clear in the mind is to fix them becoming the product specialist, transmitting a single benefit and a single message. By doing this, you will be perceived as the “expert in” or the “best of” and your brand could even name the item. Kleenex is a good example of all this. And as hateful as it may be to lawyers, a brand turned into a generic name is the best weapon a company can count on in the marketing war.
Strategy is a matter of being different
Differentiation is the key to distance yourself from the competition, as the author recounted in his book Differentiate or Die. In the XNUMXs, companies embarked on a war for quality, so business leaders asked tools and techniques to measure it. All surveys point to an improvement in quality: cars are better, small appliances last longer, computers come with instruction manuals in understandable language. Consequently, quality has ceased to be a differentiating element and has become just another of the elements that must be possessed so that they do not eliminate you from the game.
The next war was that of customer satisfaction. According to the Harvard Business Review, companies would improve their profits by 25% if they reduced customer churn by 5%. It was then that the clients became collaborators and each complaint a gift. And somewhere along the way, satisfaction Customer service was no longer a differentiating trait and was taken for granted. That said, what remains for us to be different from the competition?
First, being the first to hit consumers' minds is a differentiating trait. People usually keep what they have, as the fact of that people do not usually change spouses if they find one slightly better than the one they have. If your brand is the first and the others copy or imitate it, they will be reinforcing your idea. Also, introducing yourself is easier than trying to convince someone that you have a better product. Even if it is, in the minds of consumers, the simple fact of being the first in its category or product
differentiates them from their followers.
Secondly, what makes a product unique is being recognized for its attributes, that is, for some outstanding characteristic. Owning or appropriating an attribute is the formula most often used to differentiate a product or service, but be careful: it cannot have the same attribute as the competition. You should look for a different one. A fairly common mistake is to emulate the leader, when it is much better to look for the opposite attribute to fight him. Coca-Cola was the original and therefore the choice of the previous generation, so Pepsi positioned itself by selling to a younger audience.
Third, leadership is the most powerful tool to differentiate a brand. When a brand relies on the leadership credential, consumers will believe whatever it says just because it is the leading brand. There are different forms of leadership: sales, technology, or performance. Leadership is a formidable platform to tell the story of how the brand reached first place and it is an opportunity that should not be missed, because if you do not do it, whoever comes behind will take advantage of it in a dishonest way.
Fourth, inheritance is another one of those great distinguishing features, since there is a psychological inclination to trust things that are backed by a long tradition. The individual feels safe at the moment of making the choice and, according to a consumer psychologist, it is like creating a link with immortality. Therefore, it is differentiating to transfer the appeal of the classic to the present and project it into the future. One way to do this is to preserve the charm of a family business, as this conveys the idea of greater concern for clients and employees.
Fifth, the way a product is manufactured may contain some differentiating idea. That is the case of the "magic ingredient", that element that achieves the perfect product for the customer, such as Sony televisions with "Trinitron". Consumers might not know what it was, but it certainly sounded impressive. The good thing about magic ingredients is that you don't have to explain them, simply because they are magic.
Sixth, if a company manufactures something that is fashionable, it automatically differentiates itself from the rest without the need to invest in advertising. The best advertising is the word of mouth that it generates. However, many companies are too shy to recognize it. When using this strategy, it is enough to define why the product has become fashionable, doing so already in terms of sales compared to the competition, either using the sector rankings or already supported by industry experts. Even better if the press tries to do it for the company, and to do this, the right public relations campaign will produce an effect similar to throwing a stone in a pond.
Strategy is purely a matter of competition
The widespread idea that the good guys always win is a fallacy. Although our product is the best, trying to change the consumer's opinion is a losing battle. Once you have made a decision, it is final. The classic definition of marketing as a way of "satisfying the needs and desires of the consumer" it has lost validity. If before the client was king, today the client king is dead, because satisfying their needs is useless if another dozen companies are already doing so. To be successful, a company must focus on competition. You must look for your weak points and attack them with the marketing weapon.
Marketing is like war. In the future, companies will have to be prepared to launch marketing campaigns as if they were warlike campaigns. It is a matter of following the right competitive strategy, starting from an adequate understanding of the four types of marketing war that we outline below.
First, defensive warfare is the one used by market leaders. Gillette is a classic defender who every two or three years replaces his razor blade with one improved design. Since he is the leader, he has little competition and, when this arises, he blocks his movements aggressively just as he did with Bic when he threw the disposable razors.
Second, offensive warfare is company strategy number two or number three. The first principle is to avoid the leader's strong points and attack the weak. The American pizza chain Papa John's attacked Pizza Hut's weak point: the ingredients. The best tomato sauce at a price that others cannot afford, the best cheese and the best complements, always staying true to its slogan “Best Ingredients. Better Pizza ”, with the sole purpose of taking clients away from the competition.
Third, junior contestants or newcomers attempting to step foot into a category while avoiding the battlefront follow a flanking war strategy. Based on moving around in unsupervised positions using the element of surprise, it is often a new idea, like Michael Dell's when he started his own computer company at age 19. Since he could not compete with established companies neither in terms of name nor in terms of space in stores, he decided to change the rules of the game and launch a marketing campaign
Fourth and last, Guerrilla Warfare is the domain of the smallest companies. The first principle is to find a square small enough to defend. No matter how successful you are, you should never act like a leader, and on the contrary, you should always be prepared to break camp at any moment and camouflage yourself in the jungle to survive another day. The Caribbean island of Grenada has been late to the tourism game. Faced with other islands that have developed their coasts at the expense of the landscape, Grenada prides itself on not having any building taller than a palm tree. Its strategy is based on being “the Caribbean as it was before”.
In Trout's view, it is not the strategy that should dictate the tactics to be employed. Rather, the strategy should be developed from the bottom up and not from the top down. Tactics should define strategies or, in other words, communication tactic should dictate marketing strategy. A tactic is a competitive mental angle, that is, a differentiating element. The strategy on the other hand is not an end, but the way, a coherent direction for marketing.
Strategy is purely a matter of specialization
If the business world is at war, the way to survive and prosper is to be better than the competition at one thing: your primary domain. Consumers prefer to buy products from brands that they consider specialists in the matter over generalists, to which they grant little credit. Buying from a generalist is like going to the GP for a neurosurgery operation. The owners of some brands do not fully understand it, but they are not the only ones. The department stores that sell everything are generalists that cover a lot and press little. In the long run they will end badly and Macy's, the American chain of department stores, currently bankrupt, is a foretaste of it.
Economist Milton Friedman could have said it louder, but not clearer: “We don't desperately need to grow. We desperately want to grow ”. With the growth rush, the delusion that bigger is better has fascinated many companies. On the other side is specialization, which is an efficient way to compete against large and fuzzy "hacelotodos".
An example of this is Southwest Airlines, the American specialist in short distance travel without connections, without food, without reserved seats and a single class of plane. (For more information, we recommend our summary of the book The Southwest Way).Specialization is the ideal to which many brands tend not to they compete on a global scale. The companies that will have problems will be those in limbo, that undefined half field in which they are not big enough to compete with global companies, nor flexible enough
to compete with specialists who are smaller.
The specialist has the possibility of displaying his field of singularity as a differentiating feature and his strategic weapon would be to become generic, so that your brand represents not only the product but also its category.There are small specialists that we never hear of and who, nevertheless, know how to exploit the advantages of occupying that niche of the market in which large companies do not fit. Also, there are great specialists who are often big companies in disguise that go unnoticed in the eyes of people, companies like 3M, Gillette or Otis lifts.
Finally, there is the bad news for specialists. A successful specialist has to remain specialized, he cannot try to become something else because, once the door is opened, another company enters ready to become the specialist. In the US market, Volkswagen was the specialist in small cars, but when it was determined to build large and fast cars, the Americans and the Japanese infiltrated, who are now dominating the market.
Strategy is purely a matter of simplicity
Leonardo da Vinci viewed the human mind as a laboratory in which information was gathered through the eyes, ears, and other perceptual organs and then conducted through the common sense organ. However, sometimes people act irrationally. It seems that people admire the complication and distrust the simple, they are suspicious of the simple things because they think that there must be hidden a more complex answer. However, this is not the case: these people should apply the antidote of common sense and fall surrendered to the power of simplicity. Complicated strategies, like complex battle plans, are doomed to failure. The holy grail is simplicity.
Research can confuse the individual, which is why Trout only believes in certain kinds of research and also in not being dazzled by data and trusting instincts. There are numerous parallels between war and marketing: in the business world the battlefield is the market, the enemy the competition, the target the mind of the consumer, weapons the media and intelligence is research. Big military brains are suspicious of the secret reports they receive and so are many marketing specialists.
You have to be cautious with the investigations. This is why Trout suggests that we not be amazed by the data. We must find a way to filter all this data and reach the ones that are truly revealing, generally 5% of the total. Still, a data overflow shouldn't make sense disappear nor the instinct of the market. It is also not good to be fooled by consumer groups who are the most widely used and abused tool, since the group is never representative of the whole and also makes marketing experts people who think no more. beyond the subject and that probably they will say what they think we want to hear. Finally, you should not be seduced by test markets, since unexpected circumstances in the market could spoil the results.
On the other hand, the researchers could promise that with their surveys they will discover the attitudes of consumers. This is also not a reliable indicator, as people rarely do what they say. DuPont commissioned a study in which 5000 women were asked outside a supermarket what they were going to buy and later reviewed their purchase tickets. Only 3 out of 10 bought the brand they had said they would acquire.
In reality, what we need is to access the perceptions that exist in the minds of consumers. It is not about deep thoughts or suggestions. It is only about what they perceive as the weak and strong points of the competition and those of our products, in order to find out what concepts or ideas each brand has. With this information, we can decide what attribute we want to possess and draw the route to the consumer's mind. A company can obtain excellent results if you only manage to acquire a word with which to penetrate the consumer's mind. You don't have to be a linguistic genius to find one, simple words are actually the ones that work best. The language complex confuses. Also, if you establish a benefit, consumers will grant you others.
Strategy is purely a matter of leadership
If you don't know where you are going, no one will follow you. The CEO's role is to lead the troops as they charge, and to do this you need a strategy, vision, and mission that make it clear where you are going. To find the north, the strategist must be at the forefront. Or in other words, you have to be at the forefront of the great battles going on in the consumer's mind.
The disconnect between senior management and the market is one of the biggest problems for large companies. If the bad news does not come directly, it is best to go out and look for it. One way to do it is to go in disguise, like the king of the story who dressed as a civilian to find out what was happening in his kingdom. This trick can be very useful with distributors and retailers. Another helpful tactic is to make the sales team an ally in providing competitor information - a good way to do this is by praising honest information.
Having an address is the beginning. The best leaders are those who use stories to convey it, encourage their employees to put their ideas into practice, and act as facilitators, supporting their vision in words and actions. A good example of this type of leadership is that of Herb Kelleher, the former CEO of Southwest Airlines, an airline that appears on the list of most admired and top-performing companies every year. One of the most characteristic Outstanding about the airline is the enthusiasm that the staff puts into serving each customer, always showing off their sense of humor. Southwest Airlines' personality is Kelleher's personality. Great leaders like Bill Gates, Rockefeller, and Iacocca embody their companies.
On the other hand, the figures are not the energy that sets the company in motion. CEOs who are only concerned with pushing troops to meet expectations are jeopardizing not only their jobs, but also the future of their company. The figures are treacherous. However, if the right strategy is put in place, the numbers will eventually add up.
The outcome of the strategies, in turn, depends on market opportunities and the perception of the leader. It must be clear that the battle is fought in the mind of the consumer and that is where your company wins or loses. So Trout advises us to focus on the customer's mind and follow our instincts. Once a strategy is in place, some time must be allowed to develop. For example, Lotus Development Corporation was the company that invented spreadsheets for personal computers, but it lost its grip on Microsoft's Excel program for Windows. Jim Manzi, the then CEO of Lotus, decided to make a change and go for groupware (software designed for computer networks). It was a drastic change, but Manzi knew where he was going and the story had a happy ending: IBM bought Lotus for $ 3.500 billion and made it one of its cornerstones.
Ultimately, since this is war, leaders must possess the qualities of good generals to succeed: they must be flexible to adjust the strategy to the situation, they must have courage, they must attack when the time comes, they must know the facts to outline their strategies and, finally, they also need to have some luck and know how to exploit it.
The strategy is pure reality
In the last decade, some of the most outstanding business icons in the United States have fallen, names like Polaroid, AT&T, Xerox, Levi Strauss or Enron. They were successful companies and talented people worked in them; They also had the advice of the best consultancies and Wall Street idolized them. And they had become adored and had become divas, gradually losing touch with the reality of the market.
In Trout's opinion, Wall Street is the cause of many strategic mistakes. It would seem that it created a greenhouse in which disasters are cultivated that sometimes have no solution. The desire for growth is what can make many companies fail. However, it is in everyone's best to grow: for CEOs it is a means of maintaining his mandate and increasing his pay and for Wall Street brokers it is a matter of keeping the rate and lining their pockets. In fact, the desire to make a mark is what drives many great leaders to act.
However, growing is neither a duty nor a necessity. It's a trap. The companies play the story of the milkmaid imagining what they will do with an average annual growth of 15%, but the truth is that few companies manage to reach such levels. Fortune magazine examined data from 150 companies in the past 40 years, and among them, only three or four managed to achieve 15% annual growth. These growth goals are what make marketing plans unrealistic, that business leaders refuse to see their failure and are determined to make things happen as planned, rather than looking for other veins to exploit. In other words, they are trying to get hold of existing markets instead of looking for new opportunities.
In reality, it is not always worth growing up, although it is certainly sometimes good to explore new ideas that may be better. It seems that when a company is big and successful, it looks suspiciously at all the inventions that don't respect the main product. IBM did not want to go to small computers, nor General Motors to small cars. Big companies don't realize that these inventions can be improved upon by turning them into the kind of landmark technology (disruptive techonology). On the other hand, the convergence of various companies, such as the one that has taken place in the media sector, and which could also occur in other fields, has not borne fruit. The merger of Viacom, Time Warner, Walt Disney, News Corporation and General Electric has led to serious accounting problems rather than having the desired marketing effect.
And it is difficult to manage such large companies. The social capacity of human beings is reduced to 150 people, which is the maximum number of individuals that can constitute a group without its members feeling uncomfortable. In larger groups, it is impossible to carry out orders and control Divergent behaviors directly, that is, from individual to individual. The more people there are, the more difficult it is to manage. That is why many CEOs are approaching new technologies to strengthen contact with their employees, to whom they send emails on a regular basis. They also project video conferences in which they transmit the same message so that everyone has the same information and even travel to the front whenever their schedules allow it.
It is true that this growing need to maintain public relations with employees and shareholders keeps them from making important decisions that, when they bounce, exploit them in their hands. That is why Trout advises that, although they cannot do everything that is expected of them, the CEOs at least know the reality of the market and do not accept any project that the marketing department presents to them.
Strategy is a supreme god to be worshiped, because in it lies the secret of success. Strategy sets competitive direction, dictates product plans, determines internal and external communication, and tells us what to focus on.That is why it is important to understand what it is, since the better we understand it, the better prepared we will be to select the appropriate strategy that will lead us to success. Strategy is what makes a product unique and what works best to introduce such a difference into the minds of consumers, who are the real battleground where the marketing war is fought.
Source: Leader Summaries © 2004. Authorized summary from: Jack Trout on Strategy, by Jack Trout, McGraw-Hill Companies © 2004.