Strategy and tactics: The two drivers of marketing success.
The two drivers of marketing success are: (1) What you do inside the company, and (2) What you do outside the company.
What you do inside the company includes the product, its price, its brand name and other things. What you do outside the company includes the PR, the advertising, the distribution and other things.
You might call the two drivers: (1) Strategy, and (2) Tactics. Of the two, strategy is more important. Tactics like PR and advertising cannot achieve more than the strategy will allow.
The marketing community tends to focus on the tactics, when the real opportunities lie inside the company. The product, its price and its brand name. In other words, the strategy.
And there is a lot that can be learned about strategy.
All categories are not alike.
Frequently-bought products usually have a clear-cut market leader and a strong second-place brand. Some examples.
Cola . . . . . . . . . . Coca-Cola and Pepsi-Cola.
Energy drinks . . . Red Bull and Monster.
Coffee shops . . . . Dunkin’ Donuts and Starbucks.
Toothpaste . . . . . . Crest and Colgate.
Smartphones . . . . The iPhone and Samsung.
Batteries . . . . . . . Duracell and Energizer.
Parcel delivery . . UPS and FedEx.
Political parties . . Republican and Democratic.
In a frequently-bought product category, there is almost no room for a No.3 brand. What is the market share of Royal Crown cola? The brand is lucky if it has more than a few percent market share.
Everybody knows Red Bull and Monster. But what’s the No.3 brand of energy drink? Everybody knows Crest and Colgate, but what’s the No.3 brand of toothpaste? Everybody knows Duracell and Energizer, but what’s the No.3 appliance battery brand?
The No.3 brands are Rockstar, Sensodyne and Rayovac. The latter brand is owned by Spectrum Brands, a company that went bankrupt in 2009. That’s typical for No.3 brands which are inherently weak.
Infrequently-bought brands are different.
In infrequently-bought product categories there are usually many brands and no clear-cut market leader.
Take life insurance, which many people buy perhaps once in their lifetimes. Which brand is the leader in life insurance?
Northwestern Mutual with a market share of 8.5 percent. Does that surprise you? It should because few people perceive Northwestern Mutual as the leader in the category.
Here are the next ten brands in the category, along with their market shares: New York Life (5.7%), MetLife (5.3%), Lincoln (5.0%), John Hancock (4.2%), Prudential (3.9%), MassMutual (3.8%), State Farm (3.6%), Transamerica (3.6%), AIG (2.9%) and Guardian (2.7%.)
There is no strong No.2 brand in the life-insurance category.
Obviously, a life insurance brand can’t use the product strategy of being the opposite of the leader if no one knows which brand is the leader. Or what position it owns.
A strategy for infrequently-bought products.
What should a life insurance brand do? It should narrow its focus to one singular attribute. And then hammer that attribute in everything it does, including its name and its strategic position.
Do you know what any of these life insurance brands stand for? Probably not, because they don’t stand for much.
Take automobiles which many people also buy infrequently. Which brand is the leader in automobiles? Ford with a market share of 14.2 percent.
And here are the next ten brands in the category, along with their market shares in the year 2016: Toyota (12.0%), Chevrolet (12.0%), Honda (8.4%), Nissan (8.1%), Jeep (5.3%), Hyundai (4.4%), Kia (3.7%), Subaru (3.5%), GMC (3.1%) and Ram (3.1%).
Obviously, an automobile brand can’t use the product strategy of being the opposite of the leader if no one knows which brand is the leader. Or what position it owns.
Go back to the year 2000 and look at which automobile brands weren’t on the list that year, but are on the 2016 list. Those are the brands that have made the most progress.
There are three: Hyundai, Kia and Subaru. And they all made the list because they used a product strategy that was very specific.
Both Hyundai and Kia entered the market at the low end, avoiding the competition with mainstream brands like Ford, Toyota and Chevrolet.
Subaru also used a product strategy that was very specific. It is the only brand focused exclusively on four-wheel-drive vehicles. Confidence in motion is Subaru’s theme, a relatively weak expression of a powerful marketing idea.
Furthermore, each of these three brands is doing better financially than Ford. Last year, Ford’s net profit margin was 3.0 percent compared with Kia (5.2 percent), Hyundai (5.8 percent) and Subaru (13.5 percent.)
A strategy for frequently-bought products.
In frequently-bought categories, leadership is usually determined by the first brand in the mind. Coca-Cola in cola. Red Bull in energy drinks. Gatorade in sports drinks. The iPhone in smartphones.
But what determines which brand winds up in second place. Usually, a product strategy that is the opposite of the leader.
After the launch of Red Bull, there were more than a thousand energy-drink brands introduced into the American market. Almost all of them in the 8.3-oz. cans pioneered by Red Bull. Except Monster, the first major brand introduced in a 16-oz. can. (With a 16-oz. name, too.)
After the launch of Coca-Cola, hundreds of other cola brands flooded the market, including Pepsi-Cola. The difference? Pepsi had a product strategy that was the opposite of the leader.
Coca-Cola was sold only in 6.5-oz. contour bottles and Pepsi was sold only in 12-oz. bottles. Hence, the radio jingle.
Pepsi-Cola hits the spot. Twelve full ounces, that’s a lot.
Twice as much for a nickel too. Pepsi-Cola is the drink for you.
And how did Starbucks compete with market leader Dunkin’ Donuts? But using a product strategy that was the opposite of the leader. In essence, by doubling the price of its coffee.
Strong No.2 brands invariably achieve their positions by product strategies that are the exact opposite of the leader’s strategy.
If no brand is launched that does use a product strategy that is the opposite of the leader, then the leader brand will often achieve what amounts to a monopoly position. Gatorade, for example, outsells the me-too Powerade brand five to one.
Customer versus category.
Most marketing programs are formulated with the idea of being customer-oriented. You isolate the market segments that your brand is most likely to appeal to. And then run marketing programs directed at those segments.
There’s a better approach. You first determine what type of category you are competing in. And then you develop a product strategy tailored to the category. Not to the customers of the category.
Try it the next time you launch a new brand.