Law #1: The Law of Leadership
The Law of Leadership affirms the importance of being number one in a category. People usually know who the number one player is, but often cannot even name the number two. Ries and Trout also claim that the first player to appear in a category usually ends up being the number one player. There are plenty of good examples of this. Chrysler brought us the first minivan and still leads the category.
Law #2: The Law of the Category
The Law of the Category says that if you cannot be first in your category, setup a new category. This is really just another way of explaining a concept called "differentiation".
New entrepreneurs tend to think purely in terms of finding a product which is better than the competition. But so very often, it is more important to be different than to be better. Every difference defines a category. And for each category, somebody is the leader. In other words, a large market is really just a cluster of small markets. Tackle the large market and you will probably lose. Tackle a small market and you might just win.
Law #3: The Law of the Mind
The Law of the Mind says it is better to be first in the mind than first in the marketplace.
Law #4: The Law of Perception
The Law of Perception says that in the battle between products, perception is more important than reality.
People tend to think that the best product will win. However, as Ries and Trout say, "Marketing is not a battle of products, it's a battle of perceptions." Sometimes the best product does not win.
This concept seems unfair, but it's fundamental and we might as well get used to it. Ries and Trout go so far as to say that "Most marketing mistakes stem from the assumption that you're fighting a product battle rooted in reality. All the laws in this book are derived from the exact opposite point of view."
Subjectivity
The real issue here is that the words "better" and "best" are subjective terms. People have different requirements and preferences upon which they form very different opinions. There are very few absolutes.
Law #5: The Law of Focus
This is one of my favorite chapters. The Law of Focus says that "the most powerful concept in marketing is owning a word in the prospect's mind." This law challenges us to boil our marketing message down to just one idea. If you can teach your market segment to associate your product with a single idea, perhaps even a single word, you can be a market leader.
Count Your Words
When entrepreneurs ask me for advice, I usually ask them to explain their product in 25 words or less.
Crafting Your Message
It's okay to have more information handy. Datasheets and whitepapers are great. Once people get interested, they will probably want all the detail you can provide. But for first impressions, you should tell the world only one thing about your product. You can use 2-3 words as long as you are not trying to sneak in extra ideas. Usually, you need only one word. But which word to pick?
• Pick a reasonably common word out of the dictionary. It should be a word that everybody understands. Don't invent a new word that nobody has ever heard.
• Don't try to associate your product with a word in the customer's mind if that word is already associated with your competitor.
• Don't pick the word "cheap" or any of its synonyms. Very few businesses can thrive while making low price their primary message. Wal-Mart is one of those businesses. Your small ISV is not.
• Don't pick the word "quality" unless you can prove that you care about quality a lot more than everybody else. As Ries and Trout say, "everybody stands for quality. As a result, nobody does."
Law #6: The Law of Exclusivity
The Law of Exclusivity says that "Two companies cannot own the same word in the prospect's mind."
It's time to face the facts. Some of these laws seem to have more punch than others. For example, I find the Law of Focus to be a concept with a lot of impact. It's very counter-intuitive, and yet very powerful.
Other laws here seem almost, well ... obvious. These other laws don't seem to deserve their pages quite as much as the great ones like the Law of Focus. I speculate that for some reason, Ries and Trout wanted exactly 22, so they kept adding laws until they got the right number. Too bad. If they had stopped at 21 they could have used some sort of a blackjack theme.
The Law of Exclusivity would have been a candidate for removal. It is fairly intuitive to me that two companies cannot have the same market position.
Still, let's not dismiss this law too quickly. After all, obviousness is not always a reason to ignore a topic. It is obvious that we should all eat better and exercise more, but we don't.
Similarly, marketers do routinely find a way to violate this law. They do a Smart Thing by following the Law of Focus and choosing one key benefit around which they build their product message. Then do a Dumb Thing by choosing the same benefit as somebody else. Almost invariably, they end up beating their head against the wall in futility. It is obvious that we should not try to beat somebody else at their own game. And yet, we often try.
Law #7: The Law of the Ladder
The Law of the Ladder acknowledges that in most market categories, there is actually more than one available slot in the mind of the customer.
The Hierarchy of Categories
In our discussion of the previous laws, we have emphasized the importance being different, the important of finding a subcategory in which you can be #1. However, when you pop the stack frame up one level to the enclosing category, we find that you are ranked on a ladder among the other players.
Three Tidbits about Ladders
1. The mind of the customer can only remember a few rungs. Research indicates a maximum of about seven, and a more practical limit of about two or three. How many brands of toothpaste can you name? How many brands of cola? How many brands of automobiles? Some categories have more rungs than others.
2. The best strategy for you depends entirely on your ranking on the ladder. The right strategy for the #1 player is probably wrong for the #2 player, and vice versa. The authors cite the Avis rent-a-car example, where they gained tremendous results from simply acknowledging their status as #2. This example has been very much-discussed in the ten years since the book was
written, but it still rings with a bell of wisdom. Avis showed a lot of self-awareness. Customers respected that.
3. There is a typical mapping of market share onto ladder position. The authors claim that each rung on the ladder has twice the market share of the rung below it. These guidelines are obviously very rough, and all kinds of exceptions do apply. Still, when we see a ladder where the market share ratios are not even close to this rule of thumb, we are motivated to ask why.
Law #8: The Law of Duality
The Law of Duality says that "in the long run, every market becomes a two-horse race."
Young markets have many rungs on the ladder. They are highly fragmented. Gradually, as the market matures, players disappear and the market settles on exactly two primary players. Examples of this phenomenon are everywhere:
• Coke and Pepsi
• Canon and Nikon
• Nike and Reebok
• GM and Ford
• McDonalds and Burger King
It often takes a long time for things to settle down, but in the end, markets usually give people what they want, which is two strong choices. Buyers don't like choosing between ten or twenty players. It's too stressful.
A big reason for this effect is that most people don't make their own buying decisions. People tend to buy what somebody else is buying. Pragmatists buy something only after they see the Early Adopters buying it. Conservatives buy it only after the Pragmatists are buying it. Laggards buy it only when the peer pressure and ridicule is so severe that they look like absurd for not buying it. Market share begets market share, and the rich get richer.
Even as the market gets very mature, it will continue to tolerate the presence of more than two players. However, the top two will have the lion's share of the market. All other players are essentially in niche segments.
Once a market reaches this state, it will generally not allow #1 and #2 to move around. For example, the market will never allow the top two players to change positions. Burger King will never be #1.
Furthermore, the market will not allow #1 to get too far ahead. Just as markets hate having a ten-horse race, they also hate having a one-horse race. When #1 gets too far ahead of #2, the market will usually correct the problem.
Law #9: The Law of the Opposite
The Law of the Opposite says that the #2 player should generally do the opposite of what the #1 player is doing.
If you are #2 in your category, you want to be #1, right?
Wrong. You can't choose to be #1, but you can certainly choose to be #3 or #4. The worst thing you can do is to try and beat the #1 player at his own game. Instead, realize that not everyone in the market wants to play that game. Offer those people an alternative.
Law #10: The Law of Division
The Law of Division observes that over time, a category tends to divide and become two or more categories.
A new market category starts out very broad. For example, in the beginning of the automobile industry, the only category was "cars". Over time, categories break up into smaller and more specialized subcategories. Today, there are quite a few brands of car, each catering to a specialized niche.
This effect is an obvious and natural consequence of other laws. Each company will try to setup a new category in which it can be #1. Not all of these categories will end up becoming real, but some will.
This law is a good place to remind ourselves that Ries and Trout primarily consult for companies like Pepsi, McDonalds and General Motors, not for small ISVs. There is a bit of an impedance mismatch between their world and ours. Those companies do business in mature industries selling mass market consumer products. Those products are easily interchangeable. I can switch from Pepsi to Coke with no major costs associated with the transition and deployment. Categories split into subcategories over very slight differences in consumer preference. Brand building is absolutely critical. General Motors understands that some car buyers want to feel like they are buying something sporty, whereas others want to feel like they are buying something conservative. So, they sell basically the same car under the Pontiac and the Buick name, managing each of these brands very carefully. The underlying engineering is identical, but the message of these two brands is very different.
Law #11: The Law of Perspective
The Law of Perspective says that "marketing effects take place over an extended period of time", but the basic point of this chapter is that some marketing actions are negative in the long-term even though they seem positive in the short-term.
Short-Term Highs
The authors include an interesting discussion of sales and coupons in the retailing industry. They argue that these devices are like drugs – they produce a short-term high, but the only way to maintain the high is to keep going. Eventually, you have to "keep those coupons rolling out not to increase sales but to keep sales from falling off if you stop." I assume this is the reason that our local furniture store is always running a sale – they are afraid of going through withdrawal.
Law #12: The Law of Line Extension
The Law of Line Extension says that it is a mistake to take the name of one product and apply it to another. Companies do this often, but it basically never works. We think that the power of the brand will help sell the new product. Instead, the brand itself is tarnished. People start to get confused about what the brand means. Quite often it is necessary to kill the second product before it causes too much damage to the first one.
Law #13: The Law of Sacrifice
The Law of Sacrifice says that "you have to give up something in order to get something".
The cool thing about this law is that it's not automatically attractive. It makes you think.
The Law of Focus isn't like that. When people hear about the Law of Focus, the first reaction is to say, "Yes, yes, focus is good." People seem to forget that the word "focus" implies a decision about what you are not going to do. With the word "sacrifice", that particular implication is much clearer.
But in some sense, these two laws are the same idea with different expressions. There is power in focus, but to get there, we have to make tough decisions about what things we will not do.
Saying "No"
The Law of Sacrifice is all about saying "no" to opportunities. This skill is incredibly difficult to learn. I suspect that the only way to learn to say "no" is to experience the pain of saying "yes" too often.
Law #14: The Law of Attributes
The Law of Attributes says that "for every attribute, there is an opposite, effective attribute."
Fussy
There was quite an uproar from fans after the recent season finale for Star Trek Enterprise18. You see, the episode contained a serious error. One of the characters states that the year is 2152 when in fact, as every Trek fan knows, the current episodes take place in the year 2154.
I've heard several people say that this mistake ruined the whole episode.
I concede the mistake is silly, but come’ on -- the whole episode? Perhaps we need a bit of perspective. That date wasn't a central point of the show. It's a detail, and aside from the fact that it was incorrect, it doesn't matter.
Incidentally, guys, this is the reason why your girlfriend or wife doesn't like going to see movies with you. Nobody wants to watch a film with some anal-retentive dork who is ready and waiting to discard the entire film because the producers made a minor mistake in science or technology. Try to just enjoy the movie, or at the very least, shut your pie hole so that she can. (This tidbit of relationship advice is provided at no extra charge. ☺)
Marketing Books
Geeks like us are lousy at marketing for the same reason that nobody wants to see movies with us. Marketing books are written for big-picture thinkers. They contain broad sweeping generalizations which are only true most of the time. Guys like Ries and Trout don't feel the need for a lot of precision.
So a geek sits down to read this book. Somehow he manages to cope with the word "immutable" in the title, which is obviously a gross exaggeration. Somehow he manages to smile at the examples, which are now ten years out of date, especially the one about Lotus Notes. Somehow he manages to overlook most of the little imprecisions in the first 13 chapters.
Law #15: The Law of Candor
The Law of Candor says that "when you admit a negative, the prospect will give you a positive". As usual, the examples from the book are mainstream consumer products:
• Listerine did it when they acknowledged that their mouthwash tastes terrible.
• Avis did it when they acknowledged that they are #2.
• Volkswagen did it when they acknowledged that the "bug" is ugly.
Each of these companies gained a lot when they applied the Law of Candor. People respect the courage and honesty it takes to admit that not everything is perfect.
Being Genuine
The Law of Candor is another one which is simply not intuitive. Most marcomm people are terrified of it. Conventional wisdom says that absolutely everything in your marketing message must be positive. In fact, a primary function of the marcomm team is to sanitize all public statements ensuring that the company never says anything it does not want to say.
Credibility
Ignoring the Law of Candor can kill your credibility. Whatever your negative issue is, everybody already knows about it anyway. If you don't talk about it, then it will become "the elephant in the room". When you issue yet another sanitized press release, your customers eagerly read it, hoping to see some evidence that you have any self-awareness at all. They ask themselves, "Don't these people realize how awful their mouthwash tastes?"
As Ries and Trout say in the chapter, "Every negative statement you make about yourself is instantly accepted as truth. Positive statements, on the other hand, are looked at as dubious at best."
Law #16: The Law of Singularity
The Law of Singularity says that "in each situation only one move will produce substantial results".
We literalists will once again have to endure the authors' word choice. The above statement is almost certainly not true. ☺
And yet, Ries and Trout make two important points in this chapter, which I will paraphrase as follows:
• One bold stroke is much better than a bunch of small marketing efforts.
• Marketing is too important to be left to the marketing people.
Law #17: The Law of Unpredictability
The Law of Unpredictability says, "Unless you write your competitors' plans, you can't predict the future."
But that doesn't seem to be the main point of this chapter. What the authors are really saying is that long-range planning doesn't work. We can try to observe and follow trends. We can make big-picture predictions. But if we try to make detailed plans over the long term, our competitors will surprise us and those plans will end up getting scrapped.
Law #18: The Law of Success
The Law of Success says that "success often leads to arrogance, and arrogance to failure".
The basic point of this chapter is a warning to not let yourself get too far from your customers. Truly small ISVs may not need to worry too much about this, but the admonition is valuable nonetheless.
As companies grow, the CEO tends to get busy with other stuff. She doesn't spend much time "in the trenches" anymore. He goes to a lot of meetings and spends a lot of time working on the big picture. In the process, she loses touch with the customer.
Despite what the chapter says, I think this effect may or may not be rooted in arrogance. The root problem might be simpler and more innocent. Maybe the CEO simply let himself get too busy. It seems quite possible to become detached from the basic activities of the company without growing a big ego.
But either way, forgetting the customer is a fatal disease. Fortunately, this disease is also preventable and treatable. Don't let it happen to you. Even as your company grows, stay involved in the basic stuff, at least a little bit.
Law #19: The Law of Failure
The Law of Failure says that "failure is to be expected and accepted".
Nothing interesting ever happens unless we take risks. The authors encourage an atmosphere of risk-taking with a good discussion of why individuals tend to be afraid of taking risks.
The chapter also includes another important point: When you realize you've made a mistake, cut your losses.
It's just so hard to admit a mistake. Denial is a wonderful thing.
Law #20: The Law of Hype
The Law of Hype talks about the fact that "history is filled with marketing failures that were successful in the press".
This chapter talks primarily about new things which claim to make existing things obsolete. Such products tend to become darlings in the press, because the notion of breakthrough innovation is very attractive to readers. People love to read stories about things like the personal helicopter which was supposed to make cars obsolete several decades ago. So the press jumps on the bandwagon, stories get written, newspapers get sold, and people get excited. And they still drive their cars to work everyday.
What I love about this chapter is that it was written in the early nineties, before the Web, and it still rings amazingly true. The Web was supposed to obsolete almost everything. Today we can see that the Web has changed life in many ways, but most of the previous structures and systems are still with us.
Law #21: The Law of Acceleration
The Law of Acceleration says that "successful programs are not built on fads, they're built on trends".
Drawing their examples from mainstream consumer products, the authors observe the tendency for companies to overestimate short-term fads. When something new becomes big and hot, companies jump on the bandwagon, spending a lot of money doing so. They restructure. They invest in new equipment. They work hard to make themselves prepared to deliver products for the fad.
And then the fad stops, and the company is left with problems:
• "What am I going to do with all the olive green refrigerators and orange carpeting I bought just before the fashion changed?"
• "Oh, great -- I can produce fifty gazillion Cabbage Patch dolls per day. That'll come in handy now that nobody wants them anymore."
• "Darn it! I just bought a warehouse of fruit-colored translucent plastic, and now I find that the next iMac looks like a white desk lamp."
Fads accelerate very quickly, but often don't last long. Trends have a much slower acceleration but eventually run fast and steady. Chasing fads is expensive, so it becomes very
Law #22: The Law of Resources
The Law of Resources says that "without adequate funding, an idea won't get off the ground". The gist of the chapter is that marketing is very expensive and you have to be prepared to spend big bucks on advertising if you want to be successful, so you're going to need a lot of funding from your VC.
Preaching these ideas to small ISVs is like showing up at your local Alcoholics Anonymous meeting and telling everyone that a little red wine every day helps the heart.
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