Why the first brand to brain wins
While innovation is important, Ashton Bishop argues it needs to be backed up with marketing to be successful.
One of our clients just learnt the hard way about the difference between business and brand. They had a strong business, with a strong technological foundation, yet they resisted advice to invest in the brand because they didn’t see the need. Then a Chinese company reverse engineered their product and now the Chinese have ostensibly the same product only 300 per cent cheaper. It hurt.
Bishop
So the strength or weakness of a brand only shows up in the face of strong competition. But, besides the obvious conflict of interest, why are clients so reluctant to heed brand advice from agencies? Well maybe we need a new model for brand and business.
The world’s most prolific MP3 player was certainly not its first. In fact 22 months before the iPod came out, Creative Technologies released the Creative Zen. It was 5GB and super similar to the iPod. But they couldn’t market it for shit. Today they’re still banging on about X-Fi3 sound processing protocol and aptX Codec. It was hard to understand and never went mass market. Then Steve Jobs came out with, ‘your entire music collection in your pocket’ and the rest is history. Apple had a marketing, not a technology advantage.
The problem is business, marketing and innovation aren’t often seen to be working together with equal importance. In their classic work, Positioning, Al Reis and Jack Trout evidence that the first brand to be remembered by brain, on average, gets twice as much long term market share as number two and then twice as much again as number three. So market share tends not to be linear, but exponential. And we all see this pattern often enough to have experienced this as true. So if it’s clearly the best marketing (backed by solid business) rather than the best business alone that wins, then why are advertising and marketing professionals losing (not gaining) kudos with the real business leaders of our time?
I suspect it comes from the disconnection between business strategy, marketing and innovation. Traditionally, the big decisions have been made at the business strategy level, with marketing seen as an implementation role driver of market advantage. So the BCGs, McKinseys and PWCs, ‘the smartest guys in the room’, have been leading the way. Now the trouble is, with too much ‘big data’ and increasingly agile markets the smartest guys in the room might not have the answers that businesses need.
Why this happens is succinctly and beautifully explained by the academic Edward De Bono where he maps the relationship between knowledge and creativity. He hypothesises that you need a requisite level of knowledge to be ‘usefully’ creative, but too much information becomes a barrier to creative thinking and action.
So if the management consultants are the best at data and are able to figure out why you are where you are and optimise what already exists then the opportunity for marketers comes from being the ones that are able to get to the final destination. Let’s be the ‘here’s how to get there’ guys.
For me, it comes back to the concept of sustainable competitive advantage, as defined by Richard Rumelt in Good Strategy, Bad Strategy: It’s providing value that nobody else in the market can provide or providing the same value cheaper – the kicker being the word ‘sustainable’.
And this is where innovation becomes so critical. Most companies don’t even have a true, resourced innovation pipeline, or if they do, it’s separated from the functions of marketing and business strategy.
So what if we stopped thinking of our business advantages as point-in-time resource or technological advantages, but instead we looked to build a sustainable competitive advantage in marketing. It makes sense. And the irony is that marketing is now often much harder to copy effectively than the underlying products. There’s also the cumulative effect of the perception of innovation; meaning that you’ll be perceived to be ahead today and you’ll be ahead tomorrow.
If we accept that markets are moving faster than ever before and physical products can be copied easily, surely it’s the brand that can develop an agile business. A business which links business strategy with an innovation pipeline and can effectively leverage marketing to be the first brand to brain can win… again and again.
Ashton Bishop is head of strategy at Step Change Marketing.
Insightful article. Well timed for me.
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Thought provoking article Ash, well written and well argued.
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You can’t sell a product for 300 per cent cheaper.
To calculate:
(price of knockoff product-price of branded product)/price of branded product*100
The biggest fall you can get is 100 per cent decrease.
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I went to one of Creative’s clearance sale in 06/07 held at their Singapore headquarters at the International Business Park to buy a Creative Zen Nano Plus in the shape of a cigarette lighter with 1GB flash memory. I saw they had so many different products besides the Zen players such as headphones, speakers, sound cards etc
In comparison, Apple had much fewer products compared to Creative. This could be why they focused much more of their marketing budget on their Ipod players.
Perhaps Creative did not focus too much on marketing the Zen as they were concentrating on their other products. They released only 35,000 pieces of the Zen 5GB that came with extra battery, which could only amount to about 5 million dollar profit. This could imply that they were not too focused on the players. Spending too much marketing budget on the small amount of pieces released might not be a wise marketing decision.
Perhaps it is not that Creative lacked insight in promoting their Zen players, it is just that they did not have as much need to market it so much compared to Apple who needed more profit from their portable players.
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‘Sustainable competitive advantage in marketing’ is double-edged sword. Can Apple repeat the ongoing innovation from the iSeries of handhelds? If not, their brand (and price/earnings multiple) will suffer from ‘unsustainable’ consumer and fanboi expectations. ‘Innovation pipeline’ seems to me as ephemeral an ambition as sitting down to write a pop hit. Apple, like Dr Dre and Bob Dylan before them, had a sustained period where the ‘full wind was in their sails’. Because of a singular talent at the helm.
But IBM is the true model for sustainability with their phases of fundamental re-invention in response to shifting market needs and competitive sets, with goodwill underpinned by the strength of their brand.
It will be interesting to watch how Kogan stays ahead of the game. Its not hard to replicate his model now that his (proven successful) marketing format is reverse engineerable.
None of this is necessarily a disagreement with you, Ashton. This is a great opinion piece.
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did the chinese company invest in their new brand ? if so , how ? what did they do or was it just a ridiculous price point entry due to labour cost differential china enjoys ?
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@B… sorry B – I obviously missed with the irony of “300% off”. The specifics and complexity of various percentages off across international markets don’t really matter. I should have probably just said, ‘ridiculously cheap by comparison’.
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@ Timothy Tang. Yeah, it’s an interesting story Tim, thanks for sharing some personal insight. I also believe there was a legal case of patent infringement that ended up costing Apple $100M paid to Zen – a whole different story. Anyway, any interpretation in this format is always going to fall foul of Kahneman’s Narrative Fallacy as an accurate summary of the real what and why, but I still believe it’s a useful juxtaposition of product vs marketing excellence.
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@me nice commentary and provoking. When it comes to sustaining performance, one of my favourite articles is here http://hbr.org/2013/04/three-r.....great/ar/1 (not sure if you can read it all). Anyway, after analysing the ROA of over 25K companies from 1966 -2010 on US stock exchange data they statistically reduced “luck” to less than 10% of results and found the secrets of business.
1) Better before cheaper
2) Revenue before cost
3) See rules one and 2
And specifically around IBM you’re right.
IBM’s New Business Turnaround 1993-99 was 12,773 Patents, but no companies operating on them (mothership doing well at the time)
Plans and ‘next 1/4 thinking’ stopped this
Reengineered over a x5 year period
22 successful launches and turnover of 15 billion
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@ormond it was simply price to my understanding. If you believe Porter it’s price or differentiation. They chose price. Which works well until somebody else can do it cheaper.
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You come off a bit whiny that they didn’t spend more money marketing their product with you. Maybe they read that article you suggested and took “2) revenue before cost” too literally.
However, you bring up some good questions about the competitiveness of world markets and the difficulty of doing business in Australia.
As the commenter “me” above said, a marketing plan is reverse engineer-able too. Often more so than the product itself. So did they not have patents in place? In the Apple/Zen example 100mil is a drop in the ocean compared to what they could have had, but that is not your average case. There is a lot of value in technology advantages and patents.
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Yes, I do agree that marketing is important especially for smaller new companies. Building a brand is to build trust and reliance with the consumers. Big companies can experiment and even choose to do both marketing(ads or co-ops with other brands) and also improve their tech advances through R&D. Small companies lack R&D so they rely mostly on consumer brand trust.
Apple has been relying on both tech(Retina display, lightweight etc) and brand trust for years, but the Chromebooks with their lightweight and similar keyboard interface is slowing catching up with the Apple notebooks. Tablets and the android OS also pose a huge threat to Apple. So Apple would have to hold on tightly to its brand name more so in the near future.
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Well said Ash.
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Nice article, Ash. Thank you
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