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First Mediaworks


Uber-Marketer Jack Trout: Strategy Is The Key To Survival (06/20/05)
By Reed Bunzel, Editor-in-Chief

No one in the business world has turned more heads - and ruffled more feathers - than uber-marketer Jack Trout. Responsible for many of the freshest ideas introduced into the marketing and advertising communities during the past quarter-century, he is most recognized for developing the concept of “positioning.” In 1980, Trout co-authored, with business partner Al Ries, the best seller Positoning: The Battle For Your Mind, which has become a near-cult classic studied by top executives and marketing students alike.

Since then, Trout has written or co-written numerous other volumes, each dealing with aspects of marketing, branding, competition and differentiation. The 1993 book, The 22 Immutable Laws of Marketing, which explored the basic reasons why marketing programs succeed or fail, is still considered a marketing bible. Trout followed that with The New Positioning and The Power of Simplicity: A Management Guide to Cutting Through the Nonsense and Doing Things Right. His latest books, Big Brands Big Trouble and The Genie's Wisdom, outline the importance for senior management to learn and practice the marketing process. Trout began his business career in the advertising department of General Electric, and subsequently became a divisional advertising manager at Uniroyal. From there, he and Ries formed the advertising agency and marketing strategy firm Trout & Reis, where they worked together for more than 26 years.

Today, Trout is president of Trout & Partners, one of the most widely recognized and respected marketing firms in the world. Headquartered in Old Greenwich, CT, with offices in 13 countries, he manages and supervises a network of marketing specialists who help develop marketing strategies for companies around the globe. The firm has done work for AT&T, IBM, Burger King, Merrill Lynch, Xerox, Merck, Lotus, Ericsson, Tetra Pak, Repsol, Hewlett-Packard, Procter & Gamble, Southwest Airlines and other Fortune 500 companies.

When Greater Media recently invited Trout to address top executives at a corporate meeting, Radio Ink took the opportunity to sit down with the positioning guru and see what he feels is right - and wrong - with today's business environment.


INK: Many radio executives insist that new technologies such as satellite radio, iPods, the Internet and WiMax don't pose much of a competitive threat. Do you agree?
TROUT:
Disruptive technology happens in every category. A company has a comfortable position, then along comes a new technology that disrupts the marketplace. It doesn't necessarily come in fast; in fact, it sneaks up on you. But, it evolves eventually - and when it does, most people who are riding the old technology ignore and pooh-pooh the new technology. A classic example is when the mainframe computer gave way to the desktop computer. That was a disruptive technology that wiped out several generations of computers. And look at what happened to Walkman when the iPod was introduced. People with the old technologies tend to be very resistant to these new, disruptive technologies. It's a classic problem.

Eighty years ago, there was one electronic medium - radio - and now there are almost too many to count. In the radio business, is this cause for concern?
It makes the environment more complicated. In The 22 Immutable Laws of Marketing, we talk about the law of division. Over time, a category will break apart into more variations. It's like amoebas that pop apart; you can't stop it. The trick is to be very sensitive to this. You can't ignore it; you must know that you will have new things in your category that will pull away some of your marketplace. You also have to decide how you're going to handle these new players, and the new segments that will arrive. Businesspeople must understand that this is the way it is. You can't stop it; you have to figure out how to deal with it.

How do you deal with it?
You have two ways. If you're a big player like Clear Channel, you say, “Satellite radio is going to be a new segment in the business, so I think I'll get a piece of it.” You buy into the satellite radio world. In the old days, Gillette, which was primarily in the cartridge business, had to deal with Bic, which had a new disposable razor - a new market segment. Gillette hated that idea. They could have chosen to ignore it, the way General Motors ignored small cars when the Volkswagen Beetle arrived. But, even though Gillette didn't like the idea of throwing away a razor, they chose to play. They got into the Good News, the twin-bladed disposable, and they lost money on it. But, you know what? That's now 40 percent of the business. They have to be there, and they are the dominant disposable razor blade in the market.

What if you don't - or can't - play the way Clear Channel has?
Then, you work very hard at protecting your existing technology by improving it. You have to make the medium better. It's a digital world now, and radio people have been hanging back on the technology until now. This is an investment in the future. There's also too much clutter, so the listening experience must be improved. You need fewer commercials, and you need to improve the existing commercials. To defend against the new technologies that may drive listeners away, you have to make the medium better.

Which path would you choose?
These are tough calls, because it's hard to predict the future. People must decide which way things are going, and how to protect their base business while playing in the new world. The key issue is to recognize the fact that satellite radio is here. How big will it be? Who knows? Will it wipe out terrestrial radio? I don't think so, unless radio doesn't do anything. If radio just sits there dumb and happy and does nothing, maybe it's playing right into satellite's hands. You must improve your medium, and make it more difficult for people to take away your business. If you want to invest in the new technology - like Gillette did - and get into satellite or podcasting, that's fine.

What must the radio industry do to reposition itself effectively?
The radio medium has never positioned itself as effectively as it should have. It has always played the subservient role to television and other media with pictures. Radio has allowed the myth that pictures are more important than words to persist. That's crap, but the radio industry has allowed it to permeate the media. Radio has portrayed itself as mother's little helper - “we'll fill in the holes, will give you free spots” - instead of positioning itself as a primary medium.

How do you define a primary medium?
A medium that doesn't need any help to get its message across. Television and radio are the two media that operate with sound; once you buy into the fact that sound is a very powerful force in how the mind works, you see that radio is a primary force. It's not a secondary, fill-in-the-gaps medium. One of the biggest problems with the radio industry is that no one has stepped up and said, “If a medium doesn't have sound, it's not powerful.”

How would you demonstrate the power of sound?
To dramatize the point, I tell people that, in each of the 25 biggest product categories that existed in 1925, 20 are still the brand leaders. Only five of the primary brands have lost their leadership. In other words, America's leading brands were built on radio, totally without television. Fundamentally, the leading brands in our country go back 70 years, and almost all were built with sound alone. That is the ultimate proof that you can build a brand purely with sound.

So, pictures aren't all they're cracked up to be?
I'm not saying pictures and sound aren't nice. They are, which is why television also is a primary medium. The problem with television is that it has enormous visual distractions. A lot of TV commercials are plain silly. They're confusing, or they visually do one thing and verbally do something else. What you end up with is a distraction, and people who are distracted stop listening. When you stop listening, the commercial stops selling. The beauty of the radio medium is it has no distractions - it's pure sound.

There is a realization within the advertising community that traditional means of advertising are becoming less effective. Is this a problem?
It's not true. The problem is that the advertising is not very good. It's not effective. Remember the old Pogo line, “We have met the enemy, and he is us.” That is the problem. If you have used good advertising, if you communicate properly, if you don't confuse people and you don't get into too much humor or visual distraction, advertising is still very effective.

Is this why so many companies - big companies, with huge resources - have major marketing problems?
The biggest problem facing American business, in terms of good, effective marketing strategy, can be defined in two words: Wall Street. When companies deal with Wall Street, they start thinking about their stock price. All of a sudden, it's all about earnings, and people become very short-term oriented. They start falling over this thing called growth. One of my heroes is a little company called Quiksilver, which makes board clothing for surfers. When the founder of the company was asked why he only distributed to surfing places, he said, “Big is the enemy of cool, and we're a cool brand.” Well, what have they done? They're getting into big. They bought Rosignol skis - they want to become like Nike. You know what? The kids who buy this stuff will get onto that real fast, and then they'll say, “This is not a cool brand anymore.”

Is the radio industry guilty of this same kind of thinking?
Sure, radio has become much the same. The basic questions are, “How can I produce shows cheaply?” and “How can I do this for less money, because people are going to want me to get my earnings up?” The truth is that the personalities - the people - made radio what it is, but many of these radio guys don't want to invest too much in personalities. They cost money. They're forgetting that everybody can play the same music. An iPod can play the music - but it doesn't have the personalities.

Are you saying that today's CEOs lack the leadership that a company - or an industry - needs?
If people don't know where you're going, they're not going to follow you. The key is to know exactly what makes you different. Understand what makes you important in the great scheme of things, your position in the marketplace. If CEOs don't have a clear perception of that, then what will they drift into? They won't necessarily focus on what they should focus on. It's an age-old problem I have with the marketing world: If you don't have the right people in the room when you're developing a marketing strategy, you won't go anywhere. Everybody must be on the same page about what you're trying to accomplish.

How do they get on that page?
They do it by asking questions like “What are we?” “What makes us unique?” and “How do we protect that?” This is a gigantic problem in corporate America: Top management doesn't have a clear vision of what they are, what they should be and what they shouldn't be. You end up with an endless parade of companies that are all about making money and hitting the numbers. This is a big problem.

Of course, many business people would say there's nothing wrong with making money and getting bigger.
Right. And it's the curse of growth of a public company. It's funny: Some people have wonderful little companies. I write about them, I talk about them and I ask their CEOs, “Why would you want to go public?” Obviously, money and capital are factors, but that's where you start down that slippery slope. My favorite specialist company is Martin Baker, which makes ejection seats. It's the only seat you can eject from the ground. Some people say they should get into other stuff, but these people know that they do one thing, and they do it well.

With so much disruptive technology and marketplace division, how can big companies survive without playing in more than one sandbox?
The future of the business and marketing world is built around being a specialist - being exceptionally good at one thing. That's the only defense against tough competition. You must be able to say, “Nobody does this better than I do.” The global world is very competitive, so it's an enormous weapon to be perceived as the best in the category. Martin Baker is the only ejector seat in the world, and they make money by introducing new and better versions.

How does this idea of specialization apply to the radio industry?
Radio must be good at one thing, and stop bouncing around. They can't keep changing formats, they have to hone in on one area and be very good at it. They also have to make the medium better. There's a lot of competition, so they must improve the medium and not play the “me-too” game. They have to differentiate themselves. They can't all have the same kind of programming, with the same music. Sure, they need music, but they also need personality - something that makes them different. And they have to sell the medium better. They have to stop attacking each other, saying my station is better than the other station. This industry must come together and say, “Radio is a powerful medium. It's a primary medium with television. You have to sell it.” The big brands were built on radio with sound, and they can continue to do it.

What about the “awareness campaigns” developed by the NAB and RAB?
They're terrible - and that has been the missing ingredient. Radio has sold itself as mother's little helper: Fill in the gaps and slip in a target market, a little of this and a little of that. Radio has to present itself as a premium buy: Advertisers can do it with radio, and radio alone.

But just saying it doesn't make it so.
Exactly. The trouble is, they're up against a bunch of kids buying media who don't appreciate the value of radio. They don't understand that radio has the emotion of the voice. They don't understand that this picture-worth-a-thousand-words stuff is crap. To change this perception, the industry must re-educate the next generation about what the medium is, and what it can do.

Many companies, both established and new, are seeing cracks in their brands' lining. What's causing this?
For years, I have stressed the point that top management at a company - small, medium or large - must be involved in the strategy. They must take a much more aggressive role in what is being done. But this doesn't happen. Large companies have armies of marketing people, and they delegate the marketing decisions to them. The problem is that you can't delegate marketing. As David Packard of Hewlett Packard said, “Marketing is too important to be left to the marketing people.”

Are you saying that marketing often is considered an after-thought?
A lot of this is common sense. Entrepreneurs are much better at it than the mega-corporations, which tend to lose control because the top people aren't involved. Getting too big is a gigantic problem for companies. General Motors is facing amazingly difficult problems connected to the fact that they destroyed their brands over a long period of time. They had “brand schizophrenia.” What is a Chevrolet? I have no idea. What's a Buick? I have no idea. They had a clearly positioned strategy, and they mucked it all up. They made all their cars look alike, and they priced them alike. They made cheap Buicks and expensive Buicks, cheap Chevrolets and expensive Chevrolets. The financial people drove that: All they focused on was how to increase the company's business. This happens all the time. I had lunch with one of the ex-chairmen of General Motors, who worked with a 32-member board of directors - and he wasn't involved with any of the strategy. He had no idea what was going on. When I questioned him about GM's brands, he said, “Yeah, it does seem a little confusing.”

What's standing in the way of shifting marketing strategy and eliminating this confusion?
One word: competition. The level of competition today in the global economy is so intense that, if you make a mistake, you get killed. And you do not get your business back - it's gone forever. At one time, General Motors had almost half of the U.S. automobile market, but today it's around 25 percent, and going down. They haven't gained back a nickel's worth of business.

Don't they still need a strategy, no matter how late in the game it is?
Strategy is the key to survival, because it teaches you not to make mistakes, and it helps guide you through difficult decisions. I was at General Electric a number of years ago, and nobody worried about losing business. Westinghouse was the big competitor, and Westinghouse was lousy. GE wanted to keep Westinghouse propped up, because if they went away, the government would be all over them for anti-trust. We weren't global, so players like Siemens or ABB were not on the scene. General Motors dominated the automotive category. Because of competition from the Japanese and the Germans, GM is under incredible pressure today. That's why it is so critical for companies and top management to understand how to do the right thing.

How can the “one-off” entrepreneur compete in a business climate overpopulated by so many large, public companies?
The smaller players compete with the big guy by becoming specialists. They compete by becoming exceptionally good at one thing, and presenting themselves as experts. Because big companies can never be specialists, they can never be experts. Is this limiting? Yes, it is, but it's how you survive. You can build a very strong business on this foundation.

Is there a critical element that should be included in every marketing message?
Yes: “Is there a reason to buy?” When you listen to TV or radio commercials, sometimes it's hard to find a reason to buy the product. You ask, “What are they selling?” The commercial is emotional, or it's trying to be funny, but the marketing people have forgotten that we need a reason to buy a product, or to buy it from one company instead of its competitor. If that reason isn't amazingly visible, there's a problem in your messaging. That's where creativity gets in the way. When I speak with creative people, I stress this point: “What's the reason to buy? What's your point of difference?” Once they have that, they must dramatize it and make it exciting. They can create something that people will pay attention to, but they can't lose sight of that reason to buy. It should always be front and center.

What happens to the brand if that reason to buy is missing?
Because advertising today is so weak on reasons to buy, we're seeing a creeping commoditization in many categories. The result is that house brands are threatening national brands. Here's a startling piece of research I saw recently: Sixty-seven percent of the people surveyed did not see a big difference between the house brand and the name brand. That's two-thirds of all consumers, which makes it a price game. And nobody wins in the price game.

That's what Wal-Mart is beginning to discover.
Exactly. Wal-Mart is all about low prices, so now Target is saying, “You can get department store stuff here for less.” Costco is the same way: They're beating up on Sam's Club by saying “we have the better brands for less.”

After beating up on a few companies in this interview, can you name some that you really admire?
Let's start with one of my heroes: Herb Kelleher at Southwest. Until recently, he was the company's CEO, and he brilliantly built a position against the big airlines. He became a specialist in short-haul, point-to-point travel. They had one kind of airplane, no lousy food, no reservation system and no hubs. He built a model that the big companies couldn't replicate.

I also have to give Dell enormous credit. From nowhere, they have become the leader in PCs. They built a brilliant strategy by going directly to the consumer. They dumped out of the in-store market. PCs are a bit of a commodity, so Dell got their pricing model down, very much as Southwest did.

Is anyone “doing it right” in the automotive industry?
I love BMW, which is one of the best automotive brands in the business today. They have been running with “the ultimate driving machine” for 25 years, and they have not screwed that up. They hung in there with prestige and the driving idea: What's the reason to buy here? It's a driving machine.

Do you like any major corporations - those at the top of the Fortune 500 list?
If you mean big, big companies, in many ways I like United Technologies Corporation. They have built an army of specialist brands: Otis elevator, Carrier air conditioning, Sikorsky, Pratt & Whitney. They're a great example of a big company that has very powerful specialists in pretty big categories. That's a terrific accomplishment, because unlike many big conglomerates that get all messy or their names mixed up, they created a holding company that allowed all their big specialty brands to run on their own.



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