The Origin of Brands
Al Ries, Chairman, and Laura Ries, President, Ries & Ries, Atlanta, Georgia, USA
Al Ries is the author or co-author of 11 books on marketing, including his latest, The Origin of Brands. He and his daughter Laura run the Atlanta-based marketing strategy firm Ries & Ries. Their website: www.ries.com
*This article is granted by International Business Association WISE CIS
It has been twenty-three years since the publication of Al's first book, Positioning: The Battle for Your Mind.
Coincidentally, twenty-three years elapsed between the day Charles Darwin completed his journey on the HMS Beagle and the day his book, The Origin of Species, was published.
Time distills ideas and concepts so they become refined and purified. In spite of the hundreds of thousands of words we have already written on branding, we believe the essence of the subject has still eluded us. We believe there's an important principle at work that has never been isolated, defined or explained.
We believe this principle is so fundamental that the only analogy that would do it justice is contained in the definitive book on biology, The Origin of Species.
That principle is "divergence," the least understood, most powerful force in the universe. Divergence is the tendency of a species over time to divide and become two or more species.
Brands Evolve and Categories Diverge
The interplay of evolution and divergence provides a model for understanding both the Universe and the universe of brands.
Evolution has received all the publicity, but evolution alone cannot account for the millions of diverse and unusual species that populate the Earth. If it weren't for the twin force of divergence, evolution would have created a world populated by millions of single-cell prokaryotes the size of dinosaurs.
So, too, it is in the world of brands. Evolution alone cannot account for the hundreds of thousands of brands that can be found in supermarkets, drug stores, clothing stores, shoe stores, discount stores and convenience stores.
Take the computer, for example. Initially all computers were mainframe computers, a category dominated by IBM. Then the category diverged and we had minicomputers (Digital Equipment), home personal computers (Apple), workstations (Sun Microsystems), 3-D workstations (Silicon Graphics), laptops (Toshiba), business personal computers (Compaq) and personal computers sold direct (Dell.)
Notice that most of these new brands were created by entrepreneurs. What happened in computers is happening today in many other categories. Big companies jump in with their brands to try to take market share from the leader while entrepreneurs pioneer new categories and become multi-millionaires in the process.
In mainframe computers, General Electric, RCA, Motorola and Xerox, big companies all, tried to muscle in on IBM's territory. All failed.
The process never ends. Divergence in personal computers created opportunities to build an operating system brand (Microsoft), a microprocessor brand (Intel), a keyboard & mouse brand (Logitech), a printer brands (Epson), a laser printer brand (Hewlett-Packard), a financial software brand (Quicken), and many more to come.
Where Does Opportunity Lie?
Opportunity does not lie in brands, opportunity lies in categories. There are more than 2.5 million brand names registered with the United States Patent and Trademark office. A vast majority of these brands are worth little or nothing. Yet some of these brands are worth billions of dollars. What makes a brand valuable?
· Starbucks is a billion dollar brand because it stands for a category called "high-end coffee shop."
· Rolex is a billion dollar brand because it stands for a category called "expensive Swiss watch."
· Red Bull is a billion dollar brand because it stands for a category called "energy drink."
How strong the brand is depends on how strong the category is. If nobody wants to buy an expensive Swiss watch, then the Rolex brand isn't worth very much. If high-end coffee consumption takes a dive, then the Starbucks brand loses much of its value.
Survival of the Firstest
Two seeds fall onto the forest floor. Maybe it was the angle the seed hit the ground, maybe it was the soil underneath the seed, but for some reason one seed germinates first and the other seed a day or two later.
At every stage of growth, the first seedling is taller, stronger, and more resistant to drought. As time passes, the first seedling grows up to become a gigantic tree, blocking the sunlight from reaching the second seedling. Eventually the second tree-in-the-making withers and dies.
Survival of the fittest? To be sure. But how did the first seedling become the fittest seedling? In the forest or in the marketplace, the battle is usually won by the first contestant to occupy the space.
Coca-Cola was the first cola. McDonald's was the first hamburger chain. Budweiser was the first national brand of bottled beer. Red Bull was the first energy drink. Rolex was the first expensive watch. Starbucks was the first European-style coffee house.
Being first doesn't automatically mean your brand will become the leader in a new category. It only gives you the opportunity to do so. If you're first, your brand starts off as the leader since there are no other brands that are trying to occupy the same branch.
Here's where evolution comes in. Your brand needs to continue to evolve to maintain your leadership. In this respect, you need to be protective of your brand and be especially vigilant when competitors threaten your position.
Survival of the Secondest
Three seeds fall onto the forest floor. Two land close together, the other lands some distance away.
In the struggle for life, the two seeds that are close together will fight an epic battle until one dominates the other. From that point on, it will be survival of the firstest.
But suppose your brand was not first, suppose your brand has no chance of being first, suppose your seed is the one that fell some distance away from the leader.
You're exactly in the right position to survive. Your brand will benefit from another principle derived from Darwin. Survival of the secondest.
The second largest city in America is not Boston, Philadelphia, Baltimore or any other city close to No.1 New York. The second largest city in America is Los Angeles, about as far as you can get from New York without leaving the country.
In business, you can generalize this concept with the strategy: "Be the opposite of the leader."
Mercedes-Benz made big, comfortable cars, so BMW introduced smaller, more "drivable" machines and became a strong No.2 brand of European luxury cars. The Home Depot has messy, male-oriented stores, so Lowe's introduced neat, clean, female-oriented stores and became a strong No.2 brand of home improvement warehouses.
Coca-Cola is the old, traditional cola, the real thing. So Pepsi-Cola ran advertising that appealed to the younger crowd and became a strong No.2 brand of cola. (The Pepsi Generation.)
Every Category, Bar None, Will Ultimately Diverge
Take electric toothbrushes which have been on the market for decades, but most brands cost US$50 or more. So John Osher and three other Cleveland-area entrepreneurs developed the first low-cost electric toothbrush, a battery-operated model that could be sold for US$5.00. Called SpinBrush, the product was introduced in 1998.
Two years later, SpinBrush was sold to Procter & Gamble for US$475 million, a big payout for an investment that totaled US$1.5 million.
Where this was once one category (electric toothbrush), now there are two (expensive models and inexpensive battery-operated models.) That's divergence in action.
No one brand can cover all these diverging branches, not in the face of specialized competition. Witness IBM's losing battle against Dell and Compaq in personal computers. Against Microsoft in personal-computer operating systems. Against Intel in personal-computer microprocessors. Against Toshiba in laptop computers.
One of the most difficult things to understand is the dynamics of a marketplace. Why some companies win and others lose. Charles Darwin provides the theoretical concepts to understand marketplace dynamics. The laws of nature apply equally as well to the marketplace.
Charles Darwin compared divergence to a tree which starts out as a single trunk. As a tree grows, its trunk branches out into limbs and twigs. The same process occurs in plants and animals. Over time, a single species might eventually become a family of different species. Take the computer tree which started with the mainframe computer pioneered by IBM. The computer tree has branched out into many different categories including mid-range computers, computer software, personal computers and PC software creating many opportunities to build new brands.
Foreign Investors Support Kazakhstan's Intention to Join the WTO Editorial Overview
The Rise of Kazakhstan on the Global Stage Valentina C. Kretzschmar
SAP’s Solutions for Kazakh Business Jacob Korobko, Alnur Zhetbayev
Kazaeronavigatsiya Invests in Flight Safety Sergei Kulnazarov
Review of Almaty’s Office Space Market Stanislav Glazkov
State Procurements for Conducting Petroleum Operations: What the Investor Should Know Rinat Begaliyev
Petroleum Legislation: Analysis of Amendments 2005 Saule Akhmetova
Application of the Double Tax Treaties to Tax Disputes Zhanar Kasymbekova
Mass Media Monitoring as a Means of Information Stream Management Aigerim Baizhumanova
How to Choose the Right Hiring Method Marten Runow
The Origin of Brands Al Ries, Laura Ries