Branding Strategy Insider

Management Consulting: Help or Hazard?

While no one has the real number, it has been estimated that management consulting has a global market of more than $50 billion. Consultants are drawn to money like bees to honey. So naturally, big rich companies are surrounded by all types of consulting firms, trying to collect as much as they can to feed their expensive teams. (It costs about $250,000 a month to have one of McKinsey’s consulting teams on site.)

An Army of Consultants. But No One to help.

I’ve seen many big brands in trouble. In fact, I wrote a book about them - Big Brands, Big Trouble: Lessons Learned The Hard Way (Wiley, 2001). Can you guess what common denominator bound them all? They were each surrounded by consultants who took their money but apparently offered no real help with the problems threatening to overwhelm them. From their performance with these big brands, one could accurately portray these folks as modern-day Robin Hoods: They rob from the rich and keep it.

Two Examples

A look at Levi’s and AT&T begins to prove my point. Levi’s spent $850 million on Andersen Consultants to reengineer the company to serve the customer better. All this did was create chaos that made things worse. The board of directors finally had to stop the nonsense.

Why Should GM Give Marketing Any Respect?

My ex-partner Al Ries and I rarely disagree, but we do part company on his Branding Strategy Insider blog post titled “GM Appointment Shows No Respect For Marketing“. In my estimation this move supports what Dave Packard of Hewlett-Packard once said: “Marketing is too important to be left to the marketing people.”

It also reinforces what I consider a brilliant statement made by Bob Lutz in a recent interview with BusinessWeek: “To spend $200 million on manufacturing, we have to get board approval with top management involved from an early stage. Yet we spend billions on marketing and delegate that to too many people at the lowest levels. It’s insanity.” He’s absolutely right. Top management has to be involved, and obviously with Mr. Lutz in charge they will be involved.

My main problem with Ries thesis is why marketing should be given respect. Chief marketing officers have shorter tenures than NFL coaches. They rarely last two years before they are gone.

As BusinessWeek commented in an article on the subject, “the job is radioactive.” The article cited a well-known search company as stating that 70% of the companies don’t know what they’re looking for when they recruit a CMO.

Marketing and Reality

The failure to understand the simple truth that marketing is a battle of perceptions trips up thousands of would-be entrepreneurs every year.

Marketing people are preoccupied with doing research and 'getting the facts.' They analyze the situation to make sure the truth is on their side. Then they sail confidently into the marketing arena, secure in the knowledge that they have the best product and that ultimately the best product will win.

It's an illusion. There is no objective reality. There are no facts. There are no best products. All that exists in the world of marketing are the perceptions in the minds of the consumers or prospects. The perception is the reality. Everything else is an illusion. Period.

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New Brand Strategies For GM

 
Much, and I mean much, has been written about the General Motors crisis. Some claim it’s hopeless. Others say there’s a chance that things will work out in time. No one writes about the fact that success or failure will not revolve around the GM brand. (No one walks into a car dealership and asks for a GM car.) Their future depends on how well their remaining brands are positioned and how well each strategy is executed. In some ways it is a replay of Alfred Sloan’s eliminating a number of GM brands, and building a gigantic business around five brands that became a “car for every purse and purpose”. But that was then. What’s available in today’s highly saturated and wildly competitive automobile market?

First, what drives today’s most successful brands? In a word, it’s a word. The most powerful brands stand for a word or a concept. Toyota is about reliability. BMW is about drivability. Mercedes is about engineering. Volvo built a brand around safety. The problem with the GM brands was each lacked that simple differentiating idea. This was the result of each brand trying to be everything for everybody. What’s a Chevrolet? It’s big, small, expensive, cheap, truck, van or sports car.

So the task for the post bankrupt GM is to carefully figure out what their four remaining brands should be about. What is the differentiating strategy to pursue?

Interestingly, there are some obvious ideas on the table that they can move to preempt.

Marketing, Memory and the Mind

 
Marketing people, and the minds of the people they are trying to influence, are often in conflict. Unfortunately, these arguments are being presented to minds that really aren’t up to dealing with all that glorious information. Our perceptions are selective. And our memory is highly selective. We are cursed with the physiological limitation of not being able to process an infinite amount of stimuli. This means that in a crowded category, your difference might not be enough unless it is a dramatic difference.

Seeing is not akin to photographing the world—merely registering an image. Memory is not a tape recorder that stores information when we turn it on. How much of your message gets through depends to a large part on what you are selling, according to years of data compiled on readership scores by advertising category.

For instance, an advertisement for footwear is going to be twice as interesting as an ad for floor coverings, regardless of the brand names or benefits. Similarly, an ad for perfume—almost any perfume—is going to have double the average readership of a furniture ad. There is even a ‘‘no-interest’’ category where people will remember no brand names. It’s caskets. The leading brand is Batesville. But after a few paragraphs, you’ll have forgotten this.

These interest levels—these biases—are firmly in place before we even pick up a magazine or newspaper. This is why the first and second brands in the market have an enormous mental advantage over the later entrants. They tend to preempt the most important differences.

Loss of Focus and Line Extension

Loss of focus is really all about line extension. And no issue in marketing is so controversial. Companies look at the brands from an economic point of view.

To gain cost efficiencies and trade acceptance, they are quite willing to turn a highly focused brand, and one that stands for a certain type of product or idea, into an unfocused brand that represents two or more types of products or ideas.

Look at the issue of line extension from the point of view of the mind. The more variations you attach to the brand, the more the mind loses focus. Gradually, a well-differentiated brand like Chevrolet comes to mean nothing at all. Scott, the leading brand of toilet tissue, line extended its name into Scotties, Scottkins, and Scott Towels. Pretty soon writing ‘‘Scott’’ on a shopping list meant very little and Charmin took over the lead.

Some Surprising Research
With about 70 percent of new products being launched with existing brand names, you would think these companies would have some supporting data on the pluses of line extension. The opposite is true.

The Journal of Consumer Marketing noted a large-scale study of 115 new-product launches across five U.S. and U.K. markets. The study compared the market share gained by products launched under established family or corporate brand names with market share gained by products launched under new brand names.

Share was measured two years after each brand’s launch. The brand extension products performed significantly less well than the products launched with new brand names.

The Harvard Business Review published a study on line extension. Their observations were that, among other things, line extension weakened a brand’s image and disturbed trade relations.

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Differentiation Takes Place in the Mind

While the mind may still be a mystery, we know one thing about it that is for certain—it’s under attack. Most Western societies have become totally ‘‘overcommunicated.’’ The explosion of media forms, and the ensuing increase in the volume of communications, has dramatically affected the way people either take in or ignore the information offered to them.

Overcommunication has changed the whole game of communicating with and influencing people. What was overload in the 1970s turned into megaload by the turn of the century.

Here are some statistics to illustrate the problem:

*More information has been produced in the past 30 years than in the previous 5,000.
*The total of all printed knowledge doubles every four or five years.
*One weekday edition of the New York Times contains more information than the average person was likely to come across in a lifetime in seventeenth-century England.
*More than 4,000 books are published around the world every day.
*The average white-collar worker uses 70 kilograms of copy paper a year—twice the amount consumed 10 years ago.

Electronic Bombardment
And what about the electronic side of our overcommunicated society?

Brand Recall and the Mind

Pure logic is no guarantee of a winning argument. Minds tend to be both emotional and rational. Why do people buy what they buy? Why do people act the way they do in the marketplace?

When you ask people why they make a particular purchase, the responses they give are often not very accurate or useful. That may mean they really do know, but they are reluctant to tell you the right reason. More often, they really don’t know precisely what their own motives are.

For when it comes to recall, minds tend to remember things that no longer exist. That’s why recognition of a well-established brand often stays high over a long period, even if advertising support is dropped. It’s all about the power of being first. In the mid-1980s, an awareness study was conducted on blenders. Consumers were asked to recall all the brand names they could. General Electric came out number two—even though General Electric hadn’t made a blender for 20 years.

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The Power of the Specialist Brand

 
When you study the marketing wars, the well-differentiated specialist tends to be the winner.

Here are some thoughts on why the specialist brand appears to make an impression on the mind. First, the specialist can focus on one product, one benefit, and one message. This focus enables the marketer to put a sharp point on the message that quickly drives it into the mind. Domino’s can focus on home delivery. Pizza Hut has to talk about its different pizzas, home delivery, and sit-down service.

Another weapon of the specialist is the ability to be perceived as the expert or the best. If that’s all they do, they must do it very well. Finally, the specialist can become the generic for the category.

Xerox became the generic word for copying. (‘‘Please Xerox that for me.’’) Federal Express became the generic word for overnight delivery. (‘‘I’ll FedEx it to you.’’) Even though the lawyers hate it, making the brand name a generic is the ultimate weapon in the marketing wars. But it’s something only a specialist can do. The generalist can’t become a generic.

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Changing Minds in the Marketplace

It’s futile trying to change minds in the marketplace. For example:

*Xerox lost hundreds of millions of dollars trying to convince the market that Xerox machines that didn’t make copies were worth the money. No one would buy their computers. But they still buy their copiers.

*Volkswagen’s share price dropped over 60 points when they tried to convince the market the VW wasn’t just a small, reliable, economical car like the Beetle. No one bought their big, fast cars. They brought back the Beetle and people flocked to buy them.

*Coca-Cola blew both prestige and money in an effort to convince the market they had a better thing than ‘‘the real thing.’’ No one bought their New Coke. But their Classic version sells as well as ever.

When the market makes up its mind about a product, there’s no changing that mind.

As John Kenneth Galbraith once said, ‘‘Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.’’

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