"The stronger a brand gets in a particular category...

Jack Trout, founder, Trout & Partners

Published 11 years ago on Feb 02, 2013 15 minutes Read

Locating the office of Trout & Partners is turning out to be a puzzle but breathing the rarified air around makes the effort worth it. Greenwich, Connecticut is hedge-fund country and has been chronicled endlessly for its aggregation of centi-millionaires. Our rendezvous point is 8, Wahneta Road but among the neatly laid houses, we can spot 9 & 10 but not the address where we are supposed to meet Jack Trout, who along with Al Ries, positioned ‘positioning’ in every B-school student’s vocabulary. Right now, we are wondering if we have got our positioning wrong. There is nobody around who is familiar and the cabbie who dropped us has already vamoosed. As we are about to hesitatingly pace down the block for a second time wondering if we should call Trout’s office, we hear a shout asking, “Is it me you are looking for?” The call is familiar and so is the man, Not that we were expecting Lionel Richie, but Trout has stepped out of his office to reposition us, his assistant having noticed the wandering flock through the window. Trout is still practicing what he has been preaching about brand management to companies. “Be their first, go out of your way to connect and be consistent.” The net result is that Trout not only lives among the jetset but he is as familiar a name in Pune as he is in Washington.

Over the years, is there any global company that has become your favourite for its brilliant marketing?

My favourite is BMW. They have been very consistent in their ultimate driving machine strategy, which they have stayed with for 25 years. Instead of drifting from that strategy, they have focused on improving the product with innovations. 

What makes companies not stick to their strategy?

The problem is that new people come in and they want to make their mark, so they tinker and fool around. I have never met a marketing person show up at a company and say, “I think everything is fine and let’s not touch a thing.” The other thing is greed to some degree. How do I get bigger? They start to do things that they really shouldn’t do — chase other people’s business, expand beyond their segment or particular niche and become more things for more people. That begins to confuse things. The biggest factor in that is Wall Street. You let Wall Street enter your business and it is nothing but trouble because they are short term. 

I will never forget a presentation I made to Hank Greenberg of AIG many years ago. Hank was the king of the hill. I said to him, “You guys have a chance of becoming America’s answer to Lloyd’s of London. Because that is what you do.” They didn’t want to hear; Hank wanted to do life insurance and everything else. Sure enough, he started insuring credit default swaps with a small office in London, which took him right over the edge. But Hank was gone by then! 

Now, at the same time, I was talking with Herb Kelleher of Southwest Airlines. He wanted to expand into the north east. In the airline business, the important thing is to have those gates. I told him if you can buy one of these eastern airlines, you will have gates all along the east coast. And you know what he said, “Jack, I know you are right. I would really like those gates. But here is what I don’t want — their airplanes and people.” He knew what he was and he knew he could get much bigger with that stuff, but was clear that the stuff he did not want would also come with the acquisition and would land him in trouble. He wanted just one kind of airplane and he had a certain corporate culture he wanted to maintain. It takes that kind of a leader who understands what the company is, what the brand is and doesn’t get swayed into doing things that Wall Street dictates. 

 Can you give a few examples of classic positioning and repositioning worldwide?

Positioning is how you differentiate yourself in the mind of customers. BMW is a driving machine; Volvo built a position around safety. Nike is a good example of positioning too. People think that the slogan “Just do it” is Nike’s positioning. No, its success is owing to the fact that it bought the best athletes in the world and put its shoes on them. If you watch Federer or any of the big players, they wear Nike shoes. What do people wear? They wear what the big guys wear. 

Repositioning is about shifting from what you were or making adjustments. You take a Rolex, which is a fancy watch. They built the brand prestige, which is what it is all about. Wearing a Rolex implies you’re rich. Now, after the financial crisis, impressing your friends and neighbours is not a good concept anymore. What they have to do is reposition the brand around being an investment — children will love this watch, this watch will last forever. So they have to shift it from prestige to an amazingly powerful investment that will last for decades. Repositioning requires you to take some tough calls; because it is about saying we are going to move to another place. 

Would you say that Bajaj is a good example of repositioning as it converted itself into a motorcycle company from a scooter company? 

Exactly. It is a classic example of repositioning. Scooters is what made them famous, they had an amazing waiting list of scooters back in their heydays; you had to, practically, wait for years. Interestingly enough, one of the early conflicts with Rahul and Rajiv was that Rajiv said we are out of scooters and going into motorcycles. Think about that. Scooters were what made the father and the founding family famous, suddenly the son takes them into another business altogether. It’s a tough call. 

What is your assessment of the tactical strategy adopted by market leader Hero Motocorp? 

In the motorcycle business, the stronger you get, the harder it will become to topple you because the cost of entry is high. When I first came to India and saw Hero Honda, I said, “Wow.” Believe me, part two is the real brand. Clearly, Hero Honda was numero uno, and then Bajaj came rolling around. I wonder what the Hero guys were thinking when they dumped the best part of their brand name and said, “We don’t need Honda anymore. We are the No.1 motorcycle company in the world.” Now, they don’t have the best of their brand name and they don’t have the R&D, while Honda is in there unleashed. The real battle is what is happening to Hero. I think Hero is going to stumble, and there is going to be a two-horse race between Bajaj and Honda.

If you look back over the past five years can you think of companies who have done a great job of positioning themselves? 

In high tech there are quite a few. You have Google and Apple. Those are the guys who have done big things. What drove Apple was Steve Jobs. He was a brilliant marketing guy, terrific at design and knew what he wanted. He was an engineer. But he pushed the engineers with what he felt we needed out there. I would say that you have got to put them in the most successful category for just what they have done. But getting bigger and going forward is never easy because now they have Samsung chasing them on the phone. It is always going to be competitive. 

Does positioning have a lifespan? When do you know it is over?

The marketplace tells you when you have to do some adjusting. Generally, a single powerful position lasts forever; so you can innovate, probably make some adjustments and take the concept to the next level. You don’t necessarily change it. A Rolex is still a Rolex, the same basic product, but it is not about prestige, but investment now. 

So you don’t radically alter the product…

You can’t do that. If you want to radically alter the product, you might as well come up with another brand. That has happened to Kodak, which was the king of film. Suddenly the digital world arose. Now, guess who invented digital photography? Kodak. But they didn’t push it because they thought it would impact the film business. What they should have done is create another brand to push the digital world. Dramatic changes usually require a new brand and a new strategy. It is getting off one horse and quickly getting on another. 

What do you think of General Electric’s strategy of extending its brand across businesses — it has been one of America’s most successful companies? 

GE got into everything and sold all products under one brand GE, which is the GE way. But my most favourite company in the world, which is a counterpoint to GE, is United Technologies. Both are very similar, large industrial companies. The difference is United Technologies built brands — Otis Elevator, Sikorsky helicopters, Pratt & Whitney jet engines, Carrier airconditioners and so on. I would rather have a United Technologies thing than a GE everything. That is the difference. In many ways, from a positioning point of view, United Technologies has done a much better job. GE’s strategy is confused. Even in terms of shareholders return, United Technologies has done much better. I believe from a marketing and strategy point of view, it is always better to build separate brands for separate businesses.

When you have a strong brand that is trustworthy, the idea obviously is to maximise the benefits from it. Then why do brand extensions fail? 

The problem with extending your brands across many businesses is that the stronger a brand gets in a particular category, the weaker it gets in others. If Virgin gets stronger in the airline space, then the other brands they try to launch with the Virgin brand name get weaker. Take the case of Heinz — it is the killer ketchup in America. They tried to get into mustard. You would think the two things are close to each other so it shouldn’t be a problem. People looked at that bottle and thought it was yellow ketchup. It was too powerful a brand to take and put on other things. The more success you have in one area of your branding the weaker all the other ones become. 

Apple has been able to pull it off quite well. They have brands such as iPhone, iPad and Mac and have been successful in building a family and the Apple store as well. This is where it really starts to get tricky, when you start to get into retail. Actually, that is what really gets to you — what happens when you get into retail. Bajaj is facing that problem now. They are starting a new series of fancy stores where you can find its motorcycles. So everything is driving you in a narrow direction and you lose the ability to spread the name around. 

Even in the case of Bajaj, the brand name is used by a number of businesses. Does that not dilute the value of the brand?

The Bajajs have lots of businesses, but for the most part, motorcycles is now really becoming the dominant business. I have been encouraging Bajaj to just use the Bajaj brand on their motorcycles and reposition some of the other businesses they have, such as electrical fittings etc. Those businesses would be stronger by giving them their own brand names and not have the Bajaj brand name hanging around. But sometimes it is hard: how do you tell a family member, “You should drop the Bajaj name even though you are part of the family.” You need very strong leadership to do that.

 But the very fact that these businesses want to use the family name is because it implies trust. It is to exploit this that multinational insurance companies came to India and tied up with big brand names...

When they first came in, they needed to have a partner. The partner gave them trust. But Allianz is the second largest insurance company in the world. Now that alone is a powerful idea. Yes, you have got Bajaj as your starting point, but here is your problem. Bajaj Allianz is not the second-largest insurance company in India. So suddenly you are miffed because you can’t use that concept of being the second-largest.

You brought up trust, which is a very good point. But would I trust my insurance needs to a big motorcycle company, which is where Bajaj is headed, or would I trust it to one of the largest insurers in the world? I think second-largest in the world brings an enormous amount of trust, expertise and knowledge with it. You want somebody who is going to be able to pay off your problems; size and scope are very important in the insurance business. The bigger you are, the safer you are. 

If you look at what has happened with India over the last 50 years, you will see that having a big family brand is helpful. But as markets mature and you have more competition, the old-fashioned way of having the family name on everything weakens the brand. So you need get away from the GE approach and move into the United Technology approach. That is what will work in this brave new competitive world. Even though I agree that in developed markets you need to play a different game than in a developing market, India is changing and becoming a more developed market. 

Let’s talk about Papa John’s pizza. It grew into a bigger brand and finally changed hands. Are there lessons out there that can be applied to smaller businesses?

Yes, I happened to be there at the beginning. A gentleman walked into its office and he was the king of tomato sauce. Dino Cortopassi supplied fresh, packed tomato sauce under the brand Stanislaus to mom-and-pop pizza joints across America. I asked Dino why he wasn’t supplying to the Pizza Huts and Dominos. He said, “I can’t sell to the chains because I don’t have enough. They bring it in by the tank car and I am selling it in cans.” So we talked for an hour. 

Fast forward, and now I am talking with John Schnatter of Papa John’s. He is winning the taste test but he can’t figure out the key to his success. So, I ask him to tell me more about his business. And somewhere he says, “I spend a lot of money for Dino’s sauce.” There are very few people who know about Dino Cortopassi, so I said, “Wait a minute. You have Dino’s sauce? But Dino said, I don’t sell to chains, and you are one.” So I went outside and called Dino. I said, “Dino. There is a guy here who says he has your sauce. But you don’t sell to chains.” He asked, “Is that young John? I used to sell to John when he started as a mom-and-pop store. He got bigger and I continue to sell to him.” I figured it’s the sauce that John had that none of the other chains had that led to better ingredients and better pizza. That became an ingredient positioning story. That was the genesis and John has never changed. Any small business has to have an angle against the biggies out there till they themselves become big. 

New businesses that start, especially in times like this, don’t have much bandwidth, capital or room to expand. So how do you know that they have got their timing and positioning right?

You have to line up against competition and ask yourself, can I bring something to the party? Rajiv was trying to get into the motorcycle business in a big way and he said there is one thing that doesn’t really exist out here: the sports motorcycle. I am going to start this category for the hotter, younger crowd as opposed to the commuters. So the Pulsar was born and it became India’s No.1 sports motorcycle. I always say it’s better to be first than better. John got better, but he had Dino’s sauce. Now Bajaj has to innovate, which they are doing with their engine technology. 

You say price, customer service and quality is not a strategy. Is that correct?

To some degree it can be a strategy but it has to be built around a story. Rolex is about quality. The best line they have is that it takes a year to build a Rolex. That is a very powerful idea. Mercedes has a high degree of quality. But quality is an attribute. How far can you push it? Remember, positioning is about owning an idea. Differentiating is about an ownable idea. It’s hard to own quality because everybody can do that. It’s different if it is technology-led — for example, for GE its turbine blade technology is ownable; adhesive technology for 3M; Gore-Tex is a membrane technology. It can be powerful if you have one of those. Otherwise, it is hard to own quality. As for price, you can’t win on price because there is always somebody who will find a way to make it cheaper.

You have said that advertising is not a sledgehammer but a light fork that envelopes your prospects. But advertising continues to be a multi-billion dollar business.

Well, how do you tell your story? Earlier you used to tell your neighbour over the fence. Now you can tell your neighbours electronically much quicker through the internet. To me advertising is story telling. But you have to be careful how you tell your story in advertising. My problem with advertising in India is that everybody wants to do Bollywood. That’s because it is so much easier to do that than finding an interesting way to make the product a star. When I first came to India, a motorcycle ad formula was boy meets girl meets motorcycle. For scooters, it is girl meets boy meets scooter. It’s funny but that’s how it was. I had to get Bajaj out of Bollywood and get them to talk about their product, features and engine technology. Sure, you can do with some drama and excitement, but this is not a Bollywood business.

You talk about having a negative on the competition as a good strategy. Any examples of companies that have done a very good job of using this strategy? 

Some of the classics did a very good job. One very famous campaign was by car rental company Avis that said, “We try harder”. Meaning, we try hard to make sure that you have a much better service. That is a good example of exploiting the leaders. Sometimes the leaders get very sloppy about what they do, which you can use as a driver. 

Again, Hyundai had a very successful campaign in the US for a year where they said if you don’t like the car, we will take it back. That is a very interesting idea, and in a way it is a counterpoint to the way most cars are sold — you buy a car; good luck, it’s yours. But Hyundai said, we are so sure that you are going to like this car that we are willing to take the risk of taking it back. That was a very unique example of countering a negative. You have to look at the competition. What are they strong or weak at? How do you exploit their weakness?

That is what Pepsi did in the beginning. It built the brand around younger people as older people were hooked to Coke. What a lot of people miss is that strategy starts with the competition. It is not about what you want to do. It is about what your competition will let you do. That is key to the whole game.