Who is Jack Trout and what’s he done for marketing lately?

Jack Trout has written a new book, that’s what he’s done!  Come and meet Jack in person and find out more next Wednesday, May 25th at the NYAMA’s “Meet The Author” breakfast series.

It starts at the ungodly hour of 8 am with a jolt of caffeine followed by a conversation with Jack Trout.  It will be held at the New York American Marketing Association offices on 116 East 27th Street, 6th floor, 1-212-687-3280.  You can sign up at nyama.org

Jack Trout is the co-author of Positioning.  And of Re-positioning.  And of many other well-know books on marketing.  If you’ve never heard him speaking about branding, you really should come.

So here’s one of my favorite Jack Trout stories.

In 2004 the CMO of McDonald’s, Larry Light, revealed the new branding strategy behind McDonald’s incredible turn-around story.  How incredible was the turn-around?  In less than a year his approach lifted the company to higher sales, revenues, margins and growth of a brand that many people had written off as just for young families.

Here’s Larry Light in a NYC speech to the heads of ad agencies and clients:

Beware of the so-called “positionistas.” They say that a brand can only stand for one thing in the mind of the market. This may make some sense for small brands. But for big bands – like McDonald’s – it’s nonsense.

Identifying one brand position, communicating it in a repetitive manner is old-fashioned, out-of-date, out-of-touch brand communication. Simplifying a brand to a single position is not simplification, it is simplistic. Simplistic marketing is marketing suicide.

Then Light introduced an entirely new approach to marketing, to advertising, to branding.  It is an approach to marketing with narrative and storytelling at the heart of it.  Here’s how Larry described it:

A brand is a multi-dimensional, multi-faceted, complex message, not a single-dimensional, single-positioned, simplistic message. Customers will not accept monotonous, repetition of the same simplistic message. They want a dynamic, creative chronicle.

And, big brands like McDonald’s are not uni-dimensional. We are a multi-dimensional, multi-faceted, multi-segmented, many-sided brand.  So, we changed from mass marketing a single message to multifaceted, multi-segmented, many-sided marketing.

We think of our new marketing approach as “Brand Journalism.”

In Ad Age Jack Trout responded.  Go back to the August 2004 and you’ll see the headline reads:

McD’s abandoning of positioning is “Lunacy”

Perhaps it was lunacy but it set the company on a path that has put it into the stratosphere.  McDonald’s was 1 of 2 DJIA companies in 2008 to end the year with their stock price higher!  Gold Effies in the US.  Global Gold Effie.  Record breaking sales.  That’s the kind of lunacy that I like!

Agree or disagree with Jack Trout….the point is you need to pay attention to him.  It is absolutely, entirely and certainly worth going and seeing him first hand next Wednesday, May 25, at the NYAMA.  nyama.org

Business Strategy = Brand Strategy, or Verizon redux

A colleague challenged me on the recent post about Verizon’s business being strong but not their brand.  “How can you have a strong business but not a strong brand?  Doesn’t that contradict the theory that business strategy = brand strategy?”

Excellent question.  I was not clear enough on that point.

So here it goes:

If you business strategy is to operate in a category where there is limited or no competition, then your brand strategy is to downplay branding.

Branding has relatively little benefit if you are in a business that is highly regulated, a monopoly, a commodity or a utility.  Of course it does matter when dealing with the regulators, employees, prospective employees and business partners.  But those are still very small audiences.  Verizon is in a category with very limited competition.  It is a category that is capital intensive, with no single technical standard, so there are very big barriers to new competitors.  And it remains highly regulated.  

The wireless business is slightly more competitive than wireline.  But it still has a limited number of competitors and is capital intensive . Most importantly, the category is growing.  Only a business in poor shape would decline in a growing category.  

Compare this with many countries in Europe where there is a more competitive market.  There is a single standard across the countries, so networks are not a competitive advantage.  There we see some truly outstanding brands such as Orange and O2.  

Now compare this to mobile handsets.  That is a category where branding is tremendously important.  Samsung, Apple, Nokia, Motorola, Sony Ericsson, Blackberry — even LG and HTC.  Those companies really understand the importance of branding and try hard to get it right.  Samsung is getting it right, Motorola has lost its way.  And who can doubt that Apple is getting it right?

In fact, it is the Apple brand that is attracting people to AT&T.  And the problem is made worse by the bad feelings people have about the Verizon brand.  Arguably the Verizon brand is pushing people away.  The AT&T brand has a residual good will from its long relationship with people.  Verizon has size.  AT&T has stature.

Here’s an example of where brand strategy drives business strategy.  The example comes from Larry Light and Joan Kiddon in their new book, Six Rules for Brand Revitalization.  McDonald’s lost faith in their brand’s ability to reach beyond a limited audience, limiting their growth potential.  Growth meant reaching teens and young adults, so the company decided to invest in many other brands such as Chipotle, Pret and Boston Market. That is where the “brand positioning” theory led them.  Brand strategy of one brand to one segment led to a business strategy of buying other brands. 

But it wasn’t working because the core McDonald’s brand continued to decline.  In a reversal of their branding strategy, they adopted a multi-segment approach to branding marketing.  In other words, a single brand appealing to multiple target audiences (but still not absolutely everyone).  The new branding approach (brand journalism) worked, driving organic growth in the McDonald’s franchise.  Eventually the company sold off those other brands and investments.   Brand strategy of one branding to multiple segments led to a business strategy of selling off other brands.

Organic growth?  One of only 2 companies in the Dow Jones Industrial Average to rise last year?  Hey, I’m lovin’ it!

Perhaps illustrates the important relationship between business strategy and brand strategy.  If not, let me know and I’ll try to give other examples or ways to look at the issue.

Zeitgeist and McDonald’s

Some words are just fun to say. Zeitgeist is one of them. It is also a wonderful word to use when talking about the mood of a particular time.  You buy your first MacBook and suddenly you notice all of these other people are carrying them around too.  There is something in the air. There was something magical about that place and time when several people in different places had the same idea.  It was uncanny.  It was the Zeitgeist!

Looking back to when Michael Thibodeau and I developed Narrative Branding, I can trace a couple of other people who were independently developing their own similar ideas about branding at that very same moment in time.  It was uncanny.  It was the Zeitgeist!

So I imagine that by now you are saying to yourself, what the heck does this have to do with McDonald’s?  

At the beginning of this decade McDonald’s was in very sorry shape.  Their business was falling apart and their brand was sliding down the slippery slope to irrelevance.  A few years later a remarkable turnaround had taken place.  Suddenly McDonald’s was a vigorous and profitable company with a strong brand.

We didn’t take much notice of it while it was happening.  Looking back I realize that about eight months after we publicly launched our Narrative Branding method to marketing, McDonald’s was making headlines by publicly launching their bold new approach to marketing which they called Brand Journalism.  It was uncanny.  It was the Zeitgeist!

Larry Light, who was the CMO of McDonald’s at the time, was the first chief marketing officer of a major corporation to publicly renounce the brand positioning approach to marketing. In the words of Larry Light and Joan Kiddon:

The “positionistas,” as I like to call them, are glued to the glory of an immutable, narrow, unidimensional view of a brand.  They believe that brands are simple, single-word ideas.  And once this idea is established, they believe that you cannot change people’s minds. This is wrong.  Brands are complex, multidimensional ideas, and you can change people’s minds.  McDonald’s is a good example.

This quote is taken from the new book that Light and Kiddon have written, “Six Rules for Brand Revitalization”.  It has just been published by Wharton School Publishing. It is essentially a book length case study of the McDonald’s story from the inside. And it is also persuasive evidence that companies can abandon brand positioning and actually perform much better.

Of course, it doesn’t take much detective work to see that Light and Kiddon are tweaking Trout and Ries by labeling them positionistas.  All I can say is that I wish I had come up with that word!

So there you have it.  Zeitgeist and McDonald’s.

The 4 methodologies of branding

Sometimes an idea becomes so well-known and widely held that people don’t even consciously recognize it as an idea but simply take it for granted.  The underlying assumptions are no longer questioned.  The idea passes from theory to law.  Consider gravity.  Before Sir Isaac Newton, people accepted that pendulums slow down and that two objects may bounce off of each other.  They were facts, nothing more.  Newton saw a set of fundamental principles behind those facts.

Over time, Newton’s theory became “laws”.  They were seen as sufficient to explain the world around us.  And for many centuries the underlying assumptions were no longer questioned.  Eventually physicists identified some special situations in which Newton’s laws could not explain the observable phenomena.  New theories of physics were developed, several of which are competing with each other.  Space-time physics, string theory, big-bang — all are theories that are vying for our attention and elevation into laws.

The same is true for branding.  For many years, brand positioning was the preeminent theory of branding.  From this theory grew a method for defining, creating and managing brands.   It has several different labels such as Mind Share or USP but those are fundamentally the same method built on the same theory.  It was popularized by Mr. Trout and Mr. Ries in articles and books.  It was widely adopted in academia, ad agencies and corporations.  At least two generations of marketers have known of almost nothing else.

Along the way the way special situations cropped up in which the brand positioning method was not sufficient to explain the success or failure of a particular brand.   So there was tinkering with the brand positioning method, adding a new twist here and there along the way.  But the underlying theory was no longer in question.  And the underlying assumptions were unquestioned, too.  Perhaps the best know superstructure — and most complex — was developed by David Aaker and his co-authors in a number of books such as Building Strong Brands.

Beginning in the mid-1990s several academics and consultants started to recognize more and more situations in which brand positioning was not working as it was meant to.  Instead of adding more complexity to the brand positioning method, they decided to opt out.  They began to question the theory itself.

Today there are 3 additional methods for defining, creating and managing brands, along with brand positioning  The first  method is Emotional Branding, popularized by the wonderfully brilliant Marc Gobe.  The second is Iconic Branding, which was formalized by Professor Douglas Holt formerly of Harvard and current at Oxford.  And the third is Narrative Branding (which is, by the way, also our trademark term) that was developed by me and Michael Thibodeau.

(In this list of the 4 methods of branding I am deliberately excluding some highly specialized methods created by individual companies for their own purposes.  The most famous of these is Brand Journalism, created by Larry Light when he was the CMO of McDonald’s.  Because this is proprietary to McDonald’s, it is not available to other companies.   It is like a hothouse plant, known to survive in the special environment but not tested out in the greater world.)

The questions about brand positioning have only grown over time.  Today the method and theory of brand positioning are being challenged by marketers at major corporations around the world.  In our recent study we found that  nearly 2/3rds of senior marketers are looking for breakthrough methods that are more effective than brand positioning (source: JupiterResearch/Verse Group study 11/08).

The resilience of McDonald’s

McDonald’s is one of the few stocks that actually increased in value during 2008 — a year in which 95% of stocks fell.  Not only that, but sales have continued to grow.  The strength of McDonald’s is amazing! 

Is this simply because a lower cost restaurant will do better in a recession?  If we look at the last recession, the stock price of McDonald’s actually fell rather dramatically.  So it cannot be only the greater economy that is driving McDonald’s performance.

If we look back, we can see that McDonald’s actually began this decade in rather tarnished shape both as a business and a brand.  As a brand it had lost relevance and trust.  In the last recession McDonald’s was weak and in this one it is strong.  In fact, today McDonald’s is one of the strongest businesses and brands in the world.  Remarkable!

How did this happen?  

The changes began at the top, with new leadership.  One of the most important hires, and most counter-intuitive, was bringing Larry Light on as the Chief Marketing Officer.  Larry Light had a storied history working at the advertising agencies BBDO and Ted Bates.  Bringing in someone with that background was unconventional for McDonald’s.

To turn around the McDonald’s brand, Light jettisoned traditional brand positioning.  He was prescient in seeing the traditional brand marketing model as being broken.  In his own words, “We reject the outmoded view of the positionistas… declaring an end to the out-of-date, simplistic concept of brand positioning…”

Light’s great insight was that brand positioning was too limiting for the McDonald’s brand.  It narrowed the potential audience for the brand down to a single market segment.  For the brand to grow, it needed to appeal to many segments of the market, not just one.

He needed a new model for brand marketing.

Always resourceful, Light developed a narrative method for brand marketing.  He called it “Brand Journalism”  It was custom made for McDonald’s.  It was far, far more than just an advertising campaign.  It was the basis for rebuilding the internal culture of McDonald’s, for shaping the company’s business strategy, for changing menus and for redirecting their overall marketing efforts.  Because it was a new model, it also required developing new market research tools and metrics.  Existing market research was designed to assess the key elements of brand positioning.  It was not appropriate for assessing a brand based on the principles of  brand journalism.

“McD’s Abandoning of Positioning is ‘Lunacy'” screamed the headlines in AdAge.

Less than a year later the magazine changed their mind.  AdAge awarded McDonald’s “marketer of the year.”  A turn around indeed! 

Brand Journalism is, at its heart, a narrative method for creating and managing a brand.  The full story of it and McDonald’s turn around remains to be written.

This narrative method is part of the reason why McDonald’s continues to be so resilient today as both a brand and a business.