More Laws of Marketing (#3 to #6)

I am a fan of the Coffee Can Portfolio, an “Active Passive” approach to investing. 

The idea is simple: You try to buy a basket of the best stocks you can and let them sit for years. You incur no costs with such a portfolio, and it is simple to manage.

You can track my stock baskets here on my Scorecard.

In my last article, I mentioned that I am reading a book called “The 22 Immutable Laws of Marketing”, by Al Ries and Jack Trout. It suggests that there are some “fundamental laws of marketing” and it is these laws that govern success and failure in the marketplace. Most importantly, in order for a company to be successful, their programs, products and services must be in tune with these laws. 

I think this is a fascinating assertion. 

Earlier, I wrote about the first two laws of marketing:

• Law #1: The Law of Leadership

• Law #2: The Law of the Category

Today, let’s explore the next few:

• Law #3: The Law of the Mind

• Law #4: The Law of Perception

• Law #5: The Law of Focus

• Law #6: The Law of Exclusivity

Law #3: The Law of The Mind

Google was not the world’s first search engine. 

Facebook was not the world’s first social network.

Reddit was not the world’s first network of interests-based communities. Anyone remember Digg?

In each case, there were predecessors. 

Does this mean the Law of Leadership (i.e. being first to market) is flawed? 

No. 

Being first to the marketplace is important, but only to the extent that it allows you to get to what really matters: Being First in the Mind. 

After all, can you really change a mind once it’s made up? It is extremely hard.   

Law #4: The Law of Perception

This chapter was mind blowing.

People are seldom, if ever, wrong… at least in their own minds. As a result, a perception that exists in the mind is often considered a universal truth.

Truth and Perception

Recall, marketing is a battle of perceptions, not products. Therefore, there is no best product. There is only a perception of what is the best product.

This perception IS the reality. 

Truth and perception become fused in the mind, leaving no difference between the two. As a result, marketing is a manipulation of our perceptions. 

I had never thought of it that way before!

The Power of Perceptions

The power of perceptions over products can best be seen with the help of an example. Let’s look at the Automobile market (keep in mind this book was written in the early 90s): Honda and Toyota sell the same car in both the US and Japan. The book argues that if marketing were a battle of products (i.e features like quality, style, horsepower etc), one would expect similar sales share in both countries. After all, the same car is sold in both countries. In the US, Toyota and Honda had similar market share in 1993 (7% vs 5%). But in Japan, Toyota sold 4X as many cars as Honda! 

Why the massive difference? 

Although the products were the same, their perceptions were very different. In the US, Honda was considered a car manufacturer. In Japan, a motorcycle manufacturer. As a result, the implication is that when people bought cars in Japan, they didn’t necessarily even consider buying a Honda.

Coca Cola presents another example. According to the book, The Coca Cola Company conducted 200,000 taste tests and learned that New Coke tasted better than Pepsi-Cola, which in turn tasted better than the Original Coke. Yet, who won the marketing battle? The original Coke, supposedly the worst tasting of the three, is still in first place!

We believe what we want to believe.

Second Hand Perceptions

What’s even more interesting is that we make buying decisions based not just on our own perceptions, but the perception of others.

The book calls this the “everybody knows” principle. 

Everybody knows that Japanese cars are of superior quality compared to American cars. Right? 

• Do you believe that? 

• Do you believe it without ever having owned a Japanese car? 

• How about an American car?

I’ve never owned a Tesla, but my perception is that it’s a fantastic car. 

That’s Scary!

Law #5: The Law of Focus

The book suggests that a company can burn its way into a person’s mind by narrowing its focus to a single word or concept. 

For example, FedEx put the word “overnight” into the minds of customers by limiting itself to overnight package delivery.

In fact, according to the book, this is the ultimate sacrifice...limiting one’s product line. You can’t stand for something if you chase after everything.

Whether the result of a deliberate program or not, most successful companies (or brands) own a word in the mind of a prospect. When I discussed the Law of Leadership, I asked the following questions: 

• When you hear the word “cola”, what brand comes to mind first? I bet it’s Coca-cola. 

• What about search engines? I bet it’s Google. 

• What about hand sanitizers? Purell isn’t it?

It’s clear from the above that the above brands own these words in the customer’s minds.

Here are some other examples provided in the book:

Looking at the list above, it’s pretty amazing how long a company can own a word in a prospect’s mind. But of course, nothing lasts forever. We as investors must always keep an eye on this. Take Domino’s Pizza for example, their brand certainly doesn’t own the word “home delivery” any more, at least not in my mind. For me, that word is owned by DoorDash or perhaps UberEats. 

The War on Drugs (an aside)

This chapter ended with a really interesting paragraph on how Anti-drug campaigns have failed because of a lack of focus. The book argues that anti-drug advertising is all over the map and as a result, drug users do not have a single word that would “unsell” the drug concept.

On the other hand, both sides of the abortion topic have single powerful words, namely “Pro-Life” and “Pro-Choice”. The anti-drug movement however does not. The books suggests that since drugs cause all kinds of losses (of job, family, freedom, self-esteem etc), a program that focused on this and said something like “Drugs are for Losers” could have a very powerful impact, especially on the recreational user who is more concerned with social status than actually getting high.

Could the Law of Focus solve one of society’s biggest problems?

Law #6: The Law of Exclusivity

I won’t go into too much detail on this one. This law is essentially a corollary to some of the ones above. It states that two companies cannot own the same word in the prospect’s mind.

Wrapping Up

The book continues to be a fun and interesting read, although a bit repetitive at times.

It’s quite interesting to see how brands can own words in our minds. More importantly, how the perceptions brands create can in fact become our reality. But what’s scary is that other people’s perceptions can also become our reality. That is mind boggling to me.

Judging a company’s brand and marketing is subjective. But it seems to me that keeping in mind whether a company’s products, programs and services are in tune with the above “laws of marketing” can be an interesting addition to one’s investment process. 

As investors in Mavericks, I think this vantage point can be particularly interesting when evaluating emerging consumer brands.

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