Category Archives: Porter

The top 10 ideas anyone ever had for marketing (or why Apple doesn’t use a Twitter account)


If you plan campaigns, you’re likely awash in data, reports, presentations, requests, vendors, staff issues, email, deadlines and ideas. It’s all so damned complex. If only you had the right framework to coherently forge a path through it all.

Well, you do. Here are 10 of the greatest business frameworks we’ve discovered for planning business growth. We lean on one at least every day. Consider this a refresher on valuable logic tools to help you clarify your marketing strategy.

1. The Pareto Principle — The basis for understanding that in business, like life, not all things are created equal. Vilfredo Pareto was a late-1800s economist who noticed that about 20% of the population of Italy owned about 80% of the land. This “80-20 rule” occurs in most groups of resources, where a small fraction contribute the greatest value. About 20% of people at a party have 80% of the fun. About 20% of your customers give you 80% of your profits. Once you accept the tragically undemocratic fact that “not all customers or products or employees” are created equal, you can begin focusing on the smaller group that drives real value to your business.

2. Five Forces Model — Pan out to all of your business, and you face much more than just competitors. Michael Porter, business guru of Harvard Business School, has posited there are five forces in the business landscape: industry competitors whom you fight with daily; upstream suppliers; downstream buyers or customers; substitutes; and new entrants. You have to watch the entire landscape of these “five forces” to compete. Kodak, for instance, was blindsided by the “new entrant” of digital cameras that, despite Kodak inventing the technology itself in 1975, 30 years later made its old film business fade away.

3. Competitive Advantage — This was Porter’s second big idea (he wrote a book with this title) and while the term “competitive advantage” is tossed around today lightly as business jargon, what it really means is finding a profitable, sustainable position against the five forces above. Porter suggested there are four competitive advantage positions: on the customer side, you can go after (a) narrow or (b) broad targets, and on the product/service side, you can either focus on (c) lowest cost or (d) differentiation. Pick (a) or (b) and add it to (c) or (d), and you have a competitive plan. But you have to pick one spot; if you try to do everything, you end up “stuck in the middle,” the competitive version of warm porridge. Apple Inc. has a competitive advantage today in that it goes after a broad customer target with a clearly differentiated line of products. Walmart has a different focus, offering the lowest possible prices to a broad audience. Don’t kid yourself that speaking the words “competitive advantage” does the trick; you must focus your entire business on staking out a real competitive position.

4. Discipline of Market Leaders — This was an evolution of Porter’s competitive advantage concept by Michael Treacy and Fred Wiersema. These authors suggested there are actually three areas of competitive focus: Product innovation (think Apple); operations excellence (think Walmart or USPS, offering low costs due to efficient supply chains); and total customer solution (think ad agencies, who will do almost anything for clients). By “discipline,” Treacy and Wiersema meant your business needs the guts to stick to one of these strategies. You can’t build the most incredible product and drive down all costs and focus on incredible customer service at the same time. This explains why Apple, a product wizard, doesn’t have a Twitter account — it doesn’t need to worry much about fawning customer service.

5. Positioning — Moving to advertising, “Positioning” was the greatest brand book ever written. It grew out of a series of articles by Jack Trout in the late 1960s that noted consumers, awash in advertising, can only remember a few brands in any product category in their head. How many watch brands do you know? Hm, Rolex, Victorinox, Timex… unless you’re really into watches, you might not be able to name more than six brands. Consumers stack these few brands up on mental ladders, and a marketer who wants to capture a consumer’s attention must grab a “position” on these rungs. A classic example was Avis who in the 1960s chased car-rental leader Hertz by stating in its ads “Avis is only No. 2. We try harder.” The Coke-Pepsi marketing wars of the 1980s were a classic positioning battle. Political candidates constantly strive to “de-position” opponents. Positioning involves numerous tactics for grabbing mindshare or pushing competitors aside; if you haven’t read the slim book, go get it.

6. 1to1 Marketing — In 1993, former ad executive Don Peppers wrote a book with Martha Rogers that was the opposing viewpoint to “positioning.” Peppers suggested that customers, not products, should be managed, and thus the goal for marketers was to build a one-to-one relationship with each customer. Instead of market share, Peppers and Rogers wrote, businesses should go for “customer share.” They outlined an entire philosophy on how to do this, noting that different customers have different values to a business (Pareto’s old idea), and different customers need different things. The payoff is when a business learned enough about a customer to customize a product or service in response, thus locking in loyalty. This idea took off thanks to the new computer databases of the 1990s that held reams of information on customers, allowing marketers for the first time to interact with customers, record their history, and provide mass-customized service response. ( with its radical personalization emerged in this period.) The 1to1 theory infused the Customer Relationship Management software craze that led us to databases today. Peppers and Rogers missed the 2000s’ advent of social networks that changed the business-customer dynamic from one-to-one to many-to-one, but their ideas were ahead of their time.

7. Price Framing — Go to the movies this weekend and buy candy, look closely at the strange box, and you’ll see price framing in action. In 1980 Richard Thaler invented behavioral economics by publishing the paper “Mental Accounting Matters,” suggesting consumers are really bad at judging value, and so make mental accounting decisions in their heads that can be guided with “price framing.” This explains everything from product “sales” to Omaha Steaks packaged with mashed potatoes. If you see a dress on sale for $50 marked down from $250, you might jump to buy it … not considering the initial “$250” price point is an illusion. The clever retailer has simply given you a reference price of $250 to “reframe” your perception of the $50 real price. Cost savings, product bundling, and price obscurity are all tactics to reframe pricing to make it more appealing. That box of candy in the theater comes in an unusual shape for good reason: by “reframing” the packaging to obscure the price for the candy inside, the movie theater has made it hard for you to determine if it is a good deal.

8. Gartner Hype Cycle — The analyst group Gartner has built a practice around a simple idea: new technologies are met with increasing expectations, followed by a trough of disillusionment, until eventually we all settle down and realize the truth is somewhere in the lukewarm middle. If you had an iPhone two weeks after launch, kids would line up around the block to see it; now, it’s just another ho-hum phone in your pocket. Gartner taught us not to get too excited by new technology or media, but not to scoff too hard, either. Think of this next time someone tells you to buy a 3-D printer.

9. Lean Startup — A relatively simple but revolutionary idea from consultant Eric Ries, who says toss out the business plan and instead launch your business with rapid prototypes, fast feedback from customers in the market, “minimally viable products,” and an ability to “pivot” to new ideas that will really take hold. Ries posits that it is pure arrogance to assume your initial product idea is good, and instead you should include customers at every stage of product development to ensure success. Give them rough drafts; listen; change based on what they say. This clever idea seems logical until you realize how few businesses do it.

10. Whatever You Think — Let us know, we’re open to new frameworks, too.

So there you have it. Not all customers are created equal. There are more forces than just direct competitors at work. Your business needs to stake a clear competitive structural position, and your marketing must also capture a brand position in customers’ minds. You can play with pricing to influence people, and you should include customer or market feedback at each stage, especially early stages, of growth. And through it all, be careful about believing the hype.

It’s not an MBA, but it’s a start.

Why Apple isn’t green with envy

NY Times missed the mark today when it chided Apple for still having only 3 percent of the personal computer market — a failing, the Times suggests, given the iPhone buzz halo and Vista’s unpleasant idiosyncrasies. Microsoft messed the launch. Apple share ain’t climbing. The Times’ point: what gives?

Maybe it’s not PC market share Apple wants, but share of market entrant. Porter’s five forces model talks about competition as five pressures — direct competitors, downstream and upstream buyers and suppliers, substitutions, and market entrants. On the tilted table of technology adoption, where every gadget eventually slides into oblivion, entrants are what to watch for.

So, where is Apple looking? Follow the path of recent Apple design and you’ll see only four things: simpler mobility, interface, content distribution, and wireless. Untethering the masses from T1 lines and profiting off the passage of content into their pockets is Apple’s future; I don’t see a PC in my pocket soon.

Another way of looking at this is that Apple is investing in future market share, by setting up a parade of products that open the funnel for where consumers will be in 2009. They are not pushing desktops hard, just as they are not pushing horses and buggies.

Media planners or marketing directors might take note of this trend, and start testing at least 5 percent of their ad budgets on emerging internet or mobile advertising formats. The results today can be strong (SEM is still the lowest-cost lead generator in most industries), but you’ll also build a knowledge base about new formats for the future.

That way, when the wafer-thin glass Apple iScreen takes even more readers away from print publications and desktop PCs in 2009, your advertising strategy will be ready. (Watch for the iScreen here.)