Atlanta based Marketing Strategists Al & Laura RiesYou may have heard me refer to marketing strategist Al Ries, co-author of "Marketing Warfare" (with Jack Trout), and author of "Focus", "Origin of Brands" (co-authored by Laura Ries) and other great Marketing Strategy books. No one has "focused" my business thinking more than Al has. Here's an interview from Jan '05. It was prepared for the radio industry, but applies industry wide.
Jan 17, 2005
Dear Dave:
Great article.
Thanks for doing the interview and your interest in our concepts.
All the best.
Al
Al Ries
Ries & Ries
www.ries.com
AL RIES SPEAKS
by Zuma Dogg
With all the excitement surrounding the battle between AM/FM (broadcast radio) and constant new technologies like iPod/satellite radio/internet radio and convergent (multi-use) devices like cell phones with microwave ovens -- I felt it was time to give our buddy Al Ries a call from the Ries & Ries marketing strategy firm (he runs with his daughter Laura Ries in Atlanta).
Al and Laura have a thoroughly enjoyable new book called, "The Origin of Brands" which applies Darwin's theory of species evolution (how new species are created) to explain how new products and services evolve within the marketplace. (KEEP READING DJs!)
I grilled him for an hour about what it all means for the future and he did a great job of helping me sort out the reality from hype. (Certain stocks became clear in my mind which would be winners and losers. If nothing else, the new book is perfect for making stock evaluations.)
As far as I'm concerned, the book answers any and all questions regarding the future of all of these emerging technologies. All you have to do is apply these simple, common sense principals to whatever situation needs evaluating. (Of course I got to speak with Al for over an hour which kind of helps, too.)
The premise of the book (and foundation for this entire conversation with Mr. Ries) is: In the "great tree of life" new branches of a tree are created by the divergence of existing branches.
New species arise by the divergence of existing species. So how are new product and service categories created? By the divergence of existing product and service categories.
With that out of the way, time for some immediate gratification:
So what about things like iPod with Sirius satellite receivers, cell phones with MP3, camera, internet and whatever else they can jam in there?
To paraphrase Ries: A half-hearted yes, there will indeed be a market for each and every one of these convergence (multi-use)devices.
However, he strongly warns manufacturers like Palm (Treo) and Apple (iPod) against introducing such products. (That is unless you don't really care about profitabilty or stock value, that is.)
Just because all the hot-shot executives reading this "swear" by their Blackburry or cell-phone with flip-out keypad, doesn't mean everyone (enough people) will jump on board.
Al tells me he loves his convertible Corvette, but realizes not everyone is going to go out and get one for themselves.
And now for some super-instant gratification. The most important line from the whole book, and first thing to think about when evaluating all these new devices is:
"Things DIVERGE, not CONVERGE." (DJ voice: Thank you, good night everybody!)
Cars that fly, cars that float...you've heard the examples before.Especially relevant; Bill Gates' Web-TV.
Even he didn't have enough money to make that turkey fly because as much as the hype insisted: People didn't use their televisions as computer monitors. Sounded like a good idea, because convergent devices sound like fun. But the position at Ries & Ries is a firm, "products don't converge, they diverge.
(I guess that's why we still don't have that video phone I've been hearing about since I was five years old. I couldn't WAIT to get one!)
So things diverge. I force myself to have the discipline to stick to this theory now -- the same way I stick to that little card in Vegas that tells you when to hit or stick on Black Jack. (I hate sticking on 12, but it pays off in the long run.)
The problem with convergence devices: They may boost revenue for the company in the short-run, but you end up dragging the boat down in the long-run.
Why? The company invariably ends up losing focus (what got them to the top), losing efficiency and therefore ends up losing profitibility.
(For more on this concept, Laura Ries has a fantastic blog site: originofbrands.com.)
Let's apply this to Apple (Steve Jobs', not The Beatles'). They sure hit it
big with iPod. Let's examine. A "single-use device." The world's first "hard drive MP3 player." (So many Ries principals at work here.)
It's focused (single-use device), first in the minds of the consumer (based on word-of mouth/PR first, then followed-up with a creative ad campaign.) It's a new divergent product based upon Darwin's theory that the "Brands" book is based upon.
Everything's perfect, the stock is through the roof, everyone's getting rich. It must be time to screw it all up and hit on 12 when the dealer has a 2!
First of all, we already referred to the proposed new iPod/Sirius (convergent) device. So that will take a ton of money to develop, launch and advertise. I'm sure all this expense for a splinter, niche market will certainly be a drain on the company's profit margin.
But wait, there's more. Didn't you hear? There is a market out there for "flash MP3 players" (non-hard drive players with very limited song capacity) and Apple is jumping on this rinky-dink bandwagon.
All this is going to do is undermine the iPod brand in the long run the way the "cheap" Cimmaron automobile undermined the prestigious "Cadillac" luxury brand name.
No one wants to drive a small, cheap Cadillac. Remember this marketing oldie, but goodie: You can't occupy BOTH positions in the mind.
Apple should stay focused on iPod "hard drive" MP3 players and leave the less desirable, cheaper players to someone else. No kid wants to show up to school with a flash player when everyone else just got an iPod for X-mas. [I think time has proven this to be the case. What percentage of the market do "flash players" represent in August 2007?]
I'm sure people are saying, "But flash players are gonna be a big market!"
Well, BMW didn't start making razor scooters just cause that market got hot for a minute.
To summarize this portion, my prediction is: We'll all be walking around with Batman-style utility belts with all of our single use devices (cell, text messanger, Blackbury, satellite, MP3 player, portable game player and intravenise Viagra dispenser. (That stuff sounds like a lot more fun than the bunch of chemical anti-dotes Batman has to carry around.)
Now, the big question. What's going to happen to traditional AM/FM broadcast radio as they try to fight against the current technology wave? Mr. Ries assured me on the phone during our discussion, "No new medium replaces the old medium."
So once again, instant gratification: Yes, radio must evolve its programming, but don't over-react and panic. That's when you really screw things up drive things into the ground.
For example, Al reminds me when the TV first came out, they predicted the end of newspapers because everyone was going to read the paper on TV. Except The Ries' book wasn't out yet, so people didn't know that products "diverge," not "converge."
Since then, MTV (music video) was going to kill radio, VHS was going to kill movie theaters, internet was going to kill TV.
So relax terrestrial radio broadcasters, you'll still have an industry this time five years from now. However, the product will have to evolve the same way AM had to evolve from music to talk once FM came around.
AM broadcasters couldn't prevent the music audience from flocking to the then superior FM dial any more than terrestrial radio is going to be able to prevent listeners from flocking to the superior Satellite receiver. (Even with a $28 million dollar NAB ad campaign promoting the careers of Avril Lavigne, Ludacris and Hoobastank.)
What AM/FM radio needs to do, is figure out how to evolve its programming the way AM had to evolve from music to talk.
Or the way ABC, NBC, CBS & FOX had to evolve from less scripted shows to more reality shows -- to prevent further erosion to the cable networks.
I hope broadcast radio doesn't make the same mistake broadcast television made when reality TV hit.
NBC scoffed at reality programming at first because, "We have 'West Wing', 'Friends', 'ER', 'Law & Order' -- and people recognize quality programming
-- and no one wants to watch that silly reality garbage..."
So, they buried their head in the sand over the real issue, until they get clobbered, then try and play catch-up to win back the audience they lost to cable with 20 versions of "Fear Factor."
The idea of the NAB spending $28 million on a campaign designed to keep people from signing up for satellite (instead of focusing on evolving the product), just gave me a GREAT idea:
Maybe all the big record companies should spend $28 million dollars to try and prevent consumers from down loading music on the internet and having them stick to buying it in stores.
A very special thanks to Al and Laura Ries for helping me apply the principals of their new book, "The Origin of Brands" to the music industry. (www.ries.com, www.originofbrands.com)
Zuma Dogg
www.LACityNews.com
zumadogg@gmail.com
(310) 928-7544
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