The ALP and The 22 Immutable Laws of Marketing (part 2)

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The “marketing bible” The 22 Immutable Laws of Marketing by Al Ries and Jack Trout sets out marketing laws that the ALP routinely violates. The result of breaking these rules has seen dire consequences for this party: massive slump in support, a collapse in membership, policy drift and an inability to “cut through” in the media.

In my previous post, I covered the first five of the immutable laws. This post goes into rules six to fourteen. Many of these rules, like the earlier five, refer to each other. This demonstrates that you can’t follow, for example, only half of the rules but not the others. Success comes from following all of the 22 rules. Violating any of them risks failure or, at best, half-hearted success.

6. The Law of Exclusivity

Two companies cannot own the same word in the prospect’s mind

The Law of Exclusivity means that two companies (or parties) cannot own the same concept or policy category as another. The first company to own the word precludes anyone else from owning it. For example, when you think chocolate, you think Cadbury. The question “which bank” summons the answer “Commonwealth Bank”. Panadol owns “pain relief”. No amount of advertising, bar a massive shock, will change those associations.

In politics, as I wrote in the first post, two political parties can’t own the same policy category as another. The Liberals own “economic management”. Labor challenged this by adding “in the interests of working families” because Labor owns “workers”. Howard tried to undermine this with “battlers”. However, in each case, the war of position was not over direct ownership of the concept, but to capture a sub-set of the category. When the Liberal/Nations try to own “education”, it is laughable, because that is Labor’s word, and the same with “health”. Labor can’t own “national security”, because the Liberal/Nationals own it.

The ALP and the Law of Exclusivity

The ALP at the moment is intent of fighting for concepts, words and policy categories that it can never own. This is because of a misunderstanding of market research. Focus groups and polling say that voters want the government to be “tough on boat people” and to “protect our borders”. So the ALP dutifully produces policies and ministers make speeches using terms of “hard head, soft heart” and “we condemn people smugglers”, and come up with the Malaysia Solution.

This fundamentally violates the Law of Exclusivity: Labor can never own in the minds of voters the “tough on boat people” policy category. Voters will always think the Liberal/Nationals are tougher. Marketing (and politics) is a war of perception; it doesn’t matter whether Labor’s policies are better, it is how they are perceived. On areas that the Liberal/Nationals own, they will always own.

We need to find different policy categories or sub-categories; Labor needs to use its own language, not the language of the Liberal/Nationals.

7. The Law of the Ladder

The strategy to use depends on which rung you occupy on the ladder

The Law of the Ladder is a powerful rule in business and even moreso in politics. It is something the Greens Party have cottoned on to recently. Because all products are not equal, most people make their purchasing decisions based on a mental short-hand that Ries and Trout call the “ladder” – where on the product ladder are you located. Most people make a decision based on the ladder — they prefer the product or service on the top rung (that is, the brand that is the category leader).

Acknowledging your rank on the ladder is important because consumers (and voters) because most people make intuitive decisions based on your rung. There’s no point in pretending you’re the market leader if you’re second or third place, and people won’t accept it.

For example, Hertz is the world leader in car rental, with Avis coming in at number two. When Avis began a marketing campaign saying “we try harder”, it recognised its second place and as a result won a lot of customers.

When marketing, you need to market appropriately to your place on the ladder.

The ALP and the Law of the Ladder

There are lots of different ladders, for each issue category, and sitting over all of that is the polls and the election.

Labor is struggling with the Law of the Ladder because it did not win a majority of seats in the last election, yet is the government. In the mind of voters, it is not acting according to its “rung” placement. The wheeling and dealing in the 17 days following the election of the hung parliament in 2010 left a sour taste in the mouth of many people. Unfortunately, this is not a problem that Labor can easily combat, except by winning the next election.

However, a problem that the Rudd Government had was that it was the market leader, yet did not act like it. Rudd was a constant apologist for previous Labor governments, praised the economic record of Howard and Costello, and appointed Liberals to government and diplomatic posts. He acted in many ways like he was on the second rung in the voters’ minds, yet he was first.

Similarly, now Labor is second in the polls, it makes acting like we’re ahead difficult.

Of course, there are many rungs for many issues. And as Ries and Trout point out, marketing is about perceptions and positions, not products or quality. Your strategy must be based on accepting the run you occupy in the mind of the customer.

The Greens Party have shown they understand this, even if it is intuitive. They have accepted they are a minor party, and refer to Labor and Liberal/Nationals as “majors”. They stick mostly to policy areas where they are positioned as leader or second.

8. The Law of Duality

In the long run, every market becomes a two horse race

In mature markets are the typically only two major players. In desktop operating systems, there are two leaders, but lots of brands — Windows, Apple OS and then lots of little ones that no one’s really heard of. In soft drinks, there’s Coke and Pepsi, then lots of little brands. In shoes, there’re Nike and Reebok. In fast food, there’s McDonalds and Hungry Jacks.

The reason for this is that most consumers don’t have the mental space to manage scores of competing brands and find it easier in a stable market place to make a choice between two brands. As a market gets very mature, it will tolerate the presence of more than two players.  However, the top two will have the lion’s share of the market.  All other players are essentially in niche segments.

In most political systems, the same applies. Labor and Liberal, Labour and Tories, Democrats and Republicans. There are other parties (Greens, Liberal Democrats, etc), but they are bit players.

The two main players can be challenged or collapse. IBM was once synonymous with personal computers, but over time was successfully challenged by others like Dell and HP (and of course, Apple is still basically the number 2 player in the “computer” category). Similarly, a major crisis can dislodge a major player. Borders was once the number one bookseller in the world, but collapsed almost overnight due to debts.

Just because there’s duality, doesn’t mean the same two brands (or parties) will be there forever. (Don’t forget, the two main parties in Australia used to be the Protectionists and the Free Trade parties, and the Liberals and the Tories in the UK — then Labor & Labour came onto the scene.)

The ALP and the Law of Duality

This is one rule that the ALP benefits from at a meta-level. In a two party system, Labor benefits by being one of the two parties. However, when looked at from an issue category point of view (which often are changeable, immature “markets”), minor parties can compete. For example, the two leading parties on climate change are the Greens Party and Labor. The National Party competes with Labor in Victoria for the bush.

Labor is in trouble if it ignores the risk of being eaten by The Greens on multiple issue categories. They are aggressively positioning themselves in areas where it is just a Labor vs Greens contest, rather than a three-cornered race with the Liberal/Nationals. They are only focusing on niche policy areas and identity politics.  This is also why the Liberals won’t go near issues like gay marriage — it’s a war of positioning fought by Labor and the Greens Party.

While Labor benefits from this law, it is not guaranteed that it will be in the two-horse race forever. We’ve seen the Liberal/Nationals realise this in Queensland, where they merged. They’ve turned three-cornered contests into two. They vacated the field in strategic seats during the Victorian election, turning inner-city contests into Labor-Greens Party battles.

9. The Law of the Opposite

If you’re shooting for second place, your strategy is determined by the leader

When you’re number two, don’t copy number one. Do the opposite. The worst thing a secondary brand can do is copy the leading brand. Don’t be better, be different.

By positioning yourself against the leader, you take business away from all the other alternatives to No 1. If you are not the leader in a category but want to be a strong second, you need to position your brand opposite the leader (because as was explained in the previous rule, every market becomes a two horse race).

Ries and Trout use the example of Coke and the Pepsi (in the US). Pepsi used the advertising campaign of “taste of a new generation” to position itself against the market leader Coke, thereby targeting young people. If old people drink Coke and young people drink Pepsi, there is nobody left to drink other brands in the soft-drink category.

The key to this is to focus not on being better than your opposition, but to position yourself as first in your (new) category.

The ALP and the Law of the Opposite

I’ve banged on about this before, but Labor is a serial offender against the Law of the Opposite. Labor has spent years trying to emulate the Liberal/Nationals on key issue categories like economic management and national security. The 2007 election was notable for Rudd’s repeated statements that he was an “economic conservative”.

Similarly, relentless negativity against the opposition won’t promote your product. The obsession over the last twelve months of Labor focusing on Tony Abbott has meant wasted time talking about the other brand, rather than building Labor’s own. This is not to say “don’t criticise your opponent”, but do so in a way that talks up your own brand. Labor did this well when focusing on working families, and when Rudd targeted Malcolm Turnbull over climate change, positioning Labor as the party for action (the “greatest moral challenge”) and Liberals as deniers. Labor’s positives were portrayed favourably to contrast against the Liberal/Nationals’ negatives. Abbott jettisoned the Liberal/Nationals from the climate change issue category (which Howard had got them into in 2007), thus leaving the fight between Labor and the Greens Party.

On refugees, Labor violated the Law of the Opposite, by trying to be tough on border security, by chasing the banner of good economic managers, by obsessing over budget surpluses, and so on — all categories and words that Howard and the Liberal/Nationals own.

The enervating effects of Labor’s violation of this law are apparent in two areas. Firstly, it makes Labor ambiguous in the minds of voters. The old saying “why vote for Liberal-lite when you can vote for the real thing” is true. Furthermore, it opens up space for third-parties to occupy the ground Labor has given up. This explains the rise of the Greens Party. It also explains the inability for Labor to communicate.

Secondly, it has seen Labor’s membership collapse. Labor members join to participate in a party that stands for making Australia a more progressive country. Labor has its own unique language, history, traditions, culture and policy. Underpinning this is the idea that “Labor reforms from government” — but those reforms must be Labor reforms, not Liberal/National reforms. The cognitive dissonance created by chasing the Liberal/Nationals means that Labor members and activists are unable or unwilling to defend Labor or remain members.

10. The Law of Division

Over time, a category will divide and become two or more categories

The Law of Division means that over time, large categories will segment into smaller categories. Trout and Ries use the example of the “car” category. In the early 20th Century, there were only a few models of cars. However, over time, the category divided into “small cars” “luxury cars” “sports cars” “pick up trucks” “hybrid cars” and so on. Similarly, when computers were first invented, there were only “computers”. Now, there are “laptops” “tablets” “mainframes” “desktops” and “supercomputers” (and more). In television, we once only had a few television stations. Now we have scores of digital and cable TV stations in Australia.

Why is this important in marketing? Because it allows brands to get into new categories as soon as possible and become the leader. For example, Apple has been languishing as secondary brand of computers until it exploited the new segment of “tablets” with the iPad. Although there were lots of makers of tablet computers, it was still a young, undeveloped market, and so allowed Apple to quickly grab first place.

A piece of advice that Ries and Trout emphasise is that when a brand extends to a new category, it is often wise use a new brand. This is because the original brand (if it is a leader) may be associated with the old category as a whole. Going to a new category can create confusion amongst customers. For example, when Toyota expanded into luxury cars, it created the Lexus brand, on the basis that it knew no one wanted to pay $60,000 for a non-prestige brand associated with small, cheap cars. When Volkswagen tried to expand from small cars in the US to the big car market, they not only failed (because no one associated large cars with the maker of the VW Beetle) but it also damaged their original market.

The ALP and the Law of Division

The ALP has shown in the past that it can exploit issue category division — and I’ve already discussed how it used “working families” to get into the lead for “good economic manger for working families“. Labor also “owned” the environment issue category for a generation under Whitlam and Hawke/Keating — until the Greens Party moved into sub-categories like “conservation”, “forestry” (and more recently, identity politics).

Similarly, the “health” category is divided, with the sub-category of “disability” finally emerging as an important issue in the last election. Labor was able win leadership in that category, is delivering major successful reforms in this area, and the disability sector recognises this leadership.

There is a salutary lesson for Labor. Issues are only going to get more fragmented. Labor needs to ensure that it expands to new issue categories that make sense for its existing areas of strength. There are some areas that Labor shouldn’t get into — long costly, pointless wars like Afghanistan. Similarly Labor should avoid fragmenting into two many disparate issue categories. There’s no point in being a big fish in a small pond — or a leading party on an issue that only a small number of voters care about. (This is where the Greens failed in the recent Victorian election; they were narrow-cast to a minority on small niche-issues.)

11. The Law of Perspective

Marketing effects take place over an extended period of time

Marketing is a long game, and short-term tactical gains can lead to long-term pain. Ries and Trout use many examples of brands that pursue short-term goals to their long-term failure.

For example, Donald Trump was man of the moment when he added his name to anything the banks would lend him money for — condos, casinos, airlines, golf courses, shopping centres and more. He was lauded as a success story by the financial media. However, after a few years, he was saddled with $3.5 billion in debt and filed for bankruptcy protection.

The Law of Perspective means that marketing should pursue the long game. Many companies and brands try to move products by holding sales. While sales do move products in the short term, excessive sales lead to consumers undervaluing the product and brand, and results in them never buying the product at full price (since they know they can just wait for another sale).

The ALP and the Law of Perspective

Labor has had scores of tactical wins this year over the Liberal/Nationals — most spectacularly with the change of speaker to Peter Slipper from Harry Jenkins. This was an undoubted tactical victory, but simply reinforces the idea in the minds of voters that Labor only cares about politics not governing.

Marketing is a battle of perceptions. The Malaysia solution was seen as a quick fix rather than a considered policy. The repeated compromises that Labor has made on headline issues, like the mining tax back-down to the mining industry, reinforces the idea that Labor makes decisions on the run, rather than having a long view in the national interest. Rudd’s retreat on climate change and dropping the CPRS after the breakdown at Copenhagen is another example of a short-term tactical decision that caused long-term damage to Labor.

12. The Law of Line Extension

There’s an irresistible pressure to extend the equity of the brand

The Law of Line Extension is the inexorable move towards putting your brand into more and more market categories. This ultimately leads to loss of sales in the original product, declining market share and confusion in the mind of the consumer.

Simply put, the Law of Line Extension says you shouldn’t take one successful brand and try to put it on products in another category. In the long-run, it damages both brands. For example, in the US, Coke tried to get into the clothing market, by producing a range of Coke-branded clothes. For several years, this did very well, but then the trend ended and Coke was left with millions of dollars worth of stock that it couldn’t sell. Dell is well known for making computers, but when it tried to get into Dell-branded smart-phones, it spent several years and millions of dollars and failed, shutting down its smart-phone division.

Politically, more is not better. We saw this with the recent election of Liberal/Nationals governments in NSW and Victoria, where Baillieu and O’Farrell didn’t release policies in a range of important issues. They kept their line focused on areas where Labor was weak (trust in NSW, delivery failures in Victoria) and where they were strong (perception of economic management).

The ALP and the Law of Line Extension

Labor seeks to govern for the majority, rather than narrowly play to a minority of voters. Unfortunately, you can’t be all things to all people. While Labor has successfully (tactically) pursued a widening group of swing voters in non-traditional areas and electorates, this has been to the long-term detriment of the Labor brand.

Labor focused on the “Middle Australia” of mortgage holders, small business people and voters with no traditional commitment to Labor. This won Labor a bunch of seats, federally and at a state level. However, in order to keep those seats, Labor alienated a lot of traditional voters and abandoned positions that long-term supporters cared about.

As the next Law explains, Labor needs to narrow its focus to build a leading position in the mind of the voter. It is better to be strong in a few leading areas, than weak across the board.

13.The Law of Sacrifice

You have to give up something in order to get something

The logical follow-on of the Law of Line Extension is the Law of Sacrifice, which says that you need to reduce your product line rather than expand it. Ries and Trout argue that winning strategies see companies focus on a single category, word or product. The main example they use is Federal Express in the US.

FedEx sacrificed the large package delivery market and aggressively went for the overnight delivery market. They built up a strong brand recognition for this market — and they “owned” the concept and category of “overnight”. This turned them into a massive business. When they then tried to get into the world-wide delivery market, they lost market-share and lost a lot of money. There are many other examples, for example in the clothing market — where successful brands focus only on particular sub-category. Nike makes only sports clothes (not formal wear); the Gap makes casual clothing; Armani makes only high-fashion, and so on.

The Law of Sacrifice is the corollary to the Law of Focus, but takes it further. It says to be successful, you need to sacrifice in three areas: product line, target market, and constant change. Successful brands focus on only a small number of products. They focus on a specific target market. And they resist the temptation to change strategy every financial year.

The ALP and the Law of Sacrifice

Labor’s electoral strategy has been in violation of the Law of Sacrifice. It has been an “all things to all people” strategy; a compromise strategy trying to please two widely divergent groups at once.

Look no further than the Murray Darling Basin plan that was announced recently by the MDB Authority. Led by a former Labor minister, it tried to chart a middle path between the competing demands of the irrigators and conservationists. On the one hand, farmers wanted the bulk of the MDB water for their crops; on the other, conservationists wanted the bulk of water for environmental flows. The compromise pleased no one and in fact, simply angered both.

Labour in the UK broke the Law of Sacrifice when it became seen as pandering to the City and big business, while at the same as introducing strong reforms like the minimum wage and paid parental leave. The incongruity exploded with the loans for peerages scandal, which damaged Labour’s perceptions in both the City and its traditional working-class constituency.

14. The Law of Attributes

For every attribute ther is an opposite, effective attribute

The Law of Attributes says that secondary brands shouldn’t copy the leader. They own the category’s leading words. Ries and Trout advise, instead, to own the opposite word. If Microsoft owns “enterprise”, then Apple owns “designer”. If IBM owns “big” (super computers) then Dell owns “small” (personal computers). The leaders have positive, successful attributes associated with their product or service.

If you end up emulating the winning attributes of the opposition, then you’ll fail. They own those attributes in the mind of the consumer.

Of course, not all attributes are equal. Going after attributes that are too niche, or are negative, obviously won’t work.

The ALP and the Law of Attributes

Labor needs to recognise its successful, powerful attributes it has, and not seek to emulate the Liberal/Nationals.

A good example of Labor’s failing in the Law of Attributes is the debate on uranium mining and export to India. Labor’s attribute of internationalism was a central plank in Labor’s history — establishing the United Nations, signing up to international treaties like Kyoto. We made our name on the world stage through our stellar success with multilateral negotiations on trade and whaling. Labor has always been a principled party and its consistency has gained Labor enormous international respect. We have always opposed the nuclear industry in Australia, and advocated nuclear disarmament.

The incremental steps towards greater acceptance of nuclear energy and uranium mining violates this attribute — and creates confusion for voters. A far better strategy (short of a principled opposition to uranium mining and nuclear energy altogether) would be to wholly embrace the nuclear industry. While this risks “copying” the Liberal/Nationals, it would at least be consistent — and Labor could position it as a solution to climate change (which it is not), which would be a way to tap into existing Labor issue categories.

It is also worth pointing out that the Law of Attributes in a political sense relies on consistency. The Liberals hammered home their primary positive attribute for a decade: “good economic management”. Labor under Rudd (except for a few periods on reconciliation, climate change and health in 2009/10) highlighted a dizzying array of political attributes. During the election, when our main slogan was “Moving Forward”, it was jettisoned (after Press Gallery mocking) after only a week or two. Under Gillard, the problem has been trying to emulate Liberal/National attributes on refugees, and the surplus/economic management. The obsession with “announceables” and the desire to feed the chooks meant that Labor never highlighted its own core, positive attributes.

My next post will cover the remaining Immutable Rules. In the mean time, it’s worth pointing out the warning that Ries and Trout give at the end of their book, which is that much of the advice in their book runs counter to corporate culture and deeply ingrained attitudes to selling products. Most corporations are obsessed with “benchmarking” (the practice of analysing the competitors’ products and services to get industry “best standards” and improving your own product to match or exceed those standards). Most corporations encourage brand extension. Advertising agencies continually want to try new things or appeal to more and more customer segments, rather than follow the Law of Focus.

The same attitudes exist in the ALP. Labor’s campaigning and electoral culture is stuck in a rut, and many decision makers are fixated on tactical victories and “winning” the evening news. There is a weariness to anything long-term, of repeating the same key message over and over, and pressure from all sides to have a policy for every occasion.

A good example of Labor’s unwillingness to learn and adapt is the paper written by David Peebles.

Marketing the ALP

Back in 2005, David Peebles wrote a paper called Marketing the ALP (download it here). While he uses buzz words like “strategic marketing” and “market intelligence” (explaining why few people would have read his paper), many of the conclusions and recommendations he makes are spot on. His key point, which is made in The 22 Immutable Laws of Marketing, is that the “core product” (the Labor’s values) must be aligned to the “tangible product” (the leader, the policies, the candidates). A disconnect between these things creates a credibility gap amongst voters.

I encourage you to read through Peeble’s paper and reflect on the last 12 months, compared to 2007-09.

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