It seems they are everywhere, iPods, Razrs, and Howard Stern. Brands with huge momentum and strength. And competing against them seems impossible. How does this happen?
Apple, Motorola and Sirius took three great ideas and then focused on them. They focused their resources, their marketing, their PR and their entire companies on these three ideas. They took products that represented a small percentage of their total sales but a large percentage of their future hopes and made them the essences of their companies.
Creating a big branding winner is not just good for one brand, but it creates a halo effect for the entire company. Success breeds more success.
Look at Apple Computer. The company has struggled for years with 3% of the personal computer market. Long considered to have a cooler and better product that the Wintel machines, they have been unable to make much headway against Hewlett-Packard and Dell.
Then along came the iPod, a new little music player product. So what did they do?
Apple put all of its chips on white. They put the entire company’s might behind the iPod. The majority of its promotion, advertising and PR dollars went to the iPod despite the fact it was initially an insignificant percentage of Apple Computer’s sales.
The result? The iPod is a runaway success and it’s leading a turnaround at the computer company itself. Apple sold 14 million iPods in the last quarter alone.
But despite 2005 being a sensational year, the iPod and iTunes together still only represents 39 percent of the company’s total sales. The other 61 percent of sales continue to come from computers, peripherals, software and services. The rest of Apple had greatly benefited from iPod’s success. Apple’s computer sales were up 26.8% over 2004. And today they have 4% of the PC market. The halo effect.
Yet look at how do most marketing dollars get spent at most companies? A little over here, a little over there, and some there. Most companies allocate resources across all of their brands. Taking all its eggs and putting them in one brand’s basket, strikes most marketing people as risky.
Not only that, putting all your eggs in one basket makes the brand managers with empty baskets a little more than angry. It takes a strong and determined leader like Steve Jobs to pull off such a strategy, but the rewards are clear. Focus delivers. More companies need strong leaders with the conviction to focus.
Look at Motorola. In the third quarter of 2005, the company shipped 38.7 cellphones. But of those 38.7 million phones, only 6.5 million were Razr phones, 16.8 percent of the total. Yet almost everywhere you look you see only see Razr being promoted; you might think it is the only product Motorola sells.
Sirius satellite radio did the same thing. It has come storming back from a slow start against market leader XM. How? Out of the 120 channels offered on the network, Sirius is only promoting only one, Howard Stern, the crass and controversial shock-jock from New York. Stern is not for everybody, half of the Sirius subscribers probably never want to listen to the channel.
Does Sirius offer other exciting programming? Absolutely. But the focus on Stern has generated enormous PR. The focus on Stern has created memorable advertising. And the focus on Stern had boosted subscribers from 660,000 in 2004 to 3.3 million subscribers today. Myself included.
What should your company do? Take a look at the brands in your stable and pick your best bet. Even if it is small, even if it represents 0% of today’s sales, put all your energy and efforts into making this one brand a big success.
Focus. Make your best horse a big winner and the whole barn will share in the glory.
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Posted by: Vita | March 2006 at 12:34 PM
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Posted by: Jim | March 2006 at 02:55 PM
I agree with the concept of focus, but there is one big caveat here - the brands you are talking about (Apple, Motorola) are corporate umbrella brands. The Apple iPod brand has a halo on the Apple Mac brand because they are both Apple, so supporting one can still support the whole.
For a company with multiple brands that share no strong corporate umbrella brand, that link is obliterated. Think Pantene and Pampers for example. No relation... putting a big effort behind Pampers will in no way halo onto Pantene. For a multi-brand company like P&G, or the Gap, or YUM, there can be a benefit to focus, but not the one you point out in your post.
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Posted by: Vikta | February 2006 at 12:44 AM
Laura,
Great article! I love seeing an underdog make such a great come back. Apple finally found their niche by marketing their products as a lifestyle. Owning an Apple means your hip, cool and creative. Meanwhile Dell simply competes on price. Dell wants to sell you a computer, Apple wants to sell you a lifestyle. No one in the industry has even touched on that.
Laura, another brand I would like to hear you give your analysis on is Target. I think they have done an awesome job differentiating themselves from Wal-Mart.
Love,
The Hotz(e)
Posted by: Paul Hotze | February 2006 at 01:40 PM
Hello Laura, great post about focus and like Darren already said it, it's so obvious.
The iPod was a new brand differentiator for Apple as well as RAZR for Motorola. Both examples have in common that it's a combination of corporate brand and a sub-brand. This makes it possible to actually focus on some or only one sub-brand to enhance the corporate brand. If your portfolio consists of many different brands which are not directly connected (most often seen in FMCG market), it isn't that easy anymore. Focusing on one brand means to leave the other brands on their own. Do you agree?
Nevertheless in times of small budgets or saturated markets it's necessary to focus. Then, the supported brands (which would be in your examples the different product categories) are the ones with highest sales. The exception of course are innovations who shall play a major role in sales in the future.
But then, why should a company have brands which aren't supported by activities (not only advertising)?
Posted by: Arnold Seefeld | February 2006 at 11:45 AM
The title "Apple put all the chips on white" is appropriate; As it is when playing some card games, until your strategy comes to comes fruition (which more often than not, takes longer than you had planned) you need enough money to stay in the game ("staying power").
Focus AND "staying power".
Posted by: ray | February 2006 at 01:28 PM
Great insight because it's so simple. Everybody knows that focus pays off. Focusing your stock portfolio can yield the greatest returns, focusing on your relationship can make a world of difference, focusing on your drive for golf can drop your handicap, and focusing on one brand can increase the bottom line.
I manage five world-leading brands and know that if we put our eggs into one basket, they'd hatch and continue to grow. Unfortunately, most companies are risk-adverse, so they spread themselves thin, protect against potential losses, and play it conservatively. If you want an example of a great brand that doesn't try to create new SKUs to capitalize on new segments, take a look at Red Bull. Two SKUs = over $1 billion in sales.
Posted by: Darren Contardo | February 2006 at 09:18 AM
Forget the losers, but them out to pasture. Focus all your resources on the winners.
You are right Mack so many companies we work with prop up the losers with the profits of the winners.
It is one of the great mistakes of buisness today.
Posted by: Laura | February 2006 at 05:49 PM
"Focus. Make your best horse a big winner and the whole barn will share in the glory."
Great quote Laura. There's so many companies that take the funds generated from a profitable division and throw the cash at a languishing area, which drags the entire company down.
Posted by: Mack Collier | February 2006 at 05:13 PM
Great article. If you look at Apple's commercial from super bowl in 1984. The woman running in the commercial wears a ipod. This realy shows that Steve Jobs knows exactly what's the next step for the company is.
Posted by: Jim | February 2006 at 11:56 AM
XM is struggling, they recently signed up Oprah to try and build some PR momentum, but I think it is too little too late. Plus as Stern has been telling everyone, Oprah will not be showing up for XM radio, her connection to Oxygen has done will to help that station. Stern is 100% behind the promotion of satellite radio and Sirius is 100% behind Stern. Oraph is 100% behind the Oraph TV show and Oprah magazine. Unless she is in the studio and doing a live show for 4 hours everyday like Stern forget her helping XM at all.
Posted by: Laura | February 2006 at 11:34 AM
I am going with Sirius and Howard. After Stern’s $500+ mil contract is up, nobody will remember XM Radio.
Posted by: Dan | February 2006 at 11:26 AM