Diamond

“When you expand your brand, you weaken your brand”

laura visual hammer

Laura Ries is a leading marketing strategist, bestselling author and television personality. In 1994, Laura founded Ries & Ries, a consulting firm with her father and partner Al Ries, the legendary Positioning-pioneer. Together they consult with companies around the world on brand strategy. With Al, Laura is the co-author of five books on branding that have been worldwide bestsellers. Her first solo book was Visual Hammer. Her latest book Battlecry was published in September 2015. In this interview she speaks to Vivek Kaul.


In the foreword to your new book Battlecry, Al Ries writes that “over time, companies drift sideways. They get into many different businesses and lose their focus.” Can you give us a few examples.

There are so many, but here are a few. Yahoo was the leading search engine, at one time worth $120 billion on the stock market. Then Yahoo turned itself into a “portal” by adding a host of new services. Yahoo Mail, Yahoo Games, Yahoo Groups, Yahoo Pager, etc.
Those additions allowed Google to move in and dominate the search market. Today, Yahoo is worth only $29 billion on the stock market and most of that value is due to its investment in Alibaba stock. (Google is worth $428 billion on the stock market.)

Any other examples?

Dell was once the largest maker of personal computers with 17 percent of the global market. Today, Dell has fallen to third place with 13 percent. Dell stock once sold for $60 a share. Two years ago, was Dell bought out by a private-equity firm for $13.75 a share.

What caused Dell to collapse?

Expansion. Dell once sold computer direct to businesses. That was it. Then Dell started selling to the consumer market, including such products as television sets, digital audio players, computer printers and smartphones. The company also made many acquisitions in such areas as storage, services, data centers, security, virtualization, networking and software. In the three years from 2009 to 2012, Dell spent $12.7 billion on 18 acquisitions.

IBM, General Electric and a host of other companies have tried to expand their businesses by introducing many new products and services. Today, these and other companies have gotten smaller, not larger.

Why does this happen?

Because when you expand your brand, you weaken your brand.      

How do you correct this mistake at the branding level?

First of all, a company should narrow its focus so it stands for something. Dell once stood for “Personal computers sold direct to business.” What does Dell stand for today? Nothing. As a result, Dell has to sell its products and services based on low prices.

Years ago, Dell had a powerful slogan. “Direct from Dell,” a slogan that implied that companies could save money by buying their PCs from Dell’s website. Furthermore, the slogan was memorable because it used “alliteration,” one of the five techniques mentioned in my Battlecry book that can increase memorability.

What is Dell’s slogan today?

“Better technology is better business.” That’s a generic slogan that could apply to any company.

Why is a narrow product line better than a broad product line? Because a narrow product line is needed to build a powerful brand.

Can you give us an example?

Take Subaru, a Japanese automobile brand. In the American market in the year 1993, Subaru sold 104,179 vehicles, but the company lost $250 million on sales of $1.5 billion. So a new president was hired. The new president found that 48 percent of Subaru’s sales were four-wheel-drive vehicles and 52 percent were two-wheel-drive vehicles.

So what did he do? He decided to focus on four-wheel-drive vehicles only. Sales declined the first two years, but then they took off. From 104,179 vehicles in 1993 to 515,693 vehicles in 2014, an increase of 393 percent. (The total automobile market in those 21 years increased only 19 percent.) In 1993, Subaru was the ninth-largest Japanese vehicle brand in the American market. Today, Subaru is the fourth largest, trailing only the big three: Toyota, Honda and Nissan.

So what is the moral of the story here?

It’s hard to find cases like Subaru because most brands are taken in the opposite direction. Companies expand their brands; they don’t contract them. That’s logical, but that’s not good marketing strategy.

Why do companies like formal words in their marketing campaigns? You recommend colloquial expressions. Why? A few examples would be great.

Formal words like “motion picture” sound important. But consumers invariably use shorter words like “movies.” Or “TV” instead of “television.” Or “SUV” instead of “sport-utility vehicle.”

One of the most-famous charities in America, organized by the United States Marine Corps, collects toys for children at Christmas time. Instead of calling the charity “Toys for Children,” they called the charity “Toys for Tots,” a colloquial expression that is also alliterative.

You also talk a lot about abstract words. Can you tell us a little bit about that and how they hurt a marketing campaign?

You have two brains. A left brain which handles words and a right brain which handles visuals. The right brain is also the site of your emotions. There are also two kinds of words, abstract words and specific words. “George Clooney” are specific words. “World-famous movie star” are abstract words.

So?

Both abstract and specific words are processed in the left brain. But specific words like George Clooney also conjure up images in your right brain, the emotional half of your brain. Emotion is the biggest, single, memory stimulant. What events do you remember the most? The day you graduated from college. The day you got married. The day you had your automobile accident. These “emotional” events are also visual. You can never forget them. That’s why slogans using specific words are much more memorable than slogans using abstract words.

Can you give us an example?

“The ultimate driving machine” made BMW the world’s largest luxury-vehicle brand. BMW could have said “The ultimate performance machine,” a broader and more inclusive slogan.

But “driving” is a word that can be visualized. (Two hands behind the wheel.) But “performance” cannot.               

What is the difference between slogans that consumers remember and the ones that they don’t? How is related to the concept of Battlecry?

Two things make a slogan memorable: Money and memory-enhancing techniques. If you have enough money (and enough time), you can make any slogan memorable. “Just do it,” the Nike slogan, is memorable because Nike has spent billions of dollars to promote it over the past 27 years.

But most companies don’t have the resources of Nike. Nor do they have the time. What can they do?

They need to consider one of these five memory-enhancing techniques.

(1) Rhyme. Folgers became the No.1 coffee brand in America by focusing on breakfast with the slogan: “The best part of waking up is Folgers in your cup.”

(2) Alliteration. M&Ms became a leading candy brand by focusing on a feature of the brand with the slogan: “Melts in your mouth. Not in your hands.”

(3) Repetition. Federal Express, an air-cargo carrier, entered the American market to compete with the market leader, Emery Air Freight. FedEx (the current name of the company) decided to focus on overnight delivery. They could have said, “The overnight carrier.”

Instead, they used repetition to create memorability. “When it absolutely, positively has to be there overnight.” Within a few years, FedEx became the leader in the category.

(4) Reversal. Secret became the leading antiperspirant/deodorant for women with a simple reversal slogan: “Strong enough for a man, but made for a woman.”

(5) Double-entendre. This is perhaps the best way to create a memorable slogan. The two meanings contained in a single slogan oscillate back and forth in your mind, thereby creating memorability.

Can you give us an example?

“A diamond is forever” is a typical example. A diamond (the hardest substance known to man) can presumably last forever. A love symbolized by a diamond can also last forever, too.

You write: “Apple is an enormously successful company…But it wasn’t because of abstractions like “Designed in California”.” What is it that you are trying to say here?

Even successful companies can fall into the trap of using grandiose, abstract words instead of down-to-earth specific words. Apple’s “Designed in California” campaign had exceptionally-low viewer ratings and was discontinued within a year.

Three successful brands made Apple the world’s most-valuable company. And they all used specific words or concepts in their introductions.

The iPod: “A thousand songs in your pocket.”

The iPhone: “The first touchscreen smartphone.”

The iPad: “The first tablet computer.”

Yet when Apple introduced the Apple watch, the company did not try to position the brand with specific words on concepts. Many people, including me, think the Apple watch will not turn out to be nearly as successful as the three brands that came before it.  A sign of trouble ahead: Apple regularly provides data on iPhone sales, but refuses to disclose Apple watch sales.

Why are companies in love with the word “innovation”?

“Business has only two functions,” wrote Peter Drucker, “Marketing and innovation.”

Innovation, like many other abstract words, is both important and useless. Important in business and useless in marketing.

Inside a company, management should focus on innovation. Long-term, a company cannot be successful unless it is innovative. When it communicates to prospects on the outside, however, it should forget about innovation. That’s inside-out thinking. Instead, companies should practice “outside-in thinking.” Start with the mind of the consumer and try to fill an open hole in the mind. “Innovation” is a typical abstract word that has no real meaning for consumers. Instead, a company should look at its innovative product and try to express that innovation in specific words like “The first touchscreen smartphone.”

But that doesn’t seem to be happening…

Many, many companies, however, continue to try to pre-empt “innovation” in their marketing slogans. Some recent examples:
ASUS: Inspiring innovation. Persistent perfection.

Bosch: We bring innovation.

Firestone: A tradition of innovation.

Ford: Driving American innovation.

NEC: Empowered by innovation.

Nissan: Innovation that excites.

Siemens: Global network of innovation.

Toshiba: Leading innovation.
It’s highly unlikely that consumers will associate the word “innovation” with any of these companies. They will, however, associate “innovation” with Apple because Apple had launched innovative products with specific slogans.

How can a slogan provide protection from future competition?

A slogan can build a brand. And a strong brand is the best protection a company can have from future competition.

How do you build a brand that will last a lifetime?

There are four critical steps.

Step one: Be first in a new category. Coca-Cola, introduced in 1886, was the first cola. It’s still the leading cola today, 129 years later.

Step two: (Which isn’t a step at all, but it’s the most important thing you can do.) Don’t line-extend the brand. Keep the brand focused on its category. If you want to introduce another product or service, use a different brand name.

Step three: Create a slogan that communicates your leadership. Coca-Cola is widely known as “The real thing.” That’s the slogan the brand should be using because it communicates the fact that Coca-Cola is the original, the authentic cola.

Step four: Hammer the slogan with visual hammer. In Coca-Cola’s case, it’s the contour bottle which the brand has been using extensively.

You just talked about a visual hammer. Can you explain that in a little more detail?

The objective of a marketing campaign is to “own a word in the mind.” But the best way to own a word is to find a visual that can hammer that word in the mind. Marlboro was the first cigarette targeted to men only. But to drive that idea in the mind, Marlboro used a cowboy. The cowboy is the visual hammer that made Marlboro the world’s best-selling cigarette.

Corona beer is the only Mexican brand that has made Interbrand’s annual list of the 100 most-valuable brands in the world. How did Corona achieve this? With a lime. When Corona was introduced in the American market, the importers insisted that the beer be served with a lime on top of the bottle. (America is a lemon country. Mexico is a lime country.) The lime communicated the fact that Corona was the authentic Mexican beer.

The interview originally appeared in the Forbes India magazine             

Chidamabaram didn’t start the rupee fire, but India is burning because of it

rupee
Vivek Kaul
P Chidambaram, the finance minister, made the routine let’s not get worried statement, over the rupee’s recent fall against the dollar.“We are watching the situation. RBI will take whatever action it has to take. We will (do) whatever has to be done…My request is you should not react in panic. It’s happening around the world,” he said.
This was something that was reiterated by Arvind Mayaram, secretary of the department of economic affairs, in the ministry of finance. “No, I don’t think the government needs to take any measures…We are watching the situation closely…If you see weakening of all currencies vis-a-vis the dollar, the rupee is also not unaffected in that sense…this panic in the market is unwarranted.”
A finance minister and his bureaucrat are expected to defend a falling currency. And yes, it’s true a lot of currencies have lost value against the dollar recently. But does that make the pain any lesser for India? Are there no reasons to worry as Mayaram wants us to believe?
Chidambaram’s “it is happening around the world” argument can be tackled with a simple analogy. Let’s say one of your neighbours starts a fire by mistake, which eventually spreads to your house. What do you do in such a situation? You try and stop the fire from spreading further, rather than sitting and blaming your neighbour for it or saying that I should not panic because I did not start the fire. Irrespective of where the fire started, the damage is yours, if you do not work towards putting it off.
Even though the rupee is falling against the dollar because of certain actions taken by the Federal Reserve of United States, it is clearly damaging India.
A depreciating rupee means that India has to pay more in rupee terms, for its oil imports. The price of the Indian basket of crude oil was at around $98 per barrel at the beginning of June.
It rose to $104 per barrel on June 19, 2013. On June 20, 2013, it fell to $101.8 per barrel. The rupee during the same period has fallen to Rs 60 to a dollar(Rs 59.75 as I write this) from around Rs 56.5 at the beginning of .
What this means is that India’s oil import bill has gone up in rupee terms. If the government decides to pass on this increase to the final consumer in the form of an increase in the price of diesel, petrol and kerosene, then it will lead to inflation or higher prices.In fact CNG prices have already been hiked in Delhi by Rs 2, because of a weaker rupee.
If it decides to take on a part of the increase then it means greater expenditure for the government. A greater expenditure in turn means a higher fiscal deficit for the government. Fiscal deficit is the difference between what a government earns and what it spends. A higher fiscal deficit means that the government has to borrow more to finance its expenditure and this leads to higher interest rates, which holds back economic growth.
Coal is another big import item. With the rupee losing value against the dollar the cost of importing coal is going up. Coal in India is imported typically by private power companies to produce power. The government owned Coal India Ltd, does not produce enough coal to meet the needs. The Cabinet Committee on Economic Affairs recently decided to allow private power companies to pass on the rising cost of imported coal to consumers.
This will lead to a higher cost of power, which will add to inflation. As Anand Tandon writes in The Economic Times “Inflation at the consumer level will start hotting up in the third quarter of the fiscal year as increases in power and fuel cost work their way through the system.”
A depreciating rupee will benefit Indian exporters, or so goes the argument. As rupee loses value against the dollar, an exporter who gets paid in dollars, gets more rupees, when he converts those dollars into rupees, thus boosting his profits.
This argument doesn’t really hold. The Economic Times quotes Anup Pujari, director general of foreign trade (DGFT), on this issue. “It is a myth that the depreciation of the rupee necessarily results in massive gains for Indian exporters. India’s top five exports — petroleum products, gems and jewellery, organic chemicals, vehicles and machinery — are so much import-dependent that the currency fluctuation in favour of exporters gets neutralised. In other words, exporters spend more in importing raw materials, which in turn erodes their profitability.”
The other thing that seems to be happening is that in a tough global economic environment, buyers are renegotiating contracts with Indian exports as the rupee loses value against the dollar.”The moment the rupee falls sharply against the dollar foreign buyers try to renegotiate their earlier deals. As most exporters give in to the pressure and split the benefits, the advantages of a weak rupee disappear,” Pujari told The Economic Times.
What this means is that a weaker rupee is unlikely to lead to higher exports. This means that the trade deficit or the difference between imports and exports will continue to remain high, which can weaken the rupee further against the dollar.
In fact, a depreciating rupee has rendered nearly 25,000 diamond workers in Surat jobless, reports The Times of India. “The depreciating rupee has resulted in nearly 1,200 small and medium diamond unit owners in shutting shops as they are unable to purchase rough stones whose prices have touched an all-time high. This has led to at least 25,000 workers being rendered jobless since last Thursday,” the report points out.
The rupee could have fallen to a much lower level against the dollar, but it did not. This is primarily because the Reserve Bank of India(RBI) has been defending the rupee, by selling dollars from its foreign exchange reserves, and buying rupees.
But the question is till when can the RBI keep selling dollars? “Foreign exchange reserves are barely sufficient to cover seven months of imports — the lowest it has been in the last 15 years. As a comparison, the other Bric members have 19-21 months of import cover,” writes Tandon. According Bank of America-Merril Lynch, the RBI can sell up to $30 billion to support the rupee.
The RBI cannot create dollars out of thin air, only the Federal Reserve of United States can do that.
Given this, there are reasons to worry. And yes, the Chidambaram’s UPA government did not start this rupee fire, but that does not mean that India is not burning because of it.
The article originally appeared on www.firstpost.com on June 25, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek) 

Valentine Day’s alert: Why diamonds are not a girl’s best friend

 valentine
Vivek Kaul
“So let’s watch Gentlemen Prefer Blondes,” she said the other day.
Knowing her taste in movies did not go beyond Salman Khan beating up the baddies, I was left wondering why did she suddenly want to watch a nearly 60 year old Hollywood film? But then her statements could be disguised questions at times and so I thought its best not to cross question.
“Yes, sure why not,” I replied. “Let me get the DVD out.”
As I tried searching for the DVD, it suddenly occurred to me, why she wanted to watch the movie. The movie had the sexy Marilyn Monroe crooning “Diamond’s are a girl’s best friend” and Valentine’s Day was round the corner. So it was her idea of giving me a hint about the stone she badly wanted.
“Well, I really can’t find the DVD,” I said. “Guess you must have put it away when you cleaned a few weeks back.”
Not the one to give up so easily “let me look for it,” she said, and found the DVD in a few minutes.  And at that moment I thought it was best to get to the point straight away.
“So you really want that stone?” I asked.
“Don’t call it a stone, dear,” she replied. “It’s a crystal clear white diamond which is forever.”
“Guess you have been reading the entertainment supplements of newspapers a way too carefully over the last few days.”
“Yes I need to get my sales pitch right,” she replied rather blatantly.
“But you know na there are problems with diamonds?”
“What problems?”
“Well, for one they are very easy to buy but very difficult to sell.”
“Now since when did something which is easy to buy become a problem,” she replied, ignoring the more important part of the statement.
“Selling gold or silver is very easy. But most jewellers do not buy back diamonds that they did not sell. Also, even if they do decide to buy they offer around 75-85% of the prevailing price.”
“Oh, is that really the case?”
“Yes. You see ascertaining whether a diamond is really a diamond is not a cakewalk and is an expert’s job, especially in a day and age when artificial diamonds look as good as the real thing, if not better. This is something that cannot be easily ascertained as is the case with gold.”
“So?”
“Hence, the easiest way for a jeweller to operate is to simply not buy anything that he hasn’t sold. At times jewellers agree to buy diamonds only if the customer agrees to buy a diamond of higher value from them.”
“So what is the problem?” she asked, not getting the point. “We can always buy a diamond of a higher value. I mean we need to move up in life.”
Now that was getting into the realm of the deeply philosophical. “Since when did moving up in life become equal to buying diamonds?” I wondered. But then I wasn’t the kind to give up so easily and decided to continue with more logic.
“Also, precious metals like gold and silver have a daily price, which is easily available. In fact these days most newspapers publish the daily price of gold/silver right under or around their mastheads. So when you buy gold/silver chances you are likely to be offered a price which is around that daily price,” I explained.
“Hmmm!” she said in a very non committal tone.
“Diamonds on the other hand have no standardised pricing, though there is something known as the Rapaport Report which is issued to jewellers. This puts out the price of diamonds based on 5Cs of a diamond i.e. carat, , clarity, colour, cost and cut. But this list is not available to an average customer. And more than that grading diamond becomes very difficult once they have been cut and set in jewellery. The best time to grade a diamond is when it’s lose.”
“But what is the point you are trying to make?” she burst out, sounding very hassled.
“Well, the point is you really don’t know what price you are going to get for a diamond when you try to sell it.”
“But who wants to sell it?”
“I’ll get back to that question. Let me explain to you how the diamond trade actually works.”
“Okay, go on,” she replied.
“The diamond trade has had a monopoly of a single South African company called De Beers. As Edward Epstein points out in his brilliant article Have You Ever Tried to Sell a Diamond? “De Beers took control of all aspects of the world diamond trade, it assumed many forms. In London, it operated under the innocuous name of the Diamond Trading Company. In Israel, it was known as “The Syndicate.” In Europe, it was called the “C.S.O.” — initials referring to the Central Selling Organisation, which was an arm of the Diamond Trading Company. And in black Africa, it disguised its South African origins under subsidiaries with names like Diamond Development Corporation and Mining Services, Inc. At its height — for most of this century — it not only either directly owned or controlled all the diamond mines in southern Africa but also owned diamond trading companies in England, Portugal, Israel, Belgium, Holland, and Switzerland.””
“So, what is your point?” she asked.
“As Barry J. Nalebuff and Adam M. Brandenburger write in their book Co-Opetiton “De Beers, a South African company, has a monopoly over the world’s diamond market. Most of the world’s diamond produce is sold through the Central Selling Organisation of De Beers.” The control that De Beers has over the diamond market has come down over the years, but it still remains reasonably strong.”
“So?”
“De Beers operates like a cartel, deciding on the supply of diamonds every year and thus ensures that the market is not flooded with them. In recessionary years it cuts down the supply of diamonds dramatically thus ensuring that they don’t lose value. Diamonds over the years have been found in countries like Angola, Australia, Nambia and so on. In 1960s, huge diamond reserves were found in Siberia, making Russia a big supplier. Hence, diamonds are not scarce as they are made out to be,” I explained.
“Thanks for giving me a crash course on diamond economics,” she said saracastically, hoping that I stop.
But I was in no mood to. As Nalebuff  and Brandenburger point out “People value diamonds highly because they perceive them to be scarce. They’re not, but it’s the perception of scarcity that counts.”
“Hah!”
“And let me come to the bit about not selling a diamond.”
“What about that?”
“A perception has been created over the years about diamonds being a permanent part of a couple’s life. As Epstein points out “Both women and men had to be made to perceive diamonds not as marketable precious stones but as an inseparable part of courtship and married life. To stabilize the market, De Beers had to endow these stones with a sentiment that would inhibit the public from ever reselling them. The illusion had to be created that diamonds were forever — “forever” in the sense that they should never be resold.” This perception has been created by a long running diamonds are forever advertising campaign.””
“Yes it’s a perception. But then have you ever heard the phrase perception is reality?”
“Well, you can maintain that reality by buying fake diamonds i.e. man made diamonds. Essentially there are two kinds of fake diamonds: moissanite and cubic zirconia (CZ).  As Geoffrey Miller, a consumer behaviour expert, writes in Spent – Sex, Evolution and Consumer Behaviour “There is a rationale behind not spending the amount on real diamonds. Casual observers can’t tell them apart, nor can most pawnshop owners using the standard thermal conductivity tests for distinguishing CZ from diamond. Only experts may notice the subtle double refractions (birefringence) caused by Moissanite’s  hexagonal crystal structure.””
“Ah! Should I say I am impressed?”
“In fact the quality of so called fake diamonds has gone up dramatically gone up over the years. As Miller writes “The arms race between real and fake has also undercut the De-Beers diamond cartel for more than a century, as ever-better imitation diamonds have been developed: titanium dioxide (synthetic rutile) in the 1940s, synthetic strontium titanate (Fabulite) in the 1950s, yttrium aluminum garnet(YAG) in the 1960s, gadolinium gallium garnet (GCG) in the 1970s, cubic zirconia (CZ) in the 1980s, and silicon carbide (Moissanite) in the 1990s. CZ makes for an excellent imitation diamond…Moissanite, introduced in 1998, is even closer to diamond, with a similar hardness, density, and luster, yet more brilliance (a higher refraction index) and more “fire” (a higher dispersion index).””
“But fake at the end of the day is fake na. I won’t be able to carry it off with the same panache and confidence as the real thing,” she said.
“Hmmm!,” I replied, ignoring what she had just said. “Did you know that every time you buy a diamond you might be supporting a dictator or a rebel movement in Africa?”
“You  won’t stop! Will you,” she said in an exasperated tone.
“As Alan Beattie writes in False Economies – A Surprising Economic History of the World “Diamonds, in particular, are a near-perfect mineral with which to fund freelance rebel movements or alternate governments. They act almost like a global currency, being small and light and holding their value well. Despite the attempts of an international campaign, the Kimberly Process, to register their source, they are very hard to trace. The Sierra Leone civil war dragged on for a decade from 1991 after the Revolutionary United Front, the main rebel movement, gained control of diamond mines and used the wealth to fund their operations,””came a long wielding response from my side.
“Okay. Now that you have said so many things let me just say one thing. My sister’s husband is buying her a big diamond or stone as you call it, this Valentine’s Day. And I guess that makes it very clear that you will have to do the same,” she said, having the last laugh.
My mind went back to a line that the short story writer Hector Hugh Munro better known by his pen name Saki, once wrote “A woman and an elephant never forget an injury.” And with that I started making a mental calculation of what the damages would be.
The article originally appeared on www.firstpost.com on February 12, 2013
(Vivek Kaul is a writer. He can be reached at [email protected])