Jack Trout is one of the world's foremost marketing strategists. He pioneered the concept of “positioning” as a critical component of business strategy.
Trout is the author of five marketing bestsellers and consultant to many leading organizations across all industries. His most recent book, A Genie's Wisdom, is a concise, insightful marketing manual for CEOs. Understanding that all leaders today face increasing pressure from press coverage, independent boards, Wall Street analysts and a distrustful public, Trout wrote the book as a top management survival guide.
Although marketing is rarely a priority on the CEO's agenda today and few know what makes good marketing, Trout shows leaders of all organizations how marketing must be the centerpiece of the business strategy. I recently talked to him by phone to get his suggestions about how we marketers can educate our CEOs about marketing as a critical driver of an organization's success.
Young: Why did you write The Genie's Wisdom?
Trout: It evolved from the book I wrote just prior to that, Big Brands, Big Trouble, where I asked why are big brands like AT&T, General Motors and Levis crashing all around us? What is going on? Why do we have all this trouble?
When you spend as much time hanging around these joints as I have over the years, [you learn that] the top management in many of these companies hasn't a clue. From a marketing strategy point of view, very few CEOs know what to do. [Louis] Gerstner knew what to do at IBM, and that's why he was able to pull IBM around. But most of these guys have no idea, because they're not trained [as marketers].
They could be accounting people, they could be financial people, they could be engineering people, they could be whatever, but very few CEOs of these disastrous companies were marketing people. So, I wrote a book to help someone in a hurry quickly get a sense of what marketing is all about.
Young: How can we involve the CEO in marketing?
Trout: You have to educate the CEO. Number one, you give him stuff to read. Give him one of my books to read.
When you give presentations, don't get lost in all the gibberish and the complexity that many marketing people like to surround themselves with. Keep it very simple so that the top manager guy can understand it. Get away from the jargon. And say, “Here's what we're trying to accomplish here in the minds of our prospects out there.
Young: Isn't it ironic that we as experts in communications are so lacking in internal communications skills?
Trout: Absolutely. I don't know why—maybe it's an insecurity. Maybe it's, “I want to keep all this stuff close to me and I want to keep control of it.”
Some people make it more complicated than it really is. When the computer guys reigned supreme in the old days with IBM, they kept it mystified. Lawyers like to keep it in their own language. And I think that marketing people like to keep mystifying things.
Young: Anything else?
Trout: Here's another issue: how many marketing people know what they're doing?
Why do you think I endlessly write these books? Many don't get it.
And their advertising agencies are just as bad. The current crop of agencies say we're going to be emotional, we're going to do this, we're going to do that. They don't know what they're supposed to be doing. That's what's frightening.
Young: You hear more and more about organizations becoming customer centric. Is this a sign that marketing is having influence?
Trout: Many years ago, Al [Ries] and I wrote a book called Marketing Warfare to teach people how to deal with competition. The world was a tea party then. Now, it's serious.
And then on top of that, you've got the Wal-Marts in this world hammering everybody. You can't make a buck. The retailers are enormously powerful—the Costcos, the Circuit Citys—so that's what has put a premium on having that right strategy, and being able hang on to it and at least get people to pay a little bit more for your point of difference.
Young: Has Wall Street's demand for short-term profits created problems for marketing?
Trout: Wall Street—with its pressures to grow, grow, grow—is a gigantic problem. The CEO is saying he's got to have 10% [annual] growth. He's listening to Wall Street. The marketing guy has got to have enough courage to say to his CEO, “You know what, that's not realistic. If you don't have reality in this game, we're going to get killed.”
Now, do you think they have enough gumption to say that? Heck, no.
But that's part of this education issue, you've got to get guys to understand that what's doable is doable, and the impossible is impossible.
Young: So then can marketers educate Wall Street?
Trout: Generally, no. When an enlightened CEO is doing his analyst meetings, he will introduce marketing. He will say here's what we're trying to accomplish. The best CEO says—like Jim Sinegal at Costco, one of my current CEO heroes—“I'm not going to let Wall Street ruin me, force me to change what I do in my culture.”
Your CEO has to be able to stand up and say, “Here's what we're trying to accomplish; here's what our marketing is trying to go for; it's going to take a little bit of time, but we feel if we do this properly, this is what it's about.”
And that's about the best you can do. Let me tell you, that's a hard deal. Look at this last decade: guys were cooking the books to maintain that stock price. You think they're into marketing?
Young: Does the same hold true for the chief financial officer?
Trout: You've got to educate him as well. If the CFO goes to the CEO pushing his numbers and the marketing guy wants to spend money, unless the two are aligned it's going to be a problem. And 9 out of 10, the CFO wins.
Young: Can marketing convince him or turn him around?
Trout: Again, you have to paint the picture of, “This is the kind of stuff that can happen to us.” I have so many stories that would just curl your hair about decisions that were never made, and they were so painfully obvious.
They never were made because of, well, that's going to cost too much, or this or that, and then, the next thing you know, nothing gets done and the business goes south.
Young: Is fear a motivator?
Trout: It's the best. When you're trying to sell a CEO on a course of action and you think he might be doing the wrong thing, you don't go in and tell the guy he's doing the wrong thing. You go in there and say, “Let me tell you what happened to a company that was doing a similar thing, and they went into the toilet. Now, this might not happen to you, but this is the kind of stuff that can happen.”
That's how you introduce the element of fear and doubt. And the guy says, “Whoa, is that what happened?” I said, “Oh yeah.”
You need that fear analogy. That's the best way to get somebody not do something that you feel, as a marketing guy, shouldn't be done.
Young: Are marketing executives effective change agents?
Trout: Not really. The marketing guy has to be aligned with all the other executives in the company. If a marketing guy stands up and starts to push a change, chances are he's going to gore somebody's ox. The only guy who can really do the change is the CEO, the top guy. And it's not even going to be easy for him. I tell a story about Lotus, the spreadsheet people.
Young: I remember that “groupware” was the word you advised them to “own” in the minds of consumers with Lotus Notes.
Trout: It was the idea. Jim Manzi, the CEO, bought into it and said, “Okay, we've got to go down that road.” He told me how painful it was. He said he was about $500 million in the hole with Lotus Notes, went through 10 executives he had to fire, the Board was a little antsy, but he hung in there.
Eventually IBM bought him out for $3.2 billion. But if he had not hung in and stayed the course, that ending would have been horrible. So, change is never easy, and change really requires the top management. They've got to say, “Look, this is where we're going, it's going to be painful, but we're going to go there.”
Young: In business school, marketers still learn about the P's. Does that prepare marketers for challenges within their organizations?
Trout: Not really. Let's take profit. The profit problem is what undid General Motors and all their brands.
Alfred Sloan tore the company up and put in place five brands: Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac. And he did it because they had seven brands that were all competing for the same business, all in the same price range. He said, “No, I'm going to have five brands: different price points, different concepts, different positions.” He was one of the first to segment a market. Five brands took the company to 50% of the business.
When he died, financial people whose whole focus was profit took over the company. They all started to ruin the brands so they could make more money, and then eventually they got to a point where, to save money, they made them all look alike. There was a point where four brands were identical—same car, just with slightly different trim.
Because of a desire to make that [profit] number, they undid all the branding that Sloan had constructed, and GM never recovered. That 50% has now shrunk to 28% of the market.
Young: If we think of marketing as a service within the organization, how does marketing position itself to have influence?
Trout: Marketing has to drive the business strategy. It's the marketing that's going to make you or break you. A great business strategy without proper marketing is going to fail in a very competitive world. And that's the point you have to make.
Young: In your extensive experience working in all product categories, what do successful marketers have in common?
Trout: Well, number one, they know what they're doing. They're knowledgeable in what's important.
Number two, they let common sense drive a lot of their decisions. Common sense is one of the most underused skills that we have in the business. People tend to leave it out in the parking lot when they come to work.
Next thing is they have to be able to think outside-in. They should not be driven by the internal politics, they've got to be driven by what's happening in the marketplace. They've got to think like a customer—to have that outside-in perspective.
You have to be very competitor-oriented, almost paranoid. It's very helpful to really have an appreciation for your competition, know clearly what they're good at, what they're not so good at, and always figure that, sooner or later, somebody's out there trying to get my business. So paranoid is good.
Young: Do you have an example of a CEO who was paranoid?
Trout: Herb Kelleher at Southwest [Airlines]. For years, Herb was very nervous about the big guys. Before he had enough momentum out there in the marketplace, he was very sensitive—these guys could come up, rise up and stamp him out.
Young: Do you do your marketing consulting with companies at the CEO level?
Trout: In the smaller companies, yes. When you're hitting these big companies—like AT&T—forget it. Those guys don't come to these meetings, and that's the problem. You always have the wrong people in the room. And you have your most success where you're dealing with the entrepreneurial players.
At Papa John's, you work with John [Schnatter], at Southwest, you're working with Herb. Where you're working with either the founder or the CEO, they're in the room, they're making the calls. In these big monoliths, CEOs are worried about Wall Street. They don't go to these [marketing] meetings, and that's a gigantic problem. That's why so many of them have so much trouble.
Young: Can the marketing executive insist that the CEO come to a meeting?
Trout: No. But you've got to be able to convey the meeting to them at some point in time. AT&T was a classic example in the early '90s. The research found that MCI and Sprint were being perceived [by customers] as just as good. We're talking about when AT&T was Godzilla and these guys were two pygmies. And I said to these guys, if these two upstarts are as good as you are in the mind of the consumer, you've got a real problem on your hands, because it's going to be a price game, and that's a killer.
And I said, “Tell me about reliability.”
They said, “Well, we just put in this system that works calls around a break automatically.”
I said, “Automatically?”
“Oh yeah, don't touch the thing.”
I said, “What's that cost?”
“Oh, let's see, $13 billion dollars.”
I said, “You put in a $13 billion dollar reliability system that's a self-restoring network, nobody knows about it, and that's your point of difference.
“These two little pygmies have nothing like this; they've got to borrow your lines if they have a problem.”
So I said, “We've got to do a big program about this, we're going to tell the world about this thing.”
Have you ever heard about this?
Young: No.
Trout: You're absolutely correct. We never had the right person in the room.
We told them you have to stop everything and run a very dramatic thing about this new self-restoring network. This will knock people's socks off. Try to get everybody in a company like AT&T to stop their programs and run this program. Only the CEO can do that. He blows the whistle; says we're going to launch a multi-jillion dollar program behind this deal; this is it, guys; sorry, you, you, you, we're not doing your projects now; here's where we're going.
And they missed it, and the world slid into commodity country, and AT&T is on the brink today. And it's a story that's never told. That's what I mean by the horror stories you can get out there. They had a moment in those early '90s where they really could have separated themselves and become truly the reliable player.
Young: Now, more and more marketers are getting involved in the ROI game of calculating the return on investment of their programs. Is that a good idea?
Trout: It's a no-win deal. Too many variables can kill you, and the competition mucks things up. The only game you should play is return on perception—call that ROP. You've got to say, I'm in the perception game, I'm going to take ownership of certain ideas. I've got some research on perceptions of us versus our competitors, and here's what we're going to build. I'll measure it after eight, nine, ten months, to see how we're doing.
This is the perception I'm going to build in the minds of the marketplace, and if we own that perception, the numbers will come. You're in the perception piece; you're not in that profit piece. It's a real problem to bet your program on those [ROI] numbers.
Young: In the B-to-B arena, can the CEO accept that you're in the perception game?
Trout: Perception is everything. Whether people perceive you as being a technological leader or how well they perceive you as having the best service in the business—whatever idea you're trying to drive after you've done your homework. It doesn't have to be consumer-type stuff.
Young: Do you have a new book in the works?
Trout: I do. It's a book called Trout on Strategy. Strategy is so critical in a very, very tough world. It's the Best of Jack Trout, like Frank Sinatra sings his best stuff. It's coming out next year.
