Commentary by Al Reis


Understanding Mainstream vs. Secondary Marketing Channels

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Four year ago, my partner (and daughter) Laura and I were giving a presentation in Helsinki on the perils of convergence. The cell phone, we pointed out, would never converge
Nokia's 9210 Communicator is a phone that is also an office computer and a personal digital assistant with keyboard.
with the handheld computer or serve as an Internet access device.

Suddenly a guy in the back of the room interrupted the presentation and shouted out, "Wait a minute. It's already happening. I've got one here in my hand. It's a Nokia Communicator."

Marketing is not a science, it's an art. A scientific law applies everywhere without exception. The speed of light in a vacuum is approximately 186,000 miles per second and is often denoted by the universal constant "c." If you could demonstrate that there are places where the speed of light in a vacuum deviates from "c," you would shake up the world of science in a most profound way. You might also win a Nobel Prize.

Always exceptions
A marketing law is different. A marketing law is a generalization of what is likely to happen if certain actions are taken. There are no exceptions to a scientific law. There are always exceptions to a marketing law.

It's like a river with secondary channels. It's not always easy to tell the main stream from a secondary channel. That's why a marketing law can be helpful in keeping your brand in the mainstream. (Unless, of course, you have a secondary brand that might be happy to exist on the fringes.)

The law of divergence
Take the law of divergence. Over time, every category divides and becomes two or more categories, creating endless opportunities to build new brands. The best way to take advantage of these opportunities is to create a new category and then be the first brand in that new category.

"Wait a minute," our detractors will say. "It's convergence that's happening."

Sure, you can find endless examples of convergence products in almost every category you look at. These are the exceptions to a general law.

Yesterday's "communicators" went nowhere, so today the cell phone industry is calling the same convergence products "smart phones."

All the hype
Smart phones are getting all the hype including a six-page article in the June 7 issue of Newsweek with the headline, "Your Next Computer."

"There are 1.5 billion mobile phones in the world today," Newsweek says. "Already you can use them to browse the Web, take pictures, send e-mail and play games. Soon they could make your PC obsolete."

Currently smart phones represent just 5% of overall cell phone sales. Will the smart phone go on to dominate the cell phone industry?

No. The basic concept of a smart phone violates the law of divergence.

Will there always be a market for convergence products like smart phones? Sure, there are always exceptions to any marketing law. There's the mainstream and the secondary channels.

Nokia's gambit
Take a mainstream player like Nokia. According to the June 1 edition of The Wall Street Journal, the "Finland-based company has spent hundreds of millions of dollars launching a string of smart phones. It now pours almost 80% of its research-and-development budget -- about $3.6 billion a year -- into software, much of it designed to give phones computer-like capabilities."

"Now it appears that [company executives] focused on the wrong battle," the article continues, "at a big cost to Nokia. Smart phones have proved too bulky and expensive for many consumers, and remain a tiny presence in the market."

Nokia's worldwide market share has plunged, from 35% a year ago to 29% today. How smart was Nokia's decision to focus on smart phones?

Meanwhile a cover story in the June issue of Business 2.0 magazine touts the success of Palm One's smart phone, the Treo 600. "How Palm got cool again. The company gambled -- and won -- with its ultrahip Treo 600. Is the genius back?"

How smart was Palm One's decision to focus on smart phones? Maybe it was the only way for a niche player like Palm One to get a foothold in the cell phone market.

There's the mainstream and there's the secondary channels.

Line extensions
Next to divergence, the law of line extension has generated the most negative reactions.

"Wait a minute, what about the Japanese? They're big practitioners of line extension and they are successful."

Today, of course, we know that most Japanese companies make very little money and the Japanese economy itself has been going sideways for decades. Our take on the situation: too much line extension.

Nowadays the more common reaction to the law of line extension is "Wait a minute, what about Virgin? They're a company built on line extensions and they're successful."

It's hard to know how successful Virgin is because most of the companies that bear the Virgin brand are privately owned. But even if every Virgin company were successful, it wouldn't change our opinion that line extensions weaken a brand.

One exception doesn't undermine a marketing law.

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Al Ries is the author or co-author of 11 books on marketing, including The 22 Immutable Laws of Marketing. He and his daughter Laura run the Atlanta-based marketing strategy firm Ries & Ries.

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