ThoughtThought

This weekend I had the pleasure of reading the branding and marketing classic The 22 Immutable Laws of Branding by Al Ries and Laura Ries. This book contains essential insights into branding as it relates to marketing and business strategy.

The book is organized into “Laws”, such as the Law of Contraction and the Law of the Category. They make sense for any business, large or small, and any market, including the madcap CRM software world. I won’t try to summarize all 22 Laws, some of which may in fact be mutable, but there are three I really like:

• Law of Contraction: A brand becomes stronger when you narrow its focus.
• The Law of the Category: A leading brand should promote the category, not the brand.
• The Law of the Generic: One of the fastest routes to failure is giving a brand a generic name .

The Law of Contraction is a beautiful idea: by contracting the amount of products and services you associate your brand with, you make it more powerful. It becomes more memorable, more trustworthy, and easier to understand, all of which enables your raving fans to evangelize your product for you. The narrower the stronger.

For those of you too lazy to read the book, let me recap the convincing example of Subway. A typical city has hundreds of cafes and delis other than Subway that may offer submarine sandwiches. But these establishments also offer regular sandwiches, and lots of other things: pirogis, pie, soup, quiche, pastries, oatmeal cookies, hot chocolate, coffee, cake, grilled cheese, etcetera. You know the menus I’m talking about — the ones that take 10 minutes to read through. Such establishments compete in the “deli” market category. Subway does not. By cutting out everything else, and focusing on submarine sandwiches, Subway created its own market category to compete in: “the submarine sandwhich deli” category, where it found little competition and tremendous success. Sure Subways may offer other items when you check out — chips, drink, cookies. But the brand stays focused on submarine sandwiches. That’s it. You know what you’re getting. Strong brand.

But what if, you might ask, there is no demand for the little market category into which your shrink youy brand? Then you apply the Law of the Category: grow your market category, not your brand. Subway did just that, and the leading CRM players have done a pretty decent job as well. And they continue to do so, judging by a Google search for “what is CRM software” , where you’ll see a plethora of ads for CRM review sites, CRM guides, CRM comparison sites, and the like, all meant to grow the CRM market category through consumer education, and all paid for by CRM providers. This is the Law of the Category in action, via Google Adwords. Businesses have a certain amount of money to invest in business software each year, the thinking goes, and CRM brands will capture those expenditures not by growing their individual brands, but by growing the CRM market category. I tend to agree this strategy — generally speaking, there is room to grow: businesses are under-invested in CRM for their external business needs (and in Wiki software for internal business needs, but that’s another story). I think there’s an argument to be made that even individuals, such as Affiliate Marketers, can improve their business using a specialized type of Online Marketing CRM.

Ries talks about applying The Law of the Category to one of the early players in the CRM software market: ACT!. When Pat Sullivan acquired ACT! in 2000, he sought counsel from Ries as to how to position the brand in the market. When Ries asked “what does ACT! do?”, the answer was “everything”. Red flag — clear violation of the Law of Contraction. Ries counseled ACT! to focus their brand on one concept: Contact Software, and grow their category.

As a result of this intentional brand narrowing, ACT! became one of the leading brands in the Contact Software/CRM category ( ‘Contact‘ software being less descriptive predecessor to ‘Contact Relationship Management software). At the same time, the CRM category as a whole has benefitted, Ries argues, from ACT!’s efforts at growing the importance of the contact software category, which in turn benefits ACT!. And so on. From a product design standpoint, ACT! may be a bloated piece of junk but at least they have (or had) their branding right.

Speaking of product defects, the fact that ACT!, and so many other enterprise CRMs, don’t offer a true on-demand solution is lamentable (in my opinion). The market has responded by endorsing a new generation of on-demand CRM, led by Salesforce.com,. The On-demand CRM category is growing fast and will ultimately capture the lion’s share of the CRM market. Meanwhile, even while the on-demand CRM market category grows with a host of vertical-specific solutions, ACT! continues to be one of the largest traditional, “offline” CRM applications on the market, with over 41,000 paying corporate customers.

In my next post I’ll analyze Salesforce.com (which is probably in violation of the Law of the Generic) and its on-demand CRM competitors in more depth, and take a look at where the market is headed. Hint: with a few exceptions, on-demand CRM brands are not doing so well at the Law of Contraction. They are trying to do too much. As the business software market becomes increasingly diverse, CRM as a software product and as a business method will be forced to splinter into several new categories of CRM, each one servicing completely different types of businesses. The “Acme Enterprise CRM” and “ACME Small Business CRM” approach aint gonna cut it. This category-birthing is already happening with new, targeted CRM brands coming on to the market, but many large CRM providers don’t get it, and will lose in the long run, both in terms of brand strength and product usefulness.

In the meantime, for those of you wise enough to take a look at this fascinating book, enjoy your reading!