The document discusses the concept of divergence and how it leads to the creation of new brands, products, categories and species. Some key points: 1) Divergence occurs when an existing branch splits off in a new direction, similar to how Darwin's theory of evolution describes new species arising. This principle applies to the development of new brands and product categories. 2) Many modern categories and brands arose through divergence from earlier products - examples include types of TVs, computers, smartphones and cars. New categories like cable TV, laptops and SUVs were created through brands diverging in new directions. 3) For companies, deliberately pursuing divergence through new brands is more effective than just improving existing products. It

1. …SO FAR

2. …SO FARImportance of DreamingHow to DreamPassion, bad purchase, insult, opportunity, enthusiasm…Brand MEYOUR unique position in the CLASSROOMThe vital 8 questions

3. THE ORIGIN OF BRANDS

5. The Great Tree of LifeGreen budding twigs like existing speciesBranch out on all sidesOvertop and kill the surrounding twigs and branches like species in the great battle of life- Charles Darwin

6. How do new branches arise?By divergence of existing branchesHow do new species arise?By divergence of existing species

7. The great tree of Products and ServicesComputers, TV, Radio, Telephone…all divergedSome Categories Live. Some Categories DieTypewriters, steam engine, sailing shipsThe great tree of BrandsLook for new categories, traditional marketing is NOT focused on creating new categories but new customers, finding out what customers want and then give better n cheaper than competition

8. Darwinian principle of DivergenceNatural selectionHow can a company figure out what might happen to a new brand in the marketplace with market research?Consumers don’t know what they will do until given an opportunity to make a decision.Big companies tend to see things the way they are. Enterpreneurs tend to see things the way they could be.

9. Predicting the futureEverywhere you look, you see the same thing: categories are evolving and divergingIn nature changes in environment create the conditions that cause species to diverge, in biz, changes in technology and culture create conditions for categories to divergeEg: the TV tree….DD then, Network TV brands – Zee Star, Cable TV – CVO, IN…..then Satellite TV – Dish, Tata SkyESPN was started with $9000 credit card advance by Scott & Bill Rasmussen. Shemaroo book library started in ‘62

10. Predicting the futureEach year you will get another Gatorade, another Google, another Maruti, another SpiceJetThese new brands don’t stand a chance because they serve a market than to create a marketWherever you look you see a single product, often a single brand. And over time it explodes in to many categories and brands. TV – crt, lcd, rear LCD, LCOS, DLP, Plasma, OLED

11. A new category needs a new NameComputers – Mainframe= IBM, Minicomputers = Digital Equip, home PC = Apple, Workstations = Sun Microsystems, 3-D workstations = Silicon Graphics, laptops = Toshiba, business PC = Compaq, direct PC = Dell, PC =Lenovo

12. Divide and ConquerIf ‘lion’ is a brand, you cant create a new brand by improving the lion. No matter how much ou improve the breed, a lion is a lionNew species are created by divergence of an existing species. Pantheragave lion, leopard, jaguar, tigerThat’s how branding works

13. Create a new marketWhen Coca cola was launched there was no existing cola market. The soft drink market in those days had root beer, ginger ale, lemonade. Coca cola created a tiger in a market populated by lions….Microsoft was the first sixteen bit brand from the eight bit system.Electric bulb by Edison Light Co or GEIntel developed the microchip 4004 and shut its memory chip biz. to focus on microchip.

14. Create a new marketNokia meant cellphone, they dropped paper, rubber, tires, boots, electronics. Computers.Disney – motion picture animation, mickey, donald, snow whiteMarlboro – first masculine cigaretteKarl Benz invented the automobile in 1885 and Gottlieb Daimler the 4 wheeler in 1886.

15. Irrelevance of Market SizeWhat was the market size of 16 bit PC OS? Electric bulb? Microprocessor?Motion picture? Fast food hamburger?Masculine cigarette?Autmobile market?Cola market?

16. Market v/s MindBranding prog is always to attack the mind of the prospectThe mind comes first, the market follows where the mind leadsThe mind doesn't think markets, it thinks categoriesEg: Marlboro – ask, does a category exist in the mind called masculine cig? 2nd Q to ask, can you create a brand that could start a divergence from the mainstream cigarette market? A divergence that would eventually create a masculine cigarette category?

17. Gradual Change v/s DivergenceStrawberries can grow to the size of plums, but it wont produce plums. It takes divergence to do thatNatural change v/s abrupt changeA 2004 Ford taurus does not look like a 1955 Ford fairlane, but both are still sedansGradual: Survival of the fittest, improves the species; Divergence: Competition between species drives them further and further apartKmart, Wal-Mart, Target (Cheap chic)

18. The pressure to DivergeNature pressures the species to divergeShipwrecked: good swimmers n bad swimmers. Given more shipwrecks we would have only swimmers n non swimmers. No mushy middleIf there were only 2 sports in the world, basketball n horse racing – 2 types of atheletes, big n small. Giraffes n GazellesIn mktg brand ‘evolves’ over time, 1908 Model T Ford to 2004 Ford Taurus. But the brand also ‘diverged’Now Ford has minivan, sport….Gradual change improved the breed Ford, divergence created additional categories

19. Keeping Up with the competitionThe Ford brand evolved from Model T in competition with the Chevrolet Malibu 2004, and the product drastically changed to keep up with the competition. Ford will stay the leaderWhy? Coz it takes time for a better product to change minds of auto buyers, and time is on the side of the leaderMonitor competition and matching or out doing is the name of brand maintenance gameDivergence creates opportunity and problems for marketers. Divergence is the evolutionary principle responsible for creating new species. New species wipes out an existing product category. PC did to typewriter, Internet to FaxIt is divergence that creates opportunities not evolution. And nature favours the extremes – Rolex-Swatch. Ford missed out on the opportunity of sports (Posrche), Luxury (Benz)

20. Swiss Army knife thinking

21. Swiss Army knife thinkingWhen was the last you saw someone actually use the scissors on a Swiss Army Knife?Or the screw driver to screw something?Or the tweezers to tweeze something?Everyone owns one, how many actually use it?TV + Computers + Internet = Interactive TV = NO way

22. FactsIn 1997 Microsoft bought WebTV Networks for $425 MMicrosoft invested $1 B for 11.5% of Comcast Corp, cable tvIn 1999, Microsoft pumped $5 B into AT&T to install Microsoft TV software in 10 M AT&T set top boxesAll above failed

23. More factsAmerica Online rolled out AOLTV. The ad said: Imagine lying on a sofa, watching a program produced by Cooking Light mag on TV, you will get a digital version of the recipe, while you see pics that were emailed and check on the shows the kids watched after school and you hear a reminder from your florist about your Aunts birthday. You send the recipe to your refrigerator, it knows you need milk, which it orders online. It failedInternet is an active medium, TV is a passive medium

24. Divergence not ConvergenceVolkswagen became a powerful Automobile brand by being first in a new category called small carsJeep …. Automobile brand …Sport utility vehicleHummer …. Automobile brand…Military vehiclesChrysler…. Automobile brand…MinivansCadillac…. Automobile brand…..expensive US carsCorvette…. Automobile brand….American sports carsPorsche…Automobile brand…..expensive sports carsBMW…. Automobile brand….driving machinesVolvo…. Automobile brand……safe carsRolls Royce…. Automobile brand……ultra expensive imported cars

25. The Great tree of low- tech Brands

26. Coffee ShopsWay back Coffee shops sold everything eggs, bacon, pancakes, hamburgers, hot dogs, chicken, soup, sandwiches, ice cream, pie, doughnuts, cake, soft drinks, and coffeeIn 1948, Dick & Mac McDonald started a coffee shop which primarily served only Hamburgers with 9 items on the menuThen: Chicken-KFC, Hot Dogs-Wienerschnitzel, Coffee-Starbucks, Doughnuts-Dunkin, Cinnamon rolls-Cinnabon, Ice cream-Baskin Robbins, Pizza-Pizza hut, submarine sandwiches-SubwaySimilarly with cuisines based restaurants

27. Divergence in PizzaFirst it was Pizza hutThe Dominos pizza branched off to home deliveryThen Little Caesars branched off to take out pizzaThen Papa Johns branched off to better ingredients, better pizzaThen Papa Murphy’s take N Bake….half baked, rest at homeCalifornia Pizza Kitchen branched off to gourmet pizza categorySbarro pizza….pizza by sliceBertucci pizza….brick-oven pizza

28. Departmental storesFirst all cities had their own big storeThen the category started branching off to various categories: Shoe, Baby, Book, Casual clothing, Consumer electronics, Furniture, Jewelers, Lingerie, Make up, Plus Size, Salon, Sports, Toy…..Sam Walton started with Ben Franklin franchised store in 1945. By 1962 Walton owned 15 Ben Franklin stores operating under Walton 5&10 name. He only opened Wal-Mart Discount store coz the Ben Franklin mgmt rejected his suggestion to open discount stores in small towns.

29. Divergence in HomesLook around you..there is opportunity to divide and conquerDid the AC converge with the furnaceDid the stove combine with the refrigerator? No, you have woodstoves, gas stoves, electric, flattop stoves. Take the refigerator, infact people have 2 refrigerators one is a freezer or wine refrigerator.And dish washer, toaster, coffeemakers, electric mixers, espresso machine, blenders, ice cream machine, electric bread makers, juicers, food processors, etc

30. Divergence in trendsTrends often diverge and go off in 2 different directions – High fat & low fat; Gourmet % Inexpensive; Oversize & Miniature (SUVs & Mini Cooper)A better strategy is to start your own trend by taking the category in a different direction, going against traditional wisdomIn food for eg – bigger is better, @ McD they ask ask “do you want to supersize that” No one says “Do you want to miniaturize your order”Yet miniature Oreos, Snickers, Palm, Game Boy help you dream of new categories. Leica the first miniature camera became 35mm, the pocket watch became the wrist watch, the miniature mainframe became the PC

31. R’berIn marketing, the passage of time creates only opportnities, it doesn’t create new categories. Companies create new categories by their marketing effortsIts marketing that creates opportunities for introducing new categories. Its not new categories that create opportunities for marketing programs to flourishEg, When a beer drinker walked into a saloon in the roaring 20s, he asked for a beer. And the bartender poured him a draft beer. Its was highly unlikely that any beer drinker asked for a bottled beer until Miller & Anheuser-Busch started marketing bottled beer nationally. The brewers created the category not the beer drinkers

32. DivergenceDivergence in countries- Yugoslavia: Croatia, Slovenia, Bosnia…Divergence in religion – Christianity: Roman. Eastern orthodox & protestantsDivergence in Dogs- 329 breeds into ten groupsDivergence in Music – Billboard has 18 separate hit listsDivergence in Recreation- snowboard, ski; skating, roller bladeDivergence in Toiletries- mouthwash, plaque reducing, dental floss, gum stimulators, gum brushes, water brushes, electric

33. Survival of the Firstest

34. Survival of the FirstestIts like a seed which hits the forest floor first, it will grow quicker and will block the sunlight to the 2ndIts no free ride if you are first, here evolution comes in, brand needs to evolve, work on its perception not salesWhat works in Movies, Matrix reloaded - $42M on 1st dayWhat works in Music, madona’s American life 241000What works in Books, JK Rowling. If everybosy thinks it is a terrific book, it must be terrific, regardless of your thoughts

35. Survival of the FirstestFortune Favours the First, Heinz ketchup, Kissan, PCC, Bud, KF, Big Bazaar. Coke 1st since 124 yrs, GE 108 yrsFirst Mover in the Mind not marketplace, Sir Edmund Hillary, many went after himLosing Its leadership doesn’t destroy a brand, Apple- 1st PC, Harvard – its no the largest; Fortune 500 Mag 1955– Business Week 1000 & Forbes 500.Imprinting a Brand, like a newborn bonding with its mother, like Scotch in cellophane tape, Kodak in film, red bull.

36. No use crying over spilled milk – Coca Cola missed out on caffeinated citrus category (Mountain Dew) they tried with Mello Yello, then Surge both failed. Again they lost out on natural beverage category (Snapple), they tried Fruitopia. And energy drink Red Bull they tried KMX, and lost to Gatorade(Pepsi bought for $13B)with PowerAdeTwo Psychological Barriers – Absence of market & targeting a slice of an existing category by divergence. Starbucks launched coffee shop that sold just coffee when traditional coffee shops sold everything.

37. Survival of theSecondest

38. SecondestAny brand that tries to grow too close to the leader is likely to suffocate and dieBe the opposite of the leader to survive. There is an opportunity to get into the mind as a strong No. 2. the driving force of human nature is to go off in 2 different directions: the desire to conform and the desire to be different. There is no 1 way to build a brand there are 2, if you cant be 1st then be the 2nd as the opp of the leader

39. Survival of the SecondestNo right way & No wrong way to build a brand. There is vanilla & Chocolate I/C, some like vanilla some choco. Some like Democratic, some Republican. Hence there is little room for no. 3, eg Royal Crown, Kmart. The danger of trying to emulate the leader. McD & Burger King- breakfast, chicken nuggets, Ronald McDonald/Magical Burger King, kiddie menu and playground. BK does 33% less biz than McD. BK has had 9 CEOs in the last 13 years, 8 mktg in 8 yrs, 5 ad agencies in 4 yrs. Do the opp instead

40. Survival of the SecondestIn strength there is weakness. McD is perceived as a place for kiddies between 2 and 6. where is the weakness of McD’s strong appeal to the younger folks? Potentially, the preteens and teens can be turned off among kiddies. So- Grow up to the flame broiled taste of BK. But BK is stuck.To do it better trap. If you built a better watch, how would you persuade consumers that your brand is better than Rolex. Did Reebok overtake Nike? Fuji overtook Kodak films?. No 2 brand did takeover the no 1 brand but not where the leader was strongly entrenched in the mind or using the “we do it better” strategy

41. Survival of the SecondestDoing it different. Enterprise became no 1 car rental co not by doing it better (like Avis tried on Hertz) but by setting up rental facilities in suburban locations and focusing on insurance replacement instead of setting up at airport terminals. $6.9B vs $5B. But Hertz is still perceived as no 1. BMW vs Benz- best example. Merc is known for big, powerful, luxurious cars with smooth ride and comfy seats. BMW is the ultimate driving machine hence are smaller lighter and more fun to drive. In 1991 Reebok sold $2.2B to Nike $2.7B with their female focus strategy. Don’t ask, does the idea makes sense? Ask whether the idea is the opposite of the leader’s strategy.

42. Creating a Category

43. Creating a CategoryThe most difficult job in mktg, and also most rewarding is creating a new categoryIf you cannot define the new category in simple , easy to understand terms, the new category is unlikely to become successfulZima - ADThe First Energy Drink – Mktg people are sometimes too literal when they try to dream up a name for a new category instead think of the essence in a simple way.

44. Creating a CategoryBrand name Follows Branch Name – not Red Energy, don’t include the category name. select a unique distinctive and short name. it should stand alone and connected by a conceptual idea, not repetition of wordsWhen to Be Different and When to Be the Same – Size of Pepsi can like Coke and Red Bull CanSelect the Simple, Not the Complicated – ENIAC, Landro -Play Analyzer (benefit) not VideoTizer (feature)You Need Two Names, Not Just One – brand name + category name. PalmPilot. People think generic first, brand second – I’m thirsty, berr. Which brand - Bud

45. Creating a CategoryYou cant short-circuit the process. To create a hot brand, you need to create a hot category. Palm Computer, then Pilot Palm Computer. And create enough distance or ou will be called baby PC – PsionNew category First, New brand second. EgMalternative– Smirnoff Ice, Bacardi Silver, Skyy Blue (its hard liquor in many variation, wont work) Wine is alternative to beer. Malternative will be like beer cooler, like wine coolers.

46. Creating a CategoryA brand must stand for something and that’s when brand loyalty works. Don’t be everything for everybody like GM . If not then it will be a worthless brand (Jeep, Harley still sell)The ladder of life. When people are young n single they buy a Maruti. When promoted a Honda. When married an Innova. When divorced a Ferrari. No one automobile brand can stand on every rung of ladder of life.Let your customers go. Customer Loyalty means when they are willing to do biz even though they can get same product for a lesser price. Keep the purity of your brand

47. Creating a CategorySome Categories will Die. Cigarettes, Instant photography. Can you sell chewing gum as Marlboro or Polaroid as computers. Weak brand can shift, but not worth it, it will only be cheaper. A strong brand cannot be shifted to a new category – Xerox computers, Tanqueray Vodka. Dinosaurs did die.Save the brand or save the company. Kodak, Polaroid. Brand are just the means to an end – Sony means electronic, Kodak means film photoNew brands almost always beat old brands. Nokia won, not motorola, Ericsson or Sony. New brands must be intoduced to preempt the category, if not then old brand will take over – Bud Light, Coors Light n Miller Light. Major players have deep pockets.

48. Creating a CategoryOpportunity lies in categories not brands. Starbucks is a billion dollar brand coz it stands for “high end coffee shop”. How strong the brand is depends on how stong the branch is. Have faith, it will pay off – Evian tastes like tap water. Coke could have stuck to TabMind is like pigeon holes, lock the brand in the pigeonhole. Lock Rolex into a category in the mind called luxury Swiss watch. And swatch into fashion watch2 names 2 different purposes. Don’t make the generic name the brand name. itslike uppercase and lowercase. What is Natures Choice? But what is Seattle’s best coffee? STARBUCKS.

49. Creating a CategoryOpportunities are constantly created. It wasn’t America Online, Yahoo, Amazon and eBay that created the internet. It was the other way around. Auctions: Sotheby’s, Autions on the internet: eBayThe Specialist strategy- Nike, Adidas & Reebok are the big generalist in athletic shoes. K-Swiss in tennis shoes. Adding attributes as the brand ages. BMW the first “driving machine” then picked up the attibute as the car for urban professionals (yuppies). Starbucks, hip place for corporate crowd. Take away the high end coffee leadership and Starbucks becomes a me-too.

50. Establishing an Enemy

51. Establishing an EnemySolving the problem is not enough. Most people don’t think in terms of problems, they think in terms of categories. “ I need a better job, a better house, a better car, higher salary”, What problem did the automobile serve? People were happy with horses. At the point of divergence identify the enemy. The enemy of the automobile was the horse.Establishing a New category is not enough. Attack the old category like fashion or clothing.A new category needs an enemy. Whisky’s enemy White Sprit. How did it happen Whisky was old fashioned. Diet Coke, email/fax/telexCategory competition: Aspirin 1899/Tylenol 1955/Advil 1984 – Advanced medicine for pain. NutraSweet/Equal/Sweet N Low/Splenda- made from sugar so it tastes like sugar

52. Wrapping things Up

53. Wrapping things UpThe 5 functions of MktgDefining the market- there are lots of markets out there, which one do we select? Automobiles, batteries, beer, cola, cellphones, detergents… Bud wont get into auto or GM make beersSelecting the market- its done, Co. have already defines their brands in termsofmktseg. Busch/ Bud/Michelob. GM – Saturn to CadillacDesigning the appeal – fine tuning of mktgprogGenerating support from other functions– fine tuning of mktgprogMonitoring performance– fine tuning of mktgprog

54. Wrapping things UpTraditional Mktg is not enough, the 5 functions maybe a way to maintain a brand, but not build a brand. Red Bull didn’t become a big brand going after the energy drink market. There was no market to define. Red Bull created energy drinks mkt. Duracell – Alkaline batteries. How did this happen? By divergence of existing markets. Nike created Athletic Shoes.Matching Competition is not enough. When Nike put up athletic shoes, Keds introduced Super Keds. Eveready batteries tried Eveready alkaline. Smirnoff tried Smirnoff Black to beat Absolut. Tanqueray Gin tried Vodka. Gatorade introduced energy bars. All flopped.

55. Wrapping things UpKeeping customers happy is not enough. What would you do if you owned – Kmart, Polaroid, Royal Crown. Nothing wrong in customer satisfaction scores. Every brand should evolve via constant change & improvementEven Evolution is not enough. A brand cant evolve until it gets created in the first place. Divergence create. Do you think these brands can be overtaken – Starbucks, Dell, Red Bull. Divergence created these brands evolution will keep them on top. Brand live n die because categories die

56. Wrapping things UpDivergence is the KeyConsumers buy Categories, Not Brands. The brand name is just a shorthand to the attribute represented by the categoryEverything will finally diverge

57. Thank you