Saturday, November 8, 2008

Analogy #220: Red + Green = Gray

For one year in college, I was an art major. They taught me a bit about color. There is a special progression in the order of colors, as you can see if you look at a rainbow or look at the colors cast by a prism. Red bleeds into orange into yellow into green into blue into purple and back to red. It forms a circle, known as the “Color Wheel.”

With paint, if you combine colors that are close together on the Color Wheel, you create another pretty color. For example if you mix yellow and blue, you get green. If you mix blue and red, you get purple. It you mix yellow and red, you get orange.

However, if you mix colors on the opposite sides of the Color Wheel, you make the color disappear. All you get is a dull, ugly dark gray. Red + Green = Gray. Yellow + Purple = Gray. Orange + Blue = Gray.

Therefore, you have to be careful when mixing colors. Otherwise, you may not end up with any color at all.

As we mentioned in our last blog, one of the keys to a successful strategy is the creation of superiority at a point of competitive differentiation. In other words, strategy is about finding a place where you can be both:

a) Unique/Distinctive; and
b) Preferred by a Sizable Sector of Consumers

These unique points of differentiation can be thought of as being like colors. You need to find your own “color” position in the marketplace. If your competitor has a “yellow” strategy, don’t try to become another yellow company. Instead, stake out your own unique superiority as a “purple” company.

The good news is that, just as there are lots of colors on the color wheel, there are lots of strategic options to choose for your competitive differentiation. In automobiles, Toyota is known for “reliability.” That is their color. BMW is known as the “ultimate driving machine.” That is their color. Kia is known for offering a good value at a low price. That is their color. By owning a different color, each of these brands has a place where they can win.

I’m not sure I understand what color a Chevrolet is supposed to be, which may explain some of their marketplace woes. By trying to have a car for everyone, Chevrolet doesn’t really stand out as special to anyone. Too many colors…too much bland gray.

So rule number one is to pick a position/color which you can own in the marketplace—one that is easy to understand. Then, rule number two is focus your communication around that color, so that people associate that color with your brand. If you do these two things, then when a customer is looking for your “color,” they will gravitate towards your brand.

These unique points of differentiation tend to be built on attributes, like price, or quality, or status, or service, and so on. So, when choosing the color of your point of differentiation, what you are really doing in choosing the attribute bundle you are going to try to own.

The problem comes when a company wants to stand for too many attributes at the same time. This would be like trying to mix together a lot of colors of paint. Little tweaks may create an exciting new color. But if you combine radically different attributes together, it can be like mixing colors at opposite sides of the color wheel—all you get is a dull, dark gray. You will fade into the background and become forgotten.

The principle here is that, when it comes to finding the proper position for your strategy, more is not always better. By trying to own a large, complex mixture of attributes, you may end up owning absolutely nothing. You become just a dull gray company that fades into the background. By contrast, a simple focus on one attribute usually helps you stand out like a bright color and create a profitable niche for your brand.

Professor Alexander Chernev, at the Kellogg School of Management at Northwestern University, recently proved this with an experiment. I will summarize the results here, but you can read a more detailed report in the November 2008 edition of Kellogg Insight.

Chernev asked consumers a number of questions about everyday items, like laundry detergent, toothpaste, and cold medicines. Some of the products stressed excellence in a single attribute. Others claimed to excel at multiple attributes. For example, there could be one toothpaste brand emphasizing just whitening, while another brand claims expertise at whitening, cavity prevention, and fresh breath.

What Chernev discovered was that products specializing in a single attribute were perceived by consumers to be superior in that attribute relative to a multi-attribute product making the same claim. In other words, even if I tell you that the teeth cleaning powers in my multi-attribute brand are as strong as the brand that only claims whitening, consumers won’t believe you. They’ll think the specialist is better at whitening.

Chernev refers to this principle as a “zero-sum heuristic.” In other words, people approach products as if they can have only so much beneficial quality to them. It’s sort of like a point system, where each product has 100 points of benefit. The more attributes you claim, the more you have to divide those hundred points among the attributes. So if you claim four attributes, each attribute only has the power of around 25. However, if you only claim one attribute, that one attribute can claim all 100 points. And 100 beats 25 if you are looking to whiten your teeth, so the single attribute product wins.

Things got even worse when the pricing component was added. Chernev discovered that if you price the multi-attribute product the same as the single attribute product, the perceived inferiority of the multi-attribute product is reinforced. Instead of being seen as a superior value (more attributes for the same price), the multi-attribute product is seen as having to weaken each attribute in order to sell them at the same price as the one attribute brand.

It’s as if a $4 toothpaste specializing in whitening is seen as having four dollar’s worth of whitening ingredients, where as a four-attribute toothpaste for $4 can only have one dollar’s worth of whitening ingredients. The other $3 have to go to support the other attributes.

What this tells me is that one must be very careful when building a positioning strategy. If you try to claim excellence in too many areas, customers will be reluctant to give you credit for your claims. This is especially true if you choose to own seemingly opposite claims, such as having both the highest quality AND the lowest price. Just as opposite colors cancel each other out, so do opposite attributes.

A better approach is to narrow your focus of excellence to one main attribute. When you do so, customers are more likely to believe you. They will give you a stronger ownership of your claim.

So, to return to our analogy, don’t mix together too many colors of paint into your position. Instead of brightening the power of the colors, they offset and weaken each other, turning into an ugly gray.

To win in the marketplace, one must create an image of superiority at a unique point of differentiation. This is done by focusing on a unique blend of attributes. When designing this focus, there are a few points to keep in mind. First, don’t pick a focus that is already owned by someone else. Choose something else. Second, clearly communicate that focus to the customer, so that they will associate your brand with that attribute.

Third, don’t get greedy and try to make too many claims of superiority. The more attributes you claim to own, the less likely customers will believe that you own any of them. A simple, narrow focus almost always wins out over claims that “I can do it all.”

As strategy professor Michael Porter likes to say, strategy is about making choices and tradeoffs. You cannot be everything, so examine the tradeoffs and choose the right narrow positioning for your firm. In other words, pick a color.

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