Study the enemy: the art of beating rivals

By DITA DE BONI

Business strategist Martin Pazzani advises companies to be "aggressively paranoid" about their competition.

More specifically, The Chess Team, a Foote Cone & Belding (FC&B) internal consultancy in New York, which Mr Pazzani heads, advises clients that as well as understanding your consumer, an equally important strategy is to studiously examine your competition.

The Chess Team has been called to analyse the problems of behemoths such as telco AT&T, the US Postal Service and Chase Manhattan Bank. It has recently scored a spot of business from Compaq.

Mr Pazzani says the consultancy's advice is heavily skewed towards marketing, although the problems a company encounters when it slips in the market can also be attributable to operations and strategy. A holistic approach is emphasised.

For all cases, bottom-line advice is crystal clear: a deep understanding of your competition is crucial; learn from businesses outside your sector; and the fundamental principles of marketing remain the same regardless of product.

Mr Pazzani uses multinational companies as examples to demonstrate this to audiences worldwide.

One example he uses, Cisco Systems, turns over $13 billion in sales yearly and has generated the largest shareholder wealth of any company in history through assimilating dozens of smaller companies and retaining, despite its size, an obsession with customer service.

Fed-Ex - which started as a college thesis that earned its author, Fed Ex founder Fred Smith, a "C" - has built a global empire on its logistics capability, global air superiority and successful migration of its business to the internet.

These two companies are among the best "business-to-business" operators. Their brands are known worldwide, but building a brand has not been their key strategy of attack.

However, branding is a key competency of credit card company American Express, and creating strong, dependable brands has been the stock-in-trade of the world's largest fast-moving consumer goods company, Procter & Gamble.

Below are a few of both P&G's and American Express' "war rules," as outlined by Mr Pazzani to FC&B troops this week.

P&G markets about 300 brands, including Pantene, Tampax, Pringles, Pampers, Oil of Olay, Jif and Cover Girl, to nearly billions of consumers in over 140 countries. it employs nearly 110,000 people.

P&G is often credited with writing the book on marketing, says Mr Pazzani.

Founded in Cincinnati by William Procter and James Gamble in 1837, it trains its people to be "marketing Machines" by an indoctrination into the internal culture of the company, which teaches them that "the P&G way is the right way."

The company has traditionally taken a very conservative approach to all communications, and indeed every aspect of its business.

It has used heavy spending on advertising, with a high television quotient, to ensure market leadership.

Its television ads are generally educational in nature, using comparatively long 45 and 60-second formats.

It has not previously marketed any product before launching, an approach perhaps better suited to a company that takes an average of five years to get a product to market.

But the company, says Mr Pazzani, has started to recognise the importance of a new communications tack.

It has started to diffuse its marketing efforts, for the first time incorporating into its strategies "below line" marketing methods such as word of mouth, internet marketing, third-party endorsements and sampling.

It has also started producing "teaser" advertisements, where it would previously have released no advertising on a product before its launch.

In 1999, the company spent 30 per cent less on local television advertising and tripled its spending in newspapers. One new product, Swiffer, an electromagnetic disposable cloth used for dusting, has been demonstrated alongside Tupperware at home parties and shown at "3-day tours." Promotions such as "Have a Swiffer man visit to clean your house" have turned the old P&G marketing model on its head, says Mr Pazzani.

The effect of such marketing innovations has been to reduce the times P&G is beaten to market by competitors as well as to take a step closer to its consumer base with more "direct" marketing methods.

Credit card company American Express, founded in 1850, provides travel-related services, financial advisory services and international banking services worldwide.

Mr Pazzani says the company realised years ago that with banks issuing Visa and Mastercards, those credit brands would be diluted, and so hit upon the ultimate in branding propositions.

He calls Amex the "only financial services brand that can substantiate a consistent premium brand positioning on a global scale."

Crucially, Amex management infuses the organisation with the idea that service brands, such as a credit card, create a brand equity that develops from customer experience with the brand.

Mr Pazzani says the company works with two key mottos: the customer is (almost) always right, and exploit the "moment of truth."

The " moment of truth" will be the instant a card holder has a "heightened need" for customer service - for example, when he or she is stranded or the victim of theft or family emergency.

It is in those situations that the company strives to assert its reputation for customer service.

The situations, which are often used as the basis for Amex advertising, help feed the "service legend"of the card and ensure its brand positioning lives on.

One of the most potent examples, says Mr Pazzani, was in the Gulf War, when a pilot refuelled a fighter jet with his Amex card.

The story hit the headlines soon after and Amex was ensured a branding coup without rival.

Mr Pazzani says the most common questions that firms ask The Chess Team now are how to add internet and e-commerce capabilities to a company, and how to reposition a brand or company in a fast-changing business environment. Again, he points to competitors.

The Chess Team conducts in-depth research of a category's competitors when hired.

"While we are often asked to look at the perception of the company that is hiring us, we look more at the perception of its competitors - things like 'where are they going?' and 'how are they smarter?'

"We find the best companies mix smart thinking and innovation with some of the fundamentals - such as good customer relationships, solid branding and clever use of technology."