A Tale of Two Positions

Positioning by Ries and Trout a strategy classicAl Ries and Jack Trout wrote Positioning: The Battle For Your Mind to show how companies can capture a unique position for their brands in the minds of their customers. Almost all of their ideas are now gospel – and almost all of their examples use brands, technologies, and companies that are no longer a part of our ever-changing economy.

If they were to write Positioning today, Ries and Trout would use examples from the startup world. Perhaps they would cite the positioning strategies of Jet and Gusto.

A Position Stuck on the Runway

Jet is an e-commerce site offering a wide range of products at low prices. Jet has garnered substantial press and lots of investment, raising more than $200 million before launch.

The company originally built a business model based on a $50 annual membership fee and low prices. The prices would be especially low compared to competitors if customers would follow the site’s prompts to ship multiple items together. “If we can educate them that, ‘Look, instead of buying one thing every week, come back every two weeks and buy two things and you will save a few percent,’ it’s actually a lot of money,” said CTO Mike Hanrahan in a January cover story in Bloomberg Businessweek.

Jet.com marketing But Jet is attacking a position firmly held by established companies. Amazon’s Prime membership program, offering low prices and fast shipping for $99 a year, already counts 44 million members in the U.S. Costco’s $55 membership offers low-priced goods in stores and online to 81 million members. Consumers already think of these companies if they want to pay a membership fee in return for low prices and other benefits.

Even if Jet offers the lowest prices, with only $200 million it cannot hope to attack companies that control hundreds of billions of dollars in resources. The position Jet seeks as a low-price member club is just not available.

And so, three months after launching, Jet announced it would eliminate its membership fee. New York Times commenter Mitch P. wrote: “I don’t need a new vision of shopping. In fact I think my soul would reject any new shopping paradigms. For better or for worse, I’m sticking with Costco and Amazon.” There is no room in consumers’ minds for a new entrant in this space: the existing companies are dominant.

Jet is still trying to attract customers in expensive ways. The company continues to demonstrate its ability to shave its prices a little lower if customers accept restricted shipping or payment options. Jet’s new position could be described as savings through inconvenience. But this is a challenging position because it is difficult to make attractive in a few words, and arguably it is also covered already by Jet’s goliath competitors.

Jet tried to build a company based on pricing and technology, and not on positioning. And now Jet may be in trouble.

Too Much Zen Is A Bad Thing

In September, I received an email from startup ZenPayroll to let me know the company was changing its name to Gusto. The company also announced a line extension, introducing benefits and worker’s comp to its original payroll-as-a-service offering.

The company explained that the new name expresses the enthusiasm its customers feel for its service. This is a true statement in my experience. I know several small business owners who use Gusto, and they have a tendency to tell me how much they love their payroll provider (even though we are talking about something else). Gusto has good reason to feel it can increase its share of wallet from its loyal customers.

But still I question both the new name and combining the rebranding with a new product announcement. This plan doesn’t meet the rules of positioning.

Zenpayroll marketingZenPayroll always was a problematic name, partly because the company got unlucky. Founded in 2011, the company led a wave of businesses using the “zen” branding concept. As of late 2015, I count a dozen “zen” startups in the Bay Area alone:

  • Zenboxx (accessory for Macs)
  • Zencoder (basically Pied Piper (link), only real)
  • Zendesk (customer service as a service)
  • Zendrive (vehicle analytics using smartphone sensors)
  • Zendure (portable chargers for devices)
  • Zenedge (military-grade virtual firewalls)
  • Zenefits (cloud HR service)
  • Zenfolio (websites for photographers)
  • Zengularity (web app programming consultants)
  • ZenPurchase (procurement software; changed name to Coupa)
  • Zenput (mobile data collection software)
  • Zenti (data mining platform)

Zenefits, a competitor founded in 2013, was the real killer. Zenefits grew much faster than Gusto and provided a full HR platform. The names and market spaces were too similar, and so Gusto was ejected from its original brand.

But if the “zen” part was an unlucky loss, the “payroll” part was a foreseeable problem. In Positioning, Ries and Trout use Eastern Airlines as an example of a restrictive brand name. Customers would not consider Eastern a national carrier because its very name denied what it was trying to be. In the same way, ZenPayroll restricted itself from the very beginning with too narrow a brand.

Gusto marketingThe company has now replaced this issue with another. Gusto may be too clever – existing customers can appreciate it, while new prospects won’t be able to understand or differentiate it. A Google search for “gusto” made from a San Francisco IP address finds a number of other products using this name:

  • At least 3 restaurants in California
  • Nescafe Dolce Gusto single-serve brewing systems
  • The Mahindra Gusto scooter
  • A Yu-Gi-Oh! character named Gusto
  • The Samsung Gusto, a flip phone
  • And numerous coffee shops, apps, and other products

Gusto is prominent in paid advertising and is mentioned in articles, but the company’s site is nowhere in the native search results. And notwithstanding the quality of service Gusto offers, many of the products that share its name could be considered inferior by its typical buyer, an American manager.

Clearly the ZenPayroll brand had to change, but now it is not unique or clearly positive. Moreover, the company is trying to associate it with new products: workers comp and benefits. The net effect is to eliminate any position its name maintained in the minds of target customers. Gusto describes the mindset of existing customers but may not appeal to new customers because it is too widely associated with other product categories.

Better would have been to change the company’s name at least a year ago, as soon as the competitive threat from Zenefits was clear. Applying the tenets of positioning, ZenPayroll/Gusto could see that Zenefits had the better name and would dominate the broader cloud HR services category as long as Gusto kept its original name. Only once a new name was established should Gusto have attempted to introduce new products.

Gusto could thrive despite its positioning challenge. Positioning is important, but cultivating evangelical customers also can be a winning strategy. A different series of positioning choices would have set Gusto on a more blissful path.


Company logos courtesy of Jet and Gusto.

Reading with Steve: Positioning by Ries and Trout

Reading with Steve is a regular feature at SteveFeyer.com. Read product marketing and content marketing book reviews.

Positioning: The Battle For Your Mind is comprehensively outdated. And it is singly essential.

The 1981 classic by Al Ries and Jack Trout proves that the most important ideas in marketing do not change, even if the examples illustrating them do.

Positioning by Ries and Trout a strategy classicRies and Trout define the tenets of positioning, the art of influencing how prospective customers perceive a product. As a marketer, you can position your own product, a competitor’s product, or a whole market category. Your successful strategy may include all three elements. The authors use many broadly accessible case studies to show how to position.

The key tenet of positioning is to find a hole in the market – which the authors call a creneau – and to exploit it. The first step in exploiting a hole is to know where you stand in the marketplace. If you are not the market leader, you cannot market like the leader: determine what makes you unique and shout it. Above all, don’t attack an entrenched position held by a competitor.

The authors say much more and say it much better than I can. Simply put, Positioning is the Principia Mathematica of marketing strategy. It is revolutionary, yet as time passes a few of its topics begin to need further elucidation. The authors admonish that no position is forever secure, as markets and tastes are constantly changing. Just so, the rules they lay out for positioning have shifted in at least one notable way.

What’s In A Name

The rules of product and company naming have evolved. The authors write that a descriptive name, such as Taster’s Choice coffee, is better than a coined name. A name without intrinsic meaning can only work “when you are first in the mind with an absolutely new product”, such as Coca-Cola.

In the past generation, descriptive names tend to get lost in the marketplace because they don’t have the memorability of a good coined name, particularly if the coined name can extend an existing product category with a new standard of service or quality.

Consider Starbucks, for example. It is a meaningless name in a crowded coffee market. But Starbucks established a new category of premium product and service, and so could position its nonsense name in the market. With the explosion of companies and brands, evocative-but-made-up names are often highly successful. And few consumers under age 30 would know what Taster’s Choice is.

Many failed dot-coms followed the logic of descriptive naming and failed. If a descriptive name held any intrinsic advantage, Books.com would have bested Amazon.com. In the digital age, it turns out, people have a more complicated mental model for the signals of desirability contained in a name. Ries and Trout’s advice on naming is not wrong, just too simplistic for the 21st century.

Some Things Can Never Change

The biggest change in business life since 1981 is the rise of startups, which now dominate the landscape of imagination as IBM once dominated computing. Ries and Trout almost exclusively draw their examples from large companies in established markets. They have little to say about how these brands came to become so dominant. If you are an entrepreneur, you may be tempted to conclude that these examples don’t apply – as many recent successes have claimed to part with past history.

The case studies are universally out of date, yet if anything this slim volume is more powerful for its archaic examples. Cited companies have folded and quoted ad campaigns are long over, forcing the modern reader to generalize the lessons.

Alcohol as a product marketing example
One possible inspiration for great writing.

I was struck that many of the examples use alcohol, beer, and wine. One imagines the authors, casting about for illustrative cases, opening a desk drawer to pour two fingers of inspiration. I found the constant booze examples surreal, but they in no way detract from the value of the case studies. What once worked for scotch and Schlitz can also work for websites.

You would ignore the rules of Positioning at your peril. In my next post, I’ll discuss two startups that failed to consider positioning first and may pay for it later.

Buy Positioning.


The Permission Revolt and Interruption Entertainment: A New Era For Marketing

A permission marketing revolt

This post is the second in a series inspired by Seth Godin’s Permission Marketing. For the first part, go here.

A rebellion is brewing all around us. You may be a part of it.

Many marketers follow Seth Godin’s permission method, yet the evidence shows a permission revolt against all marketing. Consumers are rejecting Internet marketing that feels intrusive, and we are entering an age of mistrust from a significant slice of the most coveted demographics. Marketers today are following permission rules to the letter, yet they’ve lost sight of the meaning behind these rules. The concomitant rise of interruption entertainment points to what consumers really want to pay attention to. Modern, savvy consumers demand a higher standard for their attention. Marketers can respond by rereading Permission Marketing and using modern tools to renew their commitment to Godin’s rules.

Permission Marketing by Seth Godin is critical product marketing readingA prospect or customer will not allow a marketer to speak to them unless the message the marketer provides has three characteristics. To build and maintain a relationship, Godin writes, a marketing communication must pass three tests:

  • It must be anticipated. The recipient is expecting to receive a message and is even looking forward to it.
  • It must be personal. The message must speak directly to the receiver, and show respect for their time.
  • It must be relevant. The message must address a need or desire of the recipient. It must speak their language.

These characteristics lie at the heart of permission marketing. To first reach a prospective buyer, however, the marketer must use a traditional interruption technique (TV ad, direct mail, banner, etc.) to get the prospect’s attention and ask for permission to build a relationship.

Down The Rabbit Hole

Reading the last sentence, perhaps an objection is forming in your mind. Marketers don’t have to interrupt their customers at all, you think. What about search engine marketing? You are exactly right.

Technology has accelerated since Godin published his book in 1999, leading marketers on an ever-faster chase to reach their markets. Yet in their quest to smooth and perfect the permissive techniques they use, marketers are leaving consumers behind. Some consumers are in open revolt.

Ad blocking. Consumers are increasingly refusing advertising on the Web, using ad blockers to prevent marketers from reaching them. One study found 15% of US Internet users blocked advertising as of this summer, a share that has doubled in two years[1]. A different report released at the same time showed 10% of US users blocking ads, but also noted that these consumers were younger, wealthier, and spent more time on the Internet than those who did not block ads[2].

Adobe PageFair 2015 Ad Blocking report

When Apple’s recent iOS 9 operating system allowed ad blockers on iPhones, paid ad blocking apps immediately became the most popular downloads on the App Store [3]. The mass refusal to view Web ads is fast picking up steam.

Retargeting unease. Consumers have quickly turned against retargeting, a tactic solely designed to give Web users information they want to make a purchase. A 2013 survey found just 11% of Internet users had negative reactions to retargeting, compared with 30% positive reactions[4]. A year later, a different survey found a range of mostly negative reactions to retargeting, ranging from annoyance to anger, and clear evidence that repeated retargeting discourages future purchases[5].

Retargeting is not popular

This promising technique appears to find trouble only months after consumers first become aware of it.

Privacy. Some consumers do not trust the often-anonymous organizations that track their Web activity, and are choosing service providers that promise not to provide personalized marketing. One visible company riding this trend is the anonymous search engine DuckDuckGo, which has seen its search traffic more than double year-over-year while Google’s traffic has reportedly grown at a 10% annual rate[6, 7]. Granted, Google still would not consider this a threat to its search business: DuckDuckGo traffic represents about 0.3% of Google’s volume. Anonymous Web use is an imminent risk to marketers and publishers.

Escape from email. Even email, a favored opt-in channel, may face a reckoning. Thirty percent of email users change email addresses annually. Twenty-one percent of email users will report opted-in email as spam, presumably because it is easier than trying to opt out[8]. A different survey finds that 70% of spam reports are for offers the recipients simply don’t want to receive anymore. Just 40% of consumers say they enjoy getting email from their favorite brands[9]. Email users are overwhelmed and tired of commercial messages.

Marketers have fine-tuned their methods to build detailed dossiers on everyone they speak to. We should be entering a golden age of perfect audience engagement. If marketers can seamlessly provide the information consumers need, consumers ought to be thrilled. Yet the very opposite seems to be occurring. Why?

I Know What You Did Last Summer

Consumers are wary partly for reasons completely outside of marketers’ control. Recent revelations about government data collection have eroded trust in any organization that tracks individuals, certainly in the US. But this is not a full explanation.

Godin intends for permission to mean a customer “raising their hand” to start a relationship with the marketer. This acceptance is explicit and mutual. Yet marketers are often following the letter of Godin’s rules without observing their spirit. Above all, many marketers have forgotten that reaching consumers is a privilege rather than a right. This leads to engagement experiences that can be bothersome, creepy, intrusive, and unwelcome.

  • Do you look forward to hearing from brands? You may when it is a few companies that contact you, however most consumers hear from dozens of companies. Often marketers seek permission to begin marketing in subtle ways: you will receive email unless you uncheck a box, or even as a term of use. Technically the marketer received permission so you should expect to receive marketing materials. But you will not welcome them. The effect is multiplied by frequent mailing list rentals. In the end, you are more likely to tune out all marketing rather than pick through the pieces for a few items you really want.
  • What do you think when an advertisement has your name on it? In the age of postal mail all letters came addressed to us personally. In the age of the Internet we are more likely to be irritated to see our name in flashing lights and subject lines. We know perfectly well that the message is not individual, it is just tailored by a piece of software that can insert our name (and other details) into the message. Personalization means a card on my birthday – yet even this classic keep-in-touch technique is cheapened by the ease of automation. The Internet has debased the personal so that a veneer of individualization is no longer special.
  • Do you think Google knows too much about you? How about the hundreds of corporations that have a profile on you? These dossiers in theory should allow for more relevant product offers and experiences than even before. In practice, they also lead to persistent tactics that become intrusive, such as retargeting that continues after a consumer completes a purchase and makes that consumer less likely to repeat the purchase in the future. Offers can even be too relevant, leading to fear and mistrust. How would you feel being outed by Facebook or learning that your daughter is pregnant from Target?

Think of the Internet as an endless series of blind dates. On a good blind date, you meet your partner at the appointed time (anticipated), your date remembers what you spoke about over email (personal), and you start to build a relationship on things you have in common (relevant). Good permission marketing can feel just as positive.

A bad blind date is what bad marketing is likeFor many consumers, modern Web marketing feels like a nightmare blind date. He rings the doorbell at a random time, maybe five minutes after you first agreed to meet or maybe five months later. Your date can recall everything about you, but inserts each detail into an obvious shell story that has nothing to do with you. In fact your date knows far more about you than you told him. He shows up with your favorite kind of chocolate, tries to take you to your favorite restaurant and movie, and even offers to pick up your friends on the way. How would you feel about that interaction?

You’d flee. After several experiences like it you might reject dating altogether.

The B2B Impact

Business-to-business marketers are just as impacted as are consumer marketers. Even though many B2B companies do a better job of cultivating and educating buyers, they are still prone to send thinly personalized and irrelevant information at the wrong time. What’s more, they are equally harmed if a prospect decides to start ad blocking or to spam-button every commercial message. The permission revolt will not spare B2B even if it comes more slowly.

Market-Us Interruptus

Many marketers are trying very hard to follow Godin’s prescription, and you might argue that the examples of failed anticipation, personalization, and relevance aren’t fair. If these tactics don’t meet the standard, how could anything?

Perhaps existing tactics could receive a better reaction if marketers stop depending on the seamlessness of modern technology, start seeking more explicit permission, and understand that consumer expectations have risen.

As Godin originally conceived it, permission is an explicit opt-in step. The consumer first indicates a willingness to receive marketing messages, usually in exchange for some benefit. Today’s Internet no longer demands this explicit agreement. Instead, marketers often seek permission through terms of service that no one reads, through hard-to-see opt-outs, and through list sharing. Customers may technically agree to these terms, but if they had been asked most would not have granted permission. (A few would, representing the motivated audience permission marketing is designed to build.)

Even more subtle are sitewide terms of use that authorize tracking which consumers implicitly accept the moment they enter a website. Web users no more accept this arrangement than air travelers accept going through security screening. It is presented as an option, but in reality it is mandatory – and thus permission is not granted at all.

Marketers like these tactics because they don’t create an interruption. If consumers are stopped by a pop-up window asking for permission to market to them, won’t most refuse? It’s far better to skip this step and put permission in the background. (The one major advertising channel which avoids both asking for permission and creating an interruption – SEM – unsurprisingly wins the largest share of online ad dollars. But this method cannot in itself build a relationship.)

Yet Godin conceives of interruption as the essential first step to gaining permission from the consumer. Though this step is no longer technically necessary, it is still important. Implicit permission is hardly permission at all. Without an initial interruption, the subsequent marketing will always feel like an interruption to consumers – who will respond accordingly. Marketing from implicit permission can lead to sales but cannot lead to relationships with consumers. When the messaging assumes the relationship, consumers turn away.

Marketers who offer good value in return for the consumer’s attention – and who appreciate the need for anticipation, personalization, and relevance – will still build trusted and profitable relationships. Modern tools do not absolve us of this requirement, and in fact elevate it further. Our personal habits on social networks and mobile phones tell us why.

Angry Birds and Happy Customers

Back in 1999, when Seth Godin first differentiated interruption marketing and permission marketing, an interruption was typically considered a bad thing. Today we don’t perceive it the same way at all, at least if we are interrupting ourselves.

Most consumers are using social media and mobile phones every day of their lives. In 2013, the typical consumer checked their smartphone 144 times a day, an average of once every seven waking minutes. About 50 of those checks were for reasons that could be considered entertainment, such as music, games, photos, and social media[10].

Kleiner Perkins Caufield Byers Mary Meeker phone use report

And no doubt our average consumer spent even more time with these distractions on their laptop.

These self-interruptions have become a major source of entertainment in our lifestyle. And it’s no wonder. The services we access so incessantly from our smartphones meet all of Godin’s three rules handily. They are wholly anticipated – desired, craved, even beloved. They are insistently personal, representing communication with our entire circle of acquaintances, or our selection of the one out of millions of apps that is more pertinent to our lives. They are precisely relevant, giving us tweets on up-to-the-second news and real-time photos of our friends. We are willing to distract ourselves – every seven minutes! – because the message is so intensely desirable. Social and mobile has led to interruption as a form of entertainment.

Marketers have shifted ad dollars to Facebook and optimized landing pages for mobile. These obvious reactions to this new world are just just shifts in tactics. Often they don’t recognize the full implications for marketing engagement.

Marketers hesitate to interrupt consumers and the experiences they offer are not as fascinating as interruption entertainment. Couldn’t the permission revolt be quelled if consumers feel that their permission is being respected? And won’t consumers engage if the marketing content is as interesting as an extra life in Angry Birds 2?

Godin gives numerous examples of good permission marketing in his book. They all required an interruption. And notably, some don’t quite meet the criteria of anticipated, personal, and relevant. The frequent flier program he cites doesn’t truly build a personal relationship with the air traveler. A technology company that sends offers for add-ons may be none of these, even though it asks its users to opt in. Columbia Records is lauded for negative option marketing, a tactic that is now discredited by Internet scams.

These examples of permission marketing were great then but would not be so successful now because we have become more demanding. If our glowing rectangle of entertainment can enthrall us so totally, we will only pay attention to a marketer who can do the same. If Angry Birds were reskinned as Coca Cola Crash players would like it just as much. Only many brands have not created anything so compelling.

Marketers today must accept the implications of our interrupted life and adapt their understanding of permission marketing to it. Marketers should have the courage to interrupt us, provided that the information they offer is able to capture our attention as fully as our voluntary interruptions. If they fail to interrupt us, they must accept that no implicit permission will ever take the place of explicit permission, and their efforts to engage with us later will always be treated as unwanted interruptions.

In a future post I will show how some brands are thriving with true permission marketing in a world of interruptions.


[1] The 2015 Ad blocking Report | Inside PageFair

[2] comScore and Sourcepoint: the State of Ad Blocking – Sourcepoint

[3] After iOS 9 launches, Ad blockers top the App Store chart | Naked Security

[4] Online Buyers Notice Retargeted Ads – eMarketer

[5] It’s Official: Consumers Are Just Not That Into Retargeted Ads – ExchangeWire.com

[6] https://duckduckgo.com/traffic.html

[7] Google Search Statistics – Internet Live Stats

[8] 15 Email Statistics That Are Shaping The Future: Convince and Convert

[9] Email Statistics

[10] 2013 Internet Trends – Kleiner Perkins Caufield Byers


Minneapolis Scientology Protest by Tony Webster     CC BY 2.0

The 2015 Ad Blocking Report, August 10, 2015 by PageFair and Adobe. Page 4 of PDF.

Reaction to frequency of retargeted online ads, October 23, 2014 by InSkin Media and RAPP published in ExchangeWire.

Blind dates by Bruce Lanza     CC BY-SA 2.0

2013 Internet Trends, May 29, 2013 by Mary Meeker and Liang Wu, Kleiner Perkins Caufield Byers. Page 52 of report.