Best of enemies: Your fiercest foe can be your brand’s major asset David Teather reports on the symbiosis of deadly retail rivals.

Would Sebastian Coe have pocketed the number of medals and world

records he did in an illustrious career on the track without the spur of

rival Steve Ovett? Possibly not. Would Martina Navratilova have dug so

deep to collect her nine Wimbledon singles titles without Chris Evert to

hone her game and keep her fighting? Fanciful, perhaps, but maybe

not.

Sometimes the best of enemies can be more of a reason to raise your game

than support from the best of friends. And, nowhere do the parallels

exist more clearly than in the field of business and marketing.

Would Unilever innovate without the threat of Procter & Gamble? Would

Virgin Atlantic exist if not for BA - the yin for BA’s yang - and would

McDonald’s have spread its tentacles so widely if not for the

ever-present threat of fast food rival Burger King?

The classic rivalries in marketing are played out on several levels.

At its most obvious, the great head-to-head is expressed in

down-and-dirty comparative advertising, such as Burger King comparing

the size and quality of its burgers with those made by McDonald’s. Car

hire group Avis ran with the advertising slogan ’Our queues are

shorter’, making a virtue of the fact that its larger rival Hertz was

more popular.

The relationship of the world’s biggest marketing company, Procter &

Gamble, with arch-rival Unilever can be traced through almost every

aspect of its business, from new product development and innovation to

packaging, pricing and advertising - even how many products are on the

shelves. The battle has been fought through liquids, big box powders

and, most recently, detergent tablets.

Opposites attract

In some instances, a company’s entire identity can be shaped by trying

to counter its opponent’s brand values and associations - something

which Virgin Atlantic chief Richard Branson has always made currency of.

When BA dropped the Union Jack from its tail fins, Branson was crowing

in the weeks that followed that Virgin was proud to fly the flag and

stuck one on his own livery.

The move afforded Virgin the usual column inches of free publicity and

allowed the airline to define itself further in the minds of travellers

by direct comparison with its chief rival. Virgin Atlantic’s struggle

with BA, including the whole ’dirty tricks’ episode, has helped to

position the younger company as a heroic David versus a lumbering

Goliath.

Sam Smith, a veteran of both Burger King’s and McDonald’s marketing

departments and now managing director at creative agency FCA!, says that

close rivalry makes a business try harder. ’The analogy is a street of

restaurants which attracts people to the area and makes you better

because you need to compete. It’s terribly healthy and you can learn a

lot from each other.’

The relationship between the two companies can be so intense that they

begin to play off each other. Smith cites the BSE crisis when she was at

Burger King. ’We were all watching each other to see how we played the

market. We quietly announced that we had begun to bring beef in from the

Netherlands and McDonald’s then put a lot of money behind its own move,

which helped us enormously.’ She adds: ’There is always a lot of close

rivalry in new product development as well. At Burger King we introduced

new fish finger products for kids and McDonald’s followed. It’s that

kind of thing that ups the ante.’

In his recently published book, Marketing as Combat, Nick Skellon draws

a parallel between military and business strategies. He quotes the

ancient Chinese military strategist Sun Tzu: ’Know the enemy and know

yourself, and in a hundred battles you will never be defeated.’

The classic example of a company which failed to do this is Marks &

Spencer, which ignored the rise of companies such as Next and The Gap

and continued ploughing its own increasingly outdated furrow. One by one

the planks of M&S’s ideology, such as not advertising or accepting

credit cards, have been removed, but only as its situation in the high

street and the stock market deteriorates.

Skellon lists others that have taken their eye off the retailing ball,

such as Shell, Sainsbury’s, Boeing, ICI, Nike and BA. ’Some of these

companies act as if their financial performance will automatically

improve year after year according to some kind of immutable law,’ he

says. ’No matter how big or established or loved it is, no company has

an inviolable right to existence, never mind to ever-increasing sales

and profits. Their continued existence (let alone their ability to grow)

is conditional on whether they can give value to their customers better

or cheaper than the competition.’

Richard Hyman, chairman of retail analysts Verdict Research, says that

Sainsbury’s suffered from complacency. ’Tesco was ducking and diving and

innovating, and Sainsbury’s was arrogant and haughty. There was intense

rivalry between the two for many years, but for the past three or four,

Sainsbury’s has been on its back. The battle for hearts and minds is

really now between Tesco and Asda.’

Trench warfare

But there are also dangers in long established rivalries - not least

that innovation will be stifled by marketing managers for whom losing

share is more on the mind than the possibility of large gains.

Skellon likens markets dominated by two large rivals to trench

warfare.

’It is like the First World War. You’ve got two sides entrenched and

having to fight, but not doing so with any imagination. The result is

they throw resources over the top which are wasted.

’When two companies have been engaged in a competitive struggle for

years it is considered a massive success to gain 100 yards of mud (or an

increment in market share) No one expects to gain 20 miles, so no one

sets their sights on it.’

In the consumer goods market in Britain, head-to-head conflicts have

often arisen as supermarket chains axed tertiary brands in favour of

giving shelf space to their own-label products. The result is that

third-placed brands in a market have simply been squeezed out,

intensifying the rivalry between the top two.

In large organisations slugging it out for incremental gains in market

share, and where the status quo has been in existence for some time, it

takes a brave marketing director to make any real changes. One former

P&G marketer tells how it took almost five years to get the company to

agree to a design change on one of its major brands. He also says that

the company watched the movement of its rivals with hawk-like intensity:

’Every action of Unilever had to have a P&G reaction. You watched their

brands, their prices, their new products and promotions and you were

expected to have a response.’

But maverick marketing moves, in markets with strong competitors, can go

disastrously wrong. It is quite telling that the biggest marketing

gaffes of recent years have come from companies in intense

rivalries.

New Coke, Persil Power or BA’s tail-fin fiasco all seem to have

originated from a desperate attempt to deliver a knock-out blow.

With BA and Coca-Cola it was perhaps a case of market leaders paying too

much attention to the smaller number two. BA’s adoption of ethnic

tail-fins, which created such a furore, could be interpreted as an

attempt to ape Virgin’s freewheeling image. The same is true with ’New

Coke’, launched in 1985 to combat Pepsi’s encroachment into the cola

market.

Pepsi had been achieving success with its advertising campaign calling

on consumers to take the ’Pepsi Challenge’, which was repeatedly showing

that people preferred its sweeter taste to Coke - a finding reiterated

by Coca-Cola’s own research.

In taste tests with a new, sweeter formula Coke found 55% preferred the

taste to its traditional flavour and used it as the basis for New

Coke.

But the backlash was enormous and, within four months, the company was

forced to reintroduce the old formula as Classic Coke. Unnervingly for

Coke, Pepsi has recently revived the challenge in the US.

The danger is also that, in markets where there has been a status quo

for some time, the two or three largest players spend too much time

circling each other and ignoring hungry and innovative outsiders.

Tom Day, who runs a course for the Chartered Institute of Marketing

called Marketing Warfare, comments: ’A market which is dominated by two

players is not necessarily good. They don’t really innovate, don’t

improve their products and services and get lackadaisical. They just

look at each other and don’t look at who else is out there. IBM lost it

because it couldn’t react to change. It believed its own

propaganda.’

Stealth attack

Skellon, a Pepsico veteran, recalls how Walkers crept up on the crisps

market when it was still dominated by three players - Golden Wonder, KP

and Smiths. The three giants were pumping the bags out and selling them

at commodity prices - which meant that the product often stayed around

for a long time on the shelves and lost its freshness.

Walkers, however, made sure its bags were on-shelf for half the time of

its rivals - while charging a slightly higher price. The strategy was

successful; the fresher product has edged KP and Smiths out of the

market.

In recent years the scenario has been played out in a number of

markets.

While Hoover was watching Electrolux, James Dyson came up with the

bagless vacuum cleaner and, from a standing start, reshaped the market

virtually overnight.

Advances in technology can also catch big companies on the hop,

especially if their attention is focused elsewhere. In the US book

retailing sector, Borders and Barnes & Noble were locked in a

long-standing rivalry when Amazon suddenly appeared online. It took

Barnes & Noble a long time before it launched its own internet business,

during which time Amazon has built up a very strong brand.

Companies in hitherto stable markets are often reluctant to change the

way they have been doing business successfully for years. They may also

be stuck within certain distribution networks in which they have a

vested interest. The personal computer market was shaken up when Dell

began selling direct to consumers, and First Direct and Direct Line

caused the financial services establishment to sit up and take notice

when it proved it was possible to operate without a physical presence on

the high street.

’Change is the thing that does the damage,’ says Day. ’The companies

that are good in stable markets often don’t have the strategy to manage

change. I walk into some big companies and you can smell the laziness

and arrogance. Then look at a company like Cisco, which thrives on

change and change management.’

Arms race

Tom Blackett, group deputy chairman at Interbrand Newell & Sorell,

argues that the amount of money spent on marketing and new product

development to inch ahead of a key rival can be an enormous waste of

resources - an arms race where neither side can afford to scale down

their investment.

’Marketing guys in these situations sit around and come up with plans to

spend so many millions to gain so much market share,’ says Skellon, who

has also worked in the marketing departments of Rothmans, Mars and

Duracell. ’They assume the competition won’t do anything in the

meantime, but their counterparts have exactly the same plan. The

marketing spends just cancel each other out.’

But, despite the caveats, two companies dominating a sector can raise

the stakes enough to leave both with bigger sales and a tighter grip on

the market. The US burger wars are a prime example. In 1995, growth in

American outlets of McDonald’s and Burger King’s domestic market was 5%,

as the chains continued to open new stores, but growth in sales was just

2%. In the past two years, however, by stepping up promotional activity

and revamping menus in a very tight market, the chains have managed to

increase demand by 4%.

Just over a year ago, McDonald’s launched the ’made for you’ cooking

system, so that each burger is assembled to order, providing fresher

food tailored to the customer’s preferences. The programme was a clear

attempt to meet Burger King’s promise of food ’your way’. The result of

the intensifying competition is that, last year, both companies enjoyed

better market share.

McDonald’s rose from 42.2% to 42.7%, while Burger King grew from 19.4%

to 20.2% according to market research group Technomic.

In the detergents business, the intense pressure between the two biggest

players has squeezed smaller players. Unilever’s success with Persil

tablets, which restored the brand to number one in the UK, has helped

take its overall share of UK detergent sales from under 30% to more than

35%, but not at the expense of P&G, which still hovers around 50%.

It seems intense competition between two rivals can benefit both sides,

and the consumer - and can lead to the creation of great brands. The

challenge is keeping them great.

This article was first published on Marketing