---
title: "Even If Burned Down, Reviving Coca-Cola in 3 Months Is Not a Myth"
description: "This article discusses how business results are defined and achieved, emphasizing that the ultimate battlefield is the customer's mind. It uses the example of Wang Laoji defeating JDB to illustrate that brand and positioning are key, and introduces the three major contributions of positioning theory and the basic methods of brand building."
author: "冯卫东"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2018-12-29"
language: "en"
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# Even If Burned Down, Reviving Coca-Cola in 3 Months Is Not a Myth

> This article discusses how business results are defined and achieved, emphasizing that the ultimate battlefield is the customer's mind. It uses the example of Wang Laoji defeating JDB to illustrate that brand and positioning are key, and introduces the three major contributions of positioning theory and the basic methods of brand building.

Source: Notesman

* What was behind Wang Laoji's defeat of JDB?
* Why do we think of Gree first when buying air conditioners?

Never claim that what you know is right; instead, verify it. Also, don't assume customers know themselves as well as you do; treat them as novices.

**Lean startup and positioning share much logic; they are largely about managing cognition.**

Lean startup manages the entrepreneur's self-awareness, while positioning aims to effectively implant your information into the customer's brain, influencing their choices and perceptions.

**I. Correctly Defining Business Results**

When running a business, the first issue is how to define business results, and the issue of results is a strategic issue.

Although Drucker's book "Managing for Results" doesn't include "strategy" in its title, it is the first important strategic management book in business history. He himself regretted not naming it "Strategic Management."

Drucker pointed out: Managing a business means defining its business results.

When we start a business, we may have initial intentions and sentiments. No matter how you motivate yourself, you plunge into the business world with eyes closed.

But once in the market, the market has its own laws and will test your intentions and sentiments, which may align with results or be contrary.

**How are business results defined?**

**Consider a famous business legend:**

Robert Woodruff, the legendary president of Coca-Cola, said: Even if all Coca-Cola factories were burned down, give me three months, and I can rebuild the complete Coca-Cola.

If the fire were more intense, burning all supplier information, could it still be rebuilt? Some say supply chain is the core competitiveness. Yes, it can.

If the fire were even more intense, with the saying "channel is king, terminals win," if distributor information were burned, could it still be rebuilt?

Even more cruel, if employees perished in the fire, could it still be rebuilt? Your answers are all yes. Is this answer a belief or a verified conclusion? It's an unverified belief.

As entrepreneurs with scientific spirit, such a major assumption naturally needs verification. But in real life, such experiments are hard to conduct.

**Fortunately, business itself is a big laboratory; reality is always richer than myth.**

Look at China's herbal tea war. Guangzhou Pharmaceutical acquired the Wang Laoji brand through litigation, but it didn't expect to win the lawsuit so quickly.

The "Wang Laoji" brand that Guangzhou Pharmaceutical obtained was like Coca-Cola after a fire. Because for over a decade, JDB had been operating the "Wang Laoji" brand, Guangzhou Pharmaceutical had no supply chain, no sales system, and no employees.

Guangzhou Pharmaceutical urgently dispatched five executives to build a 3,000-person FMCG team within six months. Worse than the Coca-Cola fire, after Guangzhou Pharmaceutical got the "Wang Laoji" brand, JDB spent 5 billion on advertising that year:

> Red can herbal tea renamed JDB.

Moreover, Guangzhou Pharmaceutical is a state-owned enterprise, while JDB is a private enterprise and a Hong Kong-funded enterprise. In terms of mechanisms, how could a state-owned enterprise beat a private one? So at the time, we all thought JDB would win and Wang Laoji would lose.

But in fact, Guangzhou Pharmaceutical's "Wang Laoji" resumed production, and wherever goods were distributed, they quickly regained market advantage.

Coupled with JDB losing the red can lawsuit and being forced to use gold cans, plus negative news like executive departures, unpaid wages, and strikes, the herbal tea war ended with Guangzhou Pharmaceutical Wang Laoji's victory.

Behind Guangzhou Pharmaceutical Wang Laoji's defeat of JDB was the role of business results.

We can imagine that if Coca-Cola needed a loan for rebuilding, banks would line up to lend; venture capital would also line up to invest. Suppliers and distributors would return at a trade fair, perhaps even more. For recruitment, the queue of applicants might exceed Foxconn's.

Behind this, all stakeholders can see that an important result still exists: consumers' continued purchase of the brand. Consumers are still waiting for Coca-Cola to be on shelves. This is the foundation for Coca-Cola's rebuilding.

**Of course, to destroy this result, a real fire isn't needed; just a little something in the customer's mind.**

> For example, domestic rumors that Coca-Cola kills sperm, or that sugary drinks harm health, can affect cola sales. So the real result is in the customer's mind.

Drucker pointed out: Business results come from outside the enterprise. Inside the enterprise, there are only costs. What fire can burn are cost items, which can be rebuilt with money.

But Drucker didn't answer where outside the enterprise business results exist and in what form.

Positioning theory has a clear answer: Business results exist in the customer's mind, influencing their choices. The carrier of this cognitive advantage is the brand.

The first cognition that positioning theory establishes is that the brand is the core result of business operations.

**How are results presented? Drucker said: "The only purpose of a business is to create customers."**

Since the brand is the core result, how does it create customers? Brand creates customers through mental pre-sale.

That is, before going out or opening an app, you have already chosen it; subsequent actions are just executing that choice.

The concept of creating customers is abstract: customers choose you before seeing your product or service; they are already your customers. In sales, this manifests as named purchase.

For example, Coca-Cola completes mental pre-sale. In a convenience store, the first customer asks for Coca-Cola by name; if the store doesn't have it, the customer leaves.

If three consecutive customers ask for Coca-Cola and it's not available, the store manager's psychological area would be huge. At that point, the manager would definitely seek a Coca-Cola supply source.

For Coca-Cola or distributors, the easiest business in the world is the business that comes to you. This is Li Ka-shing's saying.

**Conversely, if your brand hasn't completed mental pre-sale and customers don't have you in mind, sales are on-site and random.**

The more shelves you have, the higher the probability customers encounter you; the better the position, the easier they see you and pick you up, increasing sales chances.

But this sales is created by the shelf. There's an iron law in market competition: the premium law.

Whoever creates value gets the competition. Sales are created by the shelf, so you can't take it away; you also pay entry fees, barcode fees, shelving fees, stack fees... it's painful.

Many suppliers now call on the government to address so-called unfair terms, believing retailers exploit suppliers with various unreasonable charges.

In a market economy with mutual consent, there's nothing unfair or unreasonable.

If you feel it's unfair, you can withdraw; after you withdraw, your competitors will enter immediately. Therefore, excess profits in sales are not the retailer's arbitrary terms but your competition with competitors for that shelf.

When we invested in Zhou Hei Ya, it was largely because Zhou Hei Ya was already a brand, completing mental pre-sale.

**At that time, Zhou Hei Ya ranked only fifth in the industry by scale, but many people on business trips to Wuhan would bring Zhou Hei Ya for friends.**

This is named purchase. Also, Zhou Hei Ya hadn't left Wuhan, but there were many counterfeit Zhou Hei Ya stores nationwide.

Counterfeit Zhou Hei Ya rather than others is because hanging that sign attracts more customers, completing pre-sale through the brand.

We recently invested in Bao Master, almost the same picture. Bao Master has 30 stores, but there may be no fewer than 300 counterfeit stores in the market.

We invested because the core business result behind it is confirmed; as long as there are no food safety or store management issues, growth will be smooth.

We can dig deeper. The basic assumption of economics is that choices are rational.

When customers choose you, for them, the value must be greater than the cost. The key is how customer value is composed.

Why is brand value also a component of customer value? We often see identical products with different labels sold at different prices.

**Original factory, original order, high imitation luxury goods, but if it's LU instead of LV, the price can differ tenfold.**

Product value is a basic component, but it's easily homogenized. So in competitive markets, more value comes from brand value.

**Intrinsic value in product value is the part not changed by others' opinions.**

For Robinson alone on a desert island, an axe has great intrinsic value—it can cut trees, build shelter, and defend against beasts. But a one-carat diamond has little intrinsic value for Robinson.

When hungry, it can't be eaten; when cold, it can't be worn. Diamonds have extrinsic value far exceeding intrinsic value, because wearing such a diamond requires social value and social evaluation.

An old Chinese saying goes: "Returning home in wealth without showing off is like wearing brocade at night."

From any economic perspective, the value of brocade is extrinsic; it's meant to be seen by others. If you must walk at night, the extrinsic value is wasted.

From a product value perspective, except for a few where technological progress gives you an edge, most categories may have little difference.

**For example, the intrinsic value of Baishuishan, Nongfu Spring, and Wahaha water is very similar.**

Returning to customer choice, to greatly reduce customers' choice costs, pay more attention to brand value.

**One is assurance value, which works at the purchase stage, helping customers make quick choices and buy with confidence.**

When buying stainless steel tableware, if there's a brand label, you feel it's a regular manufacturer and buy with more confidence.

Another is signaling value, which continues to work during use, signaling personal information like wealth, status, knowledge, taste, etc. For example, to show wealth, you don't pull out your bankbook but the Maserati keys.

**Do a small exercise:**

1. What value does Dole banana brand have?
At the purchase stage, seeing this brand's bananas gives you confidence; that's assurance value. Buying as a gift, giving branded bananas shows your attention to the guest, so branded bananas also have signaling value.

2. Is there negative extrinsic value?
Extrinsic value arises from others' opinions; negative extrinsic value means others' opinions are negative, making you psychologically reluctant to use such products, wanting to hide them.

For example, cigarettes once had positive extrinsic value, seeming masculine; now smoking has shifted from positive to negative extrinsic value.

3. Is there negative signaling value?
If consumers have a negative view of the brand, the brand's signaling value is negative. For example, many joint-venture car owners spend money to remove the brand badge. At least 100 yuan to knock it off.

4. Can B2B brands have signaling value?
Signaling value doesn't mean showing off; it's about conveying internal information to others. For example, listed companies say their financial reports are audited by the Big Four, signaling that the company is well-managed.

Classifying customer value has practical guidance. Look at P&G's diaper example.

Before launching diapers, P&G did extensive market research and found one pain point for new mothers was poor sleep, because babies wet the bed and cry, mothers get up to clean, leading to postpartum depression.

Targeting this pain point, the initial marketing appeal was "Use Pampers, let mom sleep well."

But sales were poor. Later consumer research found mothers felt guilty using diapers, thinking they weren't good mothers.

Then it changed to "Use Pampers, baby dry and sleeps well." This change made it sell like hotcakes. Later surveys showed mothers would feel guilty if they didn't use it, thinking they were stingy mothers.

**Brand is not a scam to sell straw as gold, but a device to improve social and economic efficiency.**

Brands can save costs and then obtain part of the savings as excess profits. Brands bring the following socio-economic efficiencies:

**1. Reduce information costs between enterprises and customers:**

> Brands provide assurance value, simplifying customer choices;
>
> Brands promote economies of scale;
>
> Brands promote specialized division of labor.

**2. Brands reduce information costs between customers and their stakeholders:**

> This reflects the signaling value of brands, simplifying customer communication;
>
> Brands assist in information transmission and expression;
>
> Brands reduce transaction costs.

**II. Three Major Contributions of Positioning Theory and Strategic Non-Common Sense**

Positioning theory was founded by Al Ries and Jack Trout, who later wrote over 20 books.

**I summarize positioning theory into three major contributions. Mastering these three contributions allows you to gain 80% of the benefits according to the 80/20 principle.**

Positioning theory should reshape our strategic concepts and become new common sense, but it hasn't yet.

Imagine a scenario: a $20,000 watch sold by two young women—how much could they sell it for? Maybe not even a few hundred dollars.

**What determines customer behavior is not the fact of whether the watch is real or fake, but whether the customer believes it's real or fake.**

This is what positioning theory says:

Cognition is greater than fact.

This statement is still vague; its true meaning is: cognition's influence on behavior is greater than fact's influence on cognition. If facts aren't transformed into cognition, they have no effect on behavior.

Customers are unwilling to buy a Rolex from a street vendor. Where does this cognition come from? It's built from a combination of multi-level facts and cognitions.

If I buy a watch here and get cheated, there's no way to find you.

But customers will buy at a Rolex boutique in a shopping mall, because the boutique has huge investment; cheating one won't recoup costs, and cheating many would have been caught long ago.

Also, the mall endorses the boutique; "the monk can run but not the temple." Interlocking facts shape customer cognition.

**1. First major contribution: The ultimate battlefield of competition is the potential customer's mind**

Cognition is the ultimate battlefield, meaning there are other battlefields, all physical.

All actions on physical battlefields aim to build certain facts and then manipulate customer cognition to win in cognition and get prioritized choice.

**Physical battlefields include three categories:**

a. Product.

This includes the product itself and the supply chain, production system, and internal management that produce it. If you have overwhelming advantage on the product battlefield, other battlefields will be easily solved.

> For example, Musk's Falcon reusable rocket can reduce rocket recovery costs tenfold.
>
> Such a huge innovation solves other battlefields; channels basically don't need to go out to sell. Reports say launch orders are booked 30 months ahead. Media battles are unnecessary; global media will report for free.

But more often, we aren't so lucky. Our products aren't tenfold innovations, and it's unclear if we even have an advantage over competitors, or it's hard to perceive. Then the focus of physical battlefields shifts to channels.

b. Channels.

During the "channel is king" era, two representative companies were Robust and Wahaha.

From the logos, Robust looks high-end, while Wahaha looks like a township enterprise.

Robust hired top international ad agencies for design, looking more tasteful, but Robust couldn't beat Wahaha.

Because Wahaha innovated in channels, establishing a supply-sales alliance, binding interests to get more distributors to sell Wahaha products.

Wahaha has over 6 million retail terminals nationwide; it can sell anything quickly. At its peak, Future Cola achieved over 7 billion in sales.

But soon, with the separation of production and sales and the full development of channel categories, as long as you spend money, you can enter channels. Channels also struggle to be the focus of physical battlefields.

**There are many things that don't sell even after entering channels; then the focus shifts to media.**

c. Media.

Media handles information. Is the information war equal to the cognition war or mind war? It has influence, but it's not equal.

The media war also builds facts and information customers can perceive. But when building these facts and information, if you don't have the mind battlefield in mind, you'll be incoherent and make mistakes.

In Lei Jun and Dong Mingzhu's 1 billion bet, Lei Jun was gentlemanly and refined, seeming to win audience favor, while Dong Mingzhu was brash.

But from the mind war perspective, Dong Mingzhu is more astute than Lei Jun.

She kept emphasizing that she's just an air conditioner maker, with thousands of engineers and over 10,000 patents around air conditioners.

**So no matter how you view Dong Mingzhu, next time you buy an air conditioner, the impression of Gree's technological leadership will appear in your mind.**

Lei Jun said Xiaomi's work is complex and hard to explain in one sentence. Xiaomi wants to be a smart hardware platform and ecosystem, but doesn't say Xiaomi is simply a good smartphone.

**The media war is not the cognition war. Everything on physical battlefields is delivering force to the mind battlefield.**

Because they don't understand the mind war, many Chinese "colas" made mistakes.

When Coca-Cola and Pepsi's channels sank, they quickly lost market. Looking back, if they hadn't named it Future Cola but Future Sparkling Tea, rooted in Chinese tea, incubating a new product, it might have been different.

Sparkling tea could establish a foundation for these brands; otherwise, you're just a counterfeit.

Because Chinese consumers, through American cultural export, know authentic cola is from the US and is the world's number one beverage brand.

We just can't buy it now, so we temporarily drink counterfeit cola. There were many counterfeit colas; consumers drank them while thinking when they could drink real cola.

This shows they didn't truly understand branding, failing to establish a basic category that belongs to Chinese cognition and ownership.

**2. Second major contribution: The basic unit of competition is the brand.**

Any important conclusion must have factual basis.

When observing daily communication, like showing a novel item to a friend, the first question is what brand or which company produced it? Definitely what brand.

**So customers care more about the brand than which company produced it.**

> For example, these three brands—Pringles, Duracell, and Nanfu batteries—were all once owned by P&G.
>
> But consumers don't care who owns the brand; when buying batteries or chips, they only care about the brand, not the company behind it.

Since the basic unit of competition is the brand, and strategy by definition is competitive strategy, the brand is a redefinition of strategy.

**Before discussing the redefinition of strategy, let's first discuss what strategy is.**

Some students say it's a method to achieve goals. Others say it's a trade-off, choosing a development path under resource constraints. Or it represents the organization's goals or differentiated positioning.

Such an important question is still at a naive and intuitive stage.

Business school strategy is high-sounding, academically rigorous, never wrong, but problematic in implementation.

Things that are never wrong often aren't easy to implement. Look at McKinsey's definition of strategy:

> Strategy is using coordinated actions to achieve a goal. This definition is never wrong, but sometimes useless.

You need to expand the definition to a falsifiable level: in what framework are goals defined, and in what framework are actions coordinated?

When I did management consulting, I saw McKinsey reports for central enterprises.

Goals were financial targets like 10 billion in five years, Fortune 500 in ten years. Coordinated actions were layer-by-layer decomposition, dividing business into strategic business units. Behind this, you can't see brands or customer minds.

Overall, McKinsey's strategic consulting is lackluster; it excels at operational improvement because it has a global best practices case library and uses benchmarking.

**Behind this is a homogenization presupposition.**

Michael Porter wrote an article "What Is Strategy?" criticizing McKinsey's definition.

> Porter's definition: Strategy is creating a unique value position with coordinated actions. But when expanded, it goes astray.

Because he divides positioning into two types: cost leadership and differentiation. Differentiation is further divided into product differentiation and customer differentiation.

Product differentiation focuses on a category of products; customer differentiation focuses on a category of customers.

Returning to physical battlefields, his definition is still based on traditional market segmentation, not customer minds, and lacks a clear brand concept.

**Michael Porter also had a consulting firm that filed for bankruptcy twice, not getting his strategy right.**

It wasn't until positioning theory emerged that strategy was led in the right direction. Ries and Trout wrote "What Is Strategy?" pointing out:

> Strategy is making your enterprise and products different in the potential customer's mind. For the audience, it's building a brand. Creating and leading a category is the shortcut to building a brand.

As an investor, having seen many business practices and different strategies, based on positioning theory, I've made a small summary, with my small contribution being the explicit proposal of a strategic dichotomy: strategy is divided into corporate strategy and brand strategy.

**Brand strategy is the cornerstone of strategy because the basic unit of competition is the brand. Corporate strategy equals the sum of brand strategies.**

Further, corporate strategy is the process of discovering new category and positioning opportunities, then using brand strategy to capture them. If capturing one opportunity, it's a single-brand strategy; if multiple, it's a multi-brand strategy.

**Brand strategy = positioning × fit. This isn't a strict mathematical multiplication; don't ask me which is more important.**

Positioning is a concept in the customer's mind that can be associated with the brand.

For example, when mentioning the safest car, people think of Volvo; Volvo occupies the "safest" positioning.

**But is it actually the safest car? Not necessarily; a US crash test ranked Volvo outside the top three.**

But this doesn't stop customers from thinking it's the safest, because other car brands don't emphasize safety; even if they are safe, customers don't see safety as a prominent feature.

All operational activities that make the brand occupy a positioning are called fit.

The term "fit" wasn't invented by positioning theory but by Michael Porter. Although translating it as "配称" is a bit abrupt, using a new concept is better; the word "positioning" has too many natural meanings, like GPS positioning, HR positioning, etc.

> But positioning theory has only one: the concept associated with the brand in the customer's mind. For example, the leading air conditioner brand is Gree.

Due to confusing corporate strategy and brand strategy, many large enterprises make mistakes. When a company and brand decline, should you save the brand or the company? The answer should be to save the company.

Because a company can have different brands and seize different opportunities; when a category declines, it means the opportunity disappears.

For example, when film declined, Kodak's CEO thought Kodak hadn't kept up with the times, thinking a new VI would make consumers like Kodak again.

But consumers actually don't like film. Fujifilm was clear: Fujifilm film couldn't be saved, but the company could. Corporate strategy and brand strategy are two different things.

Fujifilm inventoried its resources and found two strong technologies from years of film production: nano-synthesis and collagen processing. It applied them to pharmaceuticals and cosmetics, launching collagen brands.

**It also found medical film areas that digital photography couldn't replace temporarily.**

Fujifilm adjusted its direction based on category changes; its profits exceeded the film era, while Kodak filed for bankruptcy.

**Even if the category doesn't decline, there's the issue of enterprise growth. Is it enterprise growth or brand growth?**

Growth first considers enterprise growth. Should the brand grow? Not necessarily. Brand growth depends on whether the category can grow and the competitive landscape can grow.

So even if the brand doesn't grow, the enterprise can still grow by seizing a second opportunity with a second brand.

Quanjude made this mistake. They thought enterprise growth required Quanjude brand growth, so a key strategic move was opening small franchise stores.

**Roast duck is hard to become a strong daily consumption category; it's only consumed occasionally.**

Quanjude, as a time-honored roast duck brand and luxury brand, should be a Beijing tourist destination. So it should follow customer cognition, not pursue Quanjude brand growth, but can pursue profit growth.

For example, it could increase average order value, use its century-old store and luxury brand, aim for Michelin three stars, position as "Great Wall, Forbidden City, Quanjude," making Quanjude a tourist destination.

**When price is not sensitive, add more ritual and cultural heritage.**

Quanjude's most suitable corporate strategy is the China Time-Honored Brand strategy, using its listed company valuation and capital advantages to acquire other time-honored brands. The value of a time-honored brand group has no ceiling, but the Beijing roast duck category has a ceiling.

**Vipshop also lacked a clear division between corporate and brand strategy after listing.**

Vipshop believed enterprise growth required brand growth, so it started selling cars, Swiss watches, Moutai, and other luxury goods, leading to great difficulties.

The correct approach would be to strengthen the "online outlet" cognition, making Vipshop the first choice for buying discounted big brands.

Vipshop's enterprise could acquire Mogujie, Xiaohongshu, etc. These two companies learn positioning and understand brands, but may not understand corporate strategy.

**3. Third major contribution: The brand is the representative of the category and its characteristics.**

How to sell Wang Laoji in the US? This depends on what's in Americans' minds.

Traditional Chinese medicine, heatiness, herbal tea—these are in Chinese minds. So promoting "Drink Wang Laoji when afraid of heatiness" domestically is fine.

**But in the US, there's no such concept; Americans have China, Coca-Cola, and herbs in mind.**

So for Wang Laoji to enter the US, it could say: This is the Chinese Coca-Cola, a drink that sells even better than Coca-Cola in China, the Eastern magic water. Coca-Cola started as Atlanta magic water.

A brand is a position in the mind. First is the category, then the characteristic. You own the herbal tea category, then you need the heatiness-reducing characteristic to root the brand.

Volvo is the same: it has the car category and the safest characteristic. Brand isn't that complex; it's the representative of the category and its characteristics.

**Brand equity theory proposes that since brand is an asset, we should maximize its use and fully leverage its benefits.**

All our products should build brands to maximize brand utility. But this falls into the brand extension trap.

Brand extension creates a seesaw effect in cognition. When strengthening one cognition, another is weakened.

Baidu represents search engines, but when Baidu does food delivery, people feel it's not its main business. When Baidu does food delivery well, its search engine seems off-track.

Galanz is known for microwaves, but it also makes air conditioners, touting global manufacturing and professional quality. This is meaningless to customers.

**Galanz can certainly make air conditioners, but a brand can only represent one category and characteristic. So it should use another brand.**

If Galanz focused only on microwaves, with "Global microwaves, half are Galanz," it would gain high recognition and not lose market to other small appliance brands.

**The trap of brand image.**

A friend told me he buys Nike shoes because of the "Just Do It" spirit. So customers attribute all good things to leading brands.

If a small brand says vague things, customers are indifferent. There's a major misconception in business thinking:

> A successful brand succeeded by doing something right, but that doesn't mean everything it does after success is right.

Many successful brands make mistakes after success. But we still learn from them as if they're right; actually, you should look at what they did before success.

Before Nike's success, it developed shoes for coaches and athletes, selling directly to athletes, becoming professional sports shoes before gradually starting.

Effectiveness and ineffectiveness of brand image ads. Why are there so many practitioners of brand image ads? They're misled by apparent effectiveness, misattributed.

Actually, there are several correct attributions:

**First, having communication beats no communication.**

For example, Weiwei Soy Milk used "Weiwei Soy Milk, joyful and happy" on CCTV.

Did you see a second soy milk ad on CCTV? So it was right, but inefficient.

As the pioneer of the soy milk category, using "Weiwei Soy Milk, cholesterol-free, more suitable for Chinese" would be more appropriate.

**Second, strong media beats weak media.**

From the 1990s to the early 21st century, it was an era of centralized media. Becoming CCTV's "king" made you popular instantly. When large enterprises all had advertising capability and awareness, it entered the third attribution:

**Third, having positioning beats no positioning.**

Gree's ad is simple: "Good air conditioners, Gree makes." The positioning is clear. Haier's is "Sincerity forever." A new generation consumer might not know what Haier is.

Use the strategic dichotomy to examine Xiaomi's successes and failures.

Lei Jun is an entrepreneur. The ability to discover opportunities and organize elements to meet them is the core entrepreneurial capability.

Xiaomi saw several major opportunities in corporate strategy and tried to seize them, but made mistakes in brand strategy.

Xiaomi is sharp at the corporate strategy level. When the smartphone category exploded, options were either knockoffs or high-end Apple/Samsung. Xiaomi saw the mid-range smartphone opportunity and launched Xiaomi at the 1999 price point.

**Next, it saw the huge low-end knockoff market and consumers' willingness to buy branded phones, so it launched Redmi.**

But in brand strategy, Redmi and Xiaomi's brand family is very obvious; people still see Redmi as Xiaomi because the logo is also Xiaomi.

Moreover, Lei Jun once said "He who wins the losers wins the world," which killed the brand's signaling value, and many stopped using it.

The third opportunity Xiaomi saw but didn't seize was mobile social software.

Xiaomi launched Mi Talk. First, the name was wrong, with "Mi" making customers think it's for Xiaomi users.

**Second, the name has "Talk," making people feel it's inconvenient during work hours. Unlike WeChat, which can be used at work, Mi Talk can't.**

The fourth opportunity was the rise of wearables requiring a new channel category.

When phones and computers rose, computer malls appeared. Xiaomi saw the opportunity for a new channel category featuring smart hardware but used brand extension with Xiaomi Home.

This kept other brands from entering.

**III. Three Brand Questions and Basic Positioning Methods**

**The basic implementation method of positioning is the three brand questions:**

When any unfamiliar brand first appears, customers instinctively want to know:

> What are you? How are you different? What's the proof? When the brand claims difference, customers are used to it; they always think, "Show me the evidence."

The corresponding answers: The answer to "What are you?" is the category. The category must be the customer's classification standard; once you say it, customers understand.

Only when customers understand can they connect to needs. Only when they know what you are can they know if they need you.

The answer to "How are you different?" is positioning. Some think positioning is defining the category, but it's not; positioning defines the position within the category.

**Positioning is competition-oriented; customers care about your difference from competitors.**

The answer to "What's the proof?" is the trust evidence. The organization of this evidence isn't necessarily strict logic but customer cognition.

For example, "walnuts supplement the brain" is a "fact" known to Chinese, though scientific research hasn't concluded this.

**1. What are you?—Define the category**

The category is the iceberg, and the brand is just the tip.

When the category grows, the brand does nothing and feels increasingly grand. But when the iceberg melts, no matter how much the brand does, it can only last a while before falling into the water.

**The category is the final classification in customers' purchase decisions, associated with the brand.**

> For example, air conditioners lead to brands like Gree and Midea. Oranges lead to Chu Orange.

Abstract categories are classifications involved in purchase decisions but not completing them. For example, appliances: during renovation, customers say it's time to buy appliances, but they can only buy specific appliances.

Fruit is also something consumers say; they go out to buy fruit, but you can't buy "fruit" without specifying apples, bananas, or oranges.

Abstract categories can be converted to concrete categories by adding a channel category word, like "appliance" is abstract, but "appliance store" is concrete.

Pseudo-categories.

This classification is for professionals; customers don't use it. If used in customer communication, it becomes a pseudo-category. Don't force what customers don't use.

> For example, white goods, kitchen appliances, and motor vehicles are pseudo-categories. If you say you're a white goods expert, customers won't know what products you sell. Many don't know electric fans are white goods.

The category is the customer's classification standard and the means to meet needs. Defining the category effectively connects to customer needs.

For example, South Beauty spends a lot of operational costs telling customers it does Sichuan cuisine.

Muji and Uniqlo: Uniqlo's cognition is clear—selling clothes; Muji's is vague.

Muji can't be clearly placed in customers' classification system, so it can't complete mental pre-sale.

> For example, before going out, we might think of going to Uniqlo for comfortable underwear, but rarely think of Muji. Low cognitive efficiency means relying on operations.

One of the most important category concepts is category differentiation. It's the main source of new categories and new brands. Creating and leading a category is the shortcut to building a strong brand.

New categories rarely emerge from nothing; unless there's disruptive technological breakthrough, they differentiate from old categories.

The dynamics of category differentiation say old categories also grew from small to large.

As more people consume, tastes differ.

Initially, personalized needs aren't met because critical mass hasn't been reached. Only when enough people exist and absolute scale is large will some products and brands optimize for differentiated needs, leading to product differentiation.

**When this differentiation becomes large enough, consumers create cognitive isolation, thinking it's something else, and a new category or species emerges.**

Because consumers lack unified standards, are dispersed, and interactions have blurred boundaries, classification standards are inconsistent, differentiation standards vary, and degrees differ, leading to incomplete category differentiation.

For example, in wine, novices think wine is only red and white.

But heavy consumers divide into Cabernet Sauvignon, Shiraz, noble rot, etc. Recently, Langjiu's brand positioning was controversial in the positioning circle.

Many ordinary consumers don't know sauce-flavored baijiu, but it's not a pseudo-category; it's incomplete differentiation.

I casually asked heavy baijiu consumers, and they all knew sauce-flavored baijiu. Whether incomplete differentiation eventually completes depends on whether the differentiation is distinct enough.

As categories differentiate, will there be more and more? Actually, categories constantly die. Customers' minds can only hold limited categories.

**2. How are you different?—Define positioning**

**This process must be a competitive difference meaningful to customers. The criterion is that after hearing the positioning, customers don't ask "So what?"**

For example, Evergrande Spring Water's "One water source supplies the world" is meaningless to customers; they'd still ask "So what?"

If changed to "All Evergrande Spring Water comes from Changbai Mountain," it's meaningful.

> Honor's "It's time to change to a dual-lens phone"—consumers ask why? OPPO's dual-lens ad is better: "Dual-lens makes portraits more beautiful."

**Differentiation must be meaningful to customers.**

The mind map is a common tool in positioning theory to find differentiated positioning. The mind map is three concentric circles. The innermost circle is the category the brand belongs to, like shampoo.

The second circle is brands, including yours and as many competitors as possible. The third circle is the positioning each brand occupies.

Drawing a mind map reveals blank opportunities for you to occupy.

This is where market research invests most. The first simplified method is the ad inspection method: look at what ads these brands have been doing.

If an ad has positioning and also holds market share, you can infer it has occupied the positioning and gained cognition in customers' minds.

**For example, Pantene focuses on nutrition, Head & Shoulders on dandruff, Rejoice on smoothness, and Oni on black hair.**

There are many differentiation methods; shampoo commonly uses physical characteristics.

Other methods include frontline observation: see how frontline salespeople influence consumer choices and what scripts they use.

You'll find some talk about physical characteristic differences, others say "ours sells best" or "we specialize in this."

A yogurt brand in Shenzhen, when asked how it differs from Mengniu and Yili, says "We're the best-selling yogurt in Shenzhen; we only make yogurt."

These are market characteristics that influence customer choice without directly describing the product, but customers can infer and associate.

In "Differentiate or Die," the two founders summarized nine differentiation concepts.

There are many differentiation methods; as long as you grasp the underlying principle—what factors can influence consumer choice—specific differentiations are numerous. For example, local leadership.

Lao Xiang Ji is positioned as Anhui's largest fast-food chain.

If it opens in Wuhan, still claiming "Anhui's largest fast-food chain," consumers will be curious: if it's the largest in Anhui, it must be good, so they'll try it.

> Afu Essential Oil created an e-commerce ad paradigm: "For every three bottles of essential oil sold online, two are Afu," later used by many.

Another example is the "second" positioning. Sometimes being second is also an important market performance.

AVIS is a classic case in advertising history: "Because we're second, we try harder. We always wash our cars clean, always fill the gas tank, because we're only second, so our waiting time is shorter."

**This ad led to rapid business growth.**

A successful Chinese practitioner is Mengniu. The ad was "Mengniu sincerely learns from Yili, striving to be the second dairy in Inner Mongolia," which was effective, achieving over a decade of rapid growth.

When consumers only know Yili as the leader and don't know who's second, Mengniu saying it strives to be second is effective.

But there are also blind imitators. Storm Player said "We're second, second only to Youku," which was ineffective. Where does that leave iQiyi? It's not credible.

**3. What's the proof?—Provide trust evidence**

Generally, between two restaurants—one with a queue and one empty—which would you choose? Most choose the crowded one.

**The queue is trust evidence for deliciousness or value. What the market tests is effective.**

Trust evidence is facts or behaviors that make brand positioning credible. Trust evidence can be divided into three categories:

a. Effective commitments of the brand.

Free trials and samples: to remove customer defenses and encourage trying;

Money-back guarantee and pay-per-performance:

> Pagoda Fruits' "three no-questions return if not tasty" is essentially "refund if not satisfied." Don't worry that this brings high costs; when product quality is excellent, you should dare to make such commitments.

Pagoda Fruits practiced this and found return rates weren't high, and customers who returned had significantly higher repurchase rates and average order values;

Reputation pledge: When the founder is a celebrity, customers trust more. Celebrities want to enhance their reputation and won't endorse counterfeit products, cherishing their feathers.

b. Customer self-verification

Product itself, brand visibility: If the product is positioned high-end but designed poorly and packaged roughly, how can it be high-end? If it claims industry leadership but is nowhere to be seen, it's not credible;

Queues, word-of-mouth, reviews, and reports;

> Associated cognition: "Common sense" in consumers' minds doesn't need to be fact.

There's also the clustering phenomenon: if you claim high-end, your first appearance should be in high-end channels; otherwise, you can't be high-end.

Zhou Hei Ya's first appearances were at airports, high-speed rail stations, and shopping malls—high-end. If first seen in a mom-and-pop store, it wouldn't be high-end.

c. Third-party authoritative certification

For example, Dezhou Braised Chicken is a China Time-Honored Brand, and Bama Tieguanyin is a national intangible cultural heritage.

**A brand usually needs to build interlocking three-dimensional trust evidence for customers to trust you.**

Like Pagoda Fruits, it has all three types. Although not all can be used in ads, customers experience different trust evidence at various touchpoints.

Be careful not to self-incriminate that your brand is unsold. Columbia, the sports brand, offered 20% off everything near Christmas, giving the impression of an unsold brand.

Instead, write: "Christmas special edition arrived, limited release."

Look at a positive case: Tai Er Sauerkraut Fish: "We don't accept groups over four, no table sharing, no extra seats, no takeout for sauerkraut fish." To lighten the mood, it added: "The store manager's smile melts hearts."

**IV. Basics of Fit**

Fit is defined as the sum of all operational activities that drive the brand to occupy a positioning. Adding a qualifier, fit is coordinated. Every action in fit should help the brand occupy the positioning.

**1. Classification of fit:**

If multiple brands share fit, it's shared fit, a source of economies of scope and synergies.

For example, P&G's fit shares supply chain and channels.

Each brand's unique fit is independent fit, a source of differentiation.

Alibaba's big data is shared fit, but each brand's name and logo are independent fit.

Fit can be divided into interface-level and non-interface fit based on whether it's a customer touchpoint. Interface-level fit can convey positioning, so CEOs should personally oversee it and not outsource.

Even under a multi-brand strategy, it should be independent, not shared.

Non-interface fit can be outsourced and shared, but consider how customers think after knowing outsourcing and sharing.

Volkswagen spent a fortune having top designers handcraft a luxury car, the Phaeton. Market analysts said the car was perfect with only two flaws: the front and rear, because it shared the VW "W" logo.

This caused the Phaeton to lose money continuously; the new CEO discontinued it.

Toyota's luxury model Lexus is different: independent fit, no shared logo, chassis design, or 4S stores. So Lexus became one of the world's top three luxury car brands.

Fit can be divided into generic and specific fit based on exclusivity.

Generic fit is what all competitors do, like meeting mandatory national standards. So generic fit is the entry ticket to competition; only generic fit can't occupy differentiated positioning.

**Only specific fit can occupy unique positioning. Whether positioning is good largely depends on whether it can launch interlocking specific fit. The more specific fit a positioning requires, the higher the barrier.**

A classic case is Schlitz Beer's claim: "Every bottle is steam-sterilized." This was the work of advertising master Claude Hopkins.

When the master found the steam sterilization positioning, the company said every brewery does this. Hopkins said the key isn't that every brewery does it, but that no brewery says it. The ad was effective, and sales recovered.

But it didn't have lasting effect; consumers eventually knew every brewery does this, and competitors would make this fact known.

Nongfu Spring's "a little sweet"—is there specific fit? Did it do anything for "a little sweet"? None at all.

When competition gets fierce, this ad becomes ineffective, so it changed to "Nature's porter," conveying the natural water positioning.

It framed other brands' purified water as artificially processed.

**When designing brand strategy fit, it's best to use the business model as a lever for final implementation.**

The business model also has two parts: corporate business model and brand business model.

The brand business model starts from corporate strategy: first decide single-brand or multi-brand strategy. Each brand must have its own positioning, and only from positioning can products be defined.

Many entrepreneurs do it backward: they make products first and then find positioning, increasing costs and making positioning imprecise.

Positioning first, then products, allows cutting many features.

After defining products, can you define the supply system? Outsource or self-build? From a lean startup perspective, you shouldn't self-build supply initially.

Next are four core actions: the interface between brand and consumer, divided into four boxes: reach, conversion, lock-in, and expansion.

**1 Reach**

How to make our products, information, and the product itself reach customers.

Through media, channels, direct sales, or ground promotion.

Fit is actually what you should do anyway; adding positioning makes it more effective. Innovative products easily capture customer attention.

**2 Conversion**

Can rely on novel products, but more importantly, lower the entry barrier for first choice.

For example, a new brand of cooking oil: a 0.5L package is better than 5L; customers' trial cost is lower, risk smaller, so sales increase.

Remember to use small packages, not low prices.

Similarly, services have small packages. If you start with monthly subscription, conversion is low. Change to seven trials, then convert to monthly after satisfaction, increasing usage.

**3 Lock-in**

Most importantly, rely on the product itself. A key indicator of whether a business model works is retention and repurchase.

Luckin Coffee wasn't lean enough: it didn't verify how many repurchase at regular prices. Second is transaction design, like membership privileges, locking in long-term customers.

**4 Expansion**

Let old customers bring new ones; the most typical is word-of-mouth, but sometimes consider expansion without word-of-mouth.

> Hotmail, at startup, added a link at the end of emails: "Click to get a free Hotmail mailbox," achieving expansion at no extra cost.

Positioning and advertising focus on acquiring new customers; for old customers, the enterprise is primary. For new customers, information transmission and word-of-mouth are important.

Consider a bike-sharing case. From a corporate strategy perspective, if you decide to stay in this track and compete, you need differentiation.

If we position bike-sharing on "easy to use," define your product: how to make it easiest to use.

Actually, the best lock isn't a smart lock but no lock. But no lock can't prevent unauthorized use. It turns out the best lock is a sound lock.

**Open the app, ride normally; don't open, after 50 meters it starts ringing.**

How to know sound is effective? Like many cities have senior bus cards; how to prevent non-seniors from using them? By visualizing social pressure through sound.

Sound locks have many benefits: no mechanical moving parts, fewer failures, no need to scan QR codes or enter passwords at night.

In user conversion, design: if a bike is quickly ridden away after parking, it indicates it's parked in a convenient spot, and the user gets a reward.

**2. Category names that determine life and death**

Improper naming affects survival. The same fruit, called kiwifruit, Chinese gooseberry, or奇异果, has different fates. Many even think奇异果 originates from New Zealand.

**3. Eight-character formula for new category naming: rooted, likable, straightforward, short.**

**1 Rooted.**

Use old categories to connect to customer needs. A startup team did short-term rentals, but the category name was problematic. Because rental needs are for long-term living and working in a place. Later, the industry changed to homestay.

**2 Likable.**

A more valuable expression angle. For example, calling a car a hybrid or dual-engine makes a difference.

**3 Straightforward.**

The name "honey peach" is good, so it becomes the most competitive peach category.

**4 Short.**

Easy to remember and spread. Sometimes one character difference increases spread resistance; for example, "computer" is used far more than "calculator."

**4. Four essentials for brand naming**

A brand name is either a one-time gain or sand in the shoe. For example, Bashu Feng and Lao Yuanzi are obvious: Bashu Feng immediately evokes Sichuan cuisine.

**With the same offline traffic, Bashu Feng's conversion is higher.**

A good brand name should meet four points:

**1 Positioning response: associate the category or characteristic from the name.**

For example, Nongfu Spring, Zhou Hei Ya, etc. You know what they do at a glance; customers see you as an expert, and only early brands get good names.

If the positioning response is reversed, it's worse than none. For example, Bainian Liyuan sounds like chestnuts but sells organic eggs. Meilishuo sounds like media, Mogujie like e-commerce.

**2 Brand response: it sounds like a brand name.**

Familiarity is prioritized. There's no red bull in reality; when people say Red Bull, they know it's a brand.

**3 Easy to spread: the name should be audible, memorable, and worth saying.**

Standard one: hearing the name and knowing it is important. If your brand requires much explanation, customers won't spread it, losing opportunities.

Standard two: simplicity. In Chinese culture, short means two or three characters; four is okay but must not need a category name, like Nongfu Spring doesn't need "mineral water." Standard three: avoid letter abbreviations and mixed text.

**4 Avoid similarity to well-known brands; otherwise, you'll be seen as counterfeit.**

Also avoid high-frequency homophones, like Huang Taiji and Niu Dun.

Customers mishear and think they heard right; these are major spread barriers. In consumer goods, cases of bad names succeeding are rare; good names rarely die ugly.

**5. Advertising as important fit**

As emphasized, learning positioning isn't about doing ads but changing what you already do to produce different effects.

Every customer touchpoint is an opportunity for positioning communication; ads are the most expensive positioning communication method.

Once successful, you soar; once failed, you might return to square one after decades of hard work. John Wanamaker said:

> "Half the money I spend on advertising is wasted; the trouble is I don't know which half."

But I'd say often both halves are wasted.

Good ads should meet the "two languages, three natures" rule. Two languages: sales language and customer language. Three natures: credibility, competitiveness, and contagiousness.

Sales language means whether it includes effective selling points; judge whether frontline salespeople would follow the ad. For example, "Drink Wang Laoji when afraid of heatiness" is what salespeople would say.

**Customer language is what customers say when referring. If customers need to translate into less ad-like language, there's loss. Every extra action customers take loses many.**

Credibility: if customers don't believe, everything is zero. How to make them believe? First, specificity: "Jinba menswear, focused on jackets for 29 years"—29 is more specific than decades.

Second, attribution: "Yunnan Baiyao band-aid, with medicine heals faster." Attribution isn't strict scientific but causal in customers' minds.

Third, use trust evidence. Bama Tieguanyin—good or not unknown, but it's national intangible cultural heritage, so it can't be bad.

When multiple trust evidence exist, prioritize the highest level.

**Competitiveness**: effectively convert competitors' customers. Deeply, it involves correctly selecting main competitors, simplified as competitors' customers should be many and easy to attack for a chance to win.

A key measure of ad competitiveness is whether competitors take action after the ad.

> For example, "The nationally leading herbal tea renamed JDB" triggered a huge reaction from Guangzhou Pharmaceutical.
>
> Another ad that angered the whole industry was Kingway Beer: "Beer brewed without added formaldehyde," at its peak holding 70% of Shenzhen market share.

**Contagiousness**: ads should not only be broadcast but also encourage secondary spread. This is where consulting and ad agencies truly help enterprises.

**But without mastering the two languages and two natures, it becomes wild imagination.**

An important aspect of contagiousness is social currency. Why do consumers or third parties forward your ad? Because secondary spread brings them something called social currency.

Social currency is information that enhances the spreader's social status, showcasing wealth, status, taste, knowledge, concern, etc. Many long articles get forwarded; the spreader may not have read them, but forwarding showcases their knowledge and taste.

**Brain Platinum's social currency is mockery; mocking its ads shows your taste, but it also helps complete brand communication.**

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