When a company makes a mistake today, footprints quickly show up on its back as competition runs off with its business. To get the business back, the company has to wait for others to make mistakes and then figure out how to exploit the situation.

The basic issue in marketing is creating a category you can be first in. It's the law of leadership: It's better to be first than it is to be better. It's much easier to get into the mind first than to try to convince someone you have a better product than the one that did get there first.

Marketing is a battle of perceptions, not products.

If you didn't get into the prospect's mind first, don't give up hope. Find a new category you can be first in. It's not as difficult as you might think.

When you launch a new product, the first question to ask yourself is not "How is this new product better than the competition?" but "First what?" In other words, what category is this new product first in? Charles Schwab didn't open a better brokerage firm. He opened the first discount broker. Lear's was not the first woman's magazine. It was the first magazine for the mature woman. (The magazine for the woman who wasn't born yesterday.) This is counter to classic marketing thinking, which is brand oriented: How do I get people to prefer my brand? Forget the brand. Think categories.

The single most wasteful thing you can do in marketing is try to change a mind.

It's an illusion. There is no objective reality. There are no facts. There are no best products. All that exists in the world of marketing are perceptions in the minds of the customer or prospect. The perception is the reality. Everything else is an illusion.

Marketing people focus on facts because they believe in objective reality. It's also easy for marketing people to assume that truth is on their side. If you think you need the best product to win a marketing battle, then it's easy to believe you have the best product. All that's required is a minor modification of your own perceptions.

What makes the battle even more difficult is that customers frequently make buying decisions based on second-hand perceptions. Instead of using their own perceptions, they base their buying decisions on someone else's perception of reality. This is the "everybody knows" principle.

The most effective words are simple and benefit oriented. No matter how complicated the product, no matter how complicated the needs of the market, it's always better to focus on one word or benefit rather than two or three or four.

This raises the all-important question: Can Federal Express ever own the worldwide word? Probably not. Someone else already owns it: DHL Worldwide Express. Its concept: Faster to more of the world. To succeed, Federal Express must find a way to narrow the focus against DHL. The company can't do it by trying to own the same word in the prospect's mind.

Some years ago Burger King started down this slippery slope from which it has never quite recovered. A market study showed that the most popular attribute for fast food was "fast" (no big surprise there). So Burger King did what most red-blooded marketers do. It turned to its advertising agency and said, "If the world wants fast, our advertising should tell them we're fast." What was overlooked in the research was that McDonald's was already perceived as being the fastest hamburger chain in the country. Fast belonged to McDonald's. Undaunted by this, Burger King launched its campaign with the slogan "Best food for fast times." The program quickly became a disaster very nearly on a par with the one that involved "Herb." The advertising agency was fired, management was fired, the company was sold, and downward momentum was maintained. Many people have paid the price for violating the law of exclusivity.

What about your product's ladder in the prospect's mind? How many rungs are there on your ladder? It depends on whether your product is a high-interest or a low-interest product. Products you use every day (cigarettes, cola, beer, toothpaste, cereal) tend to be high-interest products with many rungs on their ladders. Products that are purchased infrequently (furniture, lawn mowers, luggage) usually have few rungs on their ladders.

Sprint is probably feeling very comfortable on the third rung of the ladder. Nine percent doesn't sound like much, but it translates to $6 billion in annual sales. And the market has been growing rapidly. For the long term, however, Sprint is in serious trouble. Look what happened to Royal Crown cola. Back in 1969, the Royal Crown company revitalized its franchise system, 350 bottlers strong, and hired the former president of Rival Pet Foods and a veteran of both Coke and Pepsi. The company also retained Wells, Rich, Greene, a high-powered New York advertising agency. "We're out to kill Coke and Pepsi," declared Mary Wells Lawrence, the agency's head, to the Royal Crown bottlers. "I hope you'll excuse the word, but we're really out for the jugular." The only brand that got killed was Royal Crown. In a maturing industry, third place is a difficult position to be in.

In the long run, marketing is a two-car race.

Knowing that marketing is a two-horse race in the long run can help you plan strategy in the short run.

If you want to establish a firm foothold on the second rung of the ladder, study the firm above you. Where is it strong? And how do you turn that strength into a weakness? You must discover the essence of the leader and then present the prospect with the opposite. (In other words, don't try to be better, try to be different.) It's often the upstart versus old reliable.

When you look at customers in a given product category, there seem to be two kinds of people. There are those who want to buy from the leader and there are those who don't want to buy from the leader. A potential No. 2 has to appeal to the latter group. In other words, by positioning yourself against the leader, you take business away from all the other alternatives to No. 1. If old people drink Coke and young people drink Pepsi, there's nobody left to drink Royal Crown cola. Yet, too many potential No. 2 brands try to emulate the leader. This usually is an error. You must present yourself as the alternative.

Does a sale increase a company's business or decrease it? Obviously, in the short term, a sale increases business. But there's more and more evidence to show that sales decrease business in the long term by educating customers not to buy at "regular" prices.

Aside from the fact that you can buy something for less, what does a sale say to a prospect? It says that your regular prices are too high. After the sale is over, customers tend to avoid a store with a "sale" reputation.

There is no evidence that couponing increases sales in the long run. Many companies find they need a quarterly dose of couponing to keep sales on an even keel. Once they stop couponing, sales drop off. In other words, you keep those coupons rolling out not to increase sales but to keep sales from falling off if you stop. Couponing is a drug. You continue to do it because the withdrawal symptoms are just too painful.

In many other areas of life (spending money, taking drugs, having sex) the long-term effects of your actions are often the opposite' of the short-term effects.

There seems to be an almost religious belief that the wider net catches more customers, in spite of many examples to the contrary.

The target is not the market. That is, the apparent target of your marketing is not the same as the people who will actually buy your product.

In chapter 6 (The Law of Exclusivity) we made the point that you can't own the same word or position that your competitor owns. You must find your own word to own. You must seek out another attribute.

Marketing is a battle of ideas. So if you are to succeed, you must have an idea or attribute of your own to focus your efforts around. Without one, you had better have a low price. A very low price.

Some say all attributes are not created equal. Some attributes are more important to customers than others. You must try and own the most important attribute.

Cavity prevention is the most important attribute in toothpaste. It's the one to own. But the law of exclusivity points to the simple truth that once an attribute is successfully taken by your competition, it's gone. You must move on to a lesser attribute and live with a smaller share of the category. Your job is to seize a different attribute, dramatize the value of your attribute, and thus increase your share.

A single trip to any McDonald's should be enough to find another attribute that McDonald's owns: "kids." This is indeed the place to which kids drag their parents, and McDonald's has the swing sets to prove it. This sets up an opportunity vividly demonstrated by the Coke and Pepsi battle. If McDonald's owns kids, then Burger King has the opportunity to position itself for the older crowd, which includes any kid who doesn't want to be perceived as a kid. That generally works out to be everyone over the age of 10 (not a bad market). To make the concept work, Burger King would have to invoke the law of sacrifice and give all the little kids to McDonald's. While this might mean getting rid of a few swing sets, it also allows Burger King to hang "kiddie land" on McDonald's (chapter 9: The Law of the Opposite). To drive the concept into prospects' minds, Burger King would need a term. It could be grow up. Grow up to the flame-broiled taste of Burger King. The new concept for Burger King would strike fear and terror in the boardroom at McDonald's, always a good sign of an effective program.

First and foremost, candor is very disarming. Every negative statement you make about yourself is instantly accepted as truth. Positive statements, on the other hand, are looked at as dubious at best. Especially in an advertisement.

When a company starts a message by admitting a problem, people tend to, almost instinctively, open their minds.

Think about the times that someone came to you with a problem and how quickly you got involved and wanted to help. Now think about people starting off a conversation about some wonderful things they are doing. You probably were a lot less interested.

One final note: The law of candor must be used carefully and with great skill. First, your "negative" must be widely perceived as a negative. It has to trigger an instant agreement with your prospect's mind. If the negative doesn't register quickly, your prospect will be confused and will wonder, "What's this all about?"

So it is in marketing. Most often there is only one place where a competitor is vulnerable. And that place should be the focus of the entire invading force.

Good short-term planning is coming up with that angle or word that differentiates your product or company. Then you set up a coherent long-term marketing direction that builds a program to maximize that idea or angle. It's not a long-term plan, it's a long-term direction.

Equally as bad as extrapolating a trend is the common practice of assuming the future will be a replay of the present. When you assume that nothing will change, you are predicting the future just as surely as when you assume that something will change. Remember Peter's Law: The unexpected always happens.

Success often leads to arrogance, and arrogance to failure.

Actually, ego is helpful. It can be an effective driving force in building a business. What hurts is injecting your ego in the marketing process. Brilliant marketers have the ability to think like a prospect thinks.

"It is better to see once than to hear a hundred times."

But, for the most part, hype is hype. Real revolutions don't arrive at high noon with marching bands and coverage on the 6:00 P.M. news. Real revolutions arrive unannounced in the middle of the night and kind of sneak up on you.

A fad is a wave in the ocean, and a trend is the tide. A fad gets a lot of hype, and a trend gets very little.

A fad is a short-term phenomenon that might be profitable, but a fad doesn't last long enough to do a company much good. Furthermore, a company often tends to gear up as if a fad were a trend. As a result, the company is often stuck with a lot of staff, expensive manufacturing facilities, and distribution networks.

Forget fads. And when they appear, try to dampen them. One way to maintain a long-term demand for your product is to never totally satisfy the demand.

Steve Jobs and Steve Wozniak had a great idea. But it was Mike Markkula's $91,000 that put Apple Computer on the map. (For his money, Markkula got one-third of Apple. He should have held out for half.)

The more successful marketers front load their investment. In other words, they take no profit for two or three years as they plow all earnings back into marketing.