Stock Talk
Keep It Simple
Interview With Author Steven Cristol
With David Gardner
February 9, 2001
Simplicity Marketing: End Brand Complexity, Clutter, and Confusion, written by Steven Cristol and Peter Sealey, examines ways companies create -- and combat -- the clutter of increased choice and complexity in our lives. David Gardner had a broad-ranging discussion with Cristol for the Feb. 3 broadcast of The Motley Fool Radio Show, in which they talked about ways today's leading companies are making our lives simpler. Here is an edited transcript of their conversation.
David: What inspired you to write the book Simplicity Marketing?
Cristol: Well, there were two sources of inspiration, because one was as a consumer and the other one was as a business guy. As a consumer, somewhere in the early 1990s, my circuit breaker started to trip from the amount of choices that were suddenly available to me. Choice had always been a good thing, of course, but suddenly when confronted with 13,000 different mutual funds and almost 50,000 different products in the supermarket, I was finding it a little harder to make decisions.
I noticed a lot of the other consumers that my clients were talking to were having the same problem. That was one source of inspiration. And the other was that as a business guy, I believe that for the companies that can sense that there is a lot of stress caused by this, those companies who are doing the most to relieve that stress are probably in the best position to succeed.
David: You mentioned the supermarket. Let's take an imaginary walk through a supermarket. Name a few products that we might encounter on our walk that have succeeded in terms of simplicity marketing, and then name a few that have failed.
Cristol: I certainly think that more have failed than succeeded. I think that there's been a relentless proliferation of what we call brand extensions: more flavor, more choices, more colors.
David: Yeah, I remember you mentioning that Crest Toothpaste has 37 different stock-keeping units today. It's not just mint or original anymore.
Cristol: Well, that's right, but actually, they're kind of in the good guys column now because they had 52 in 1996. They've recognized that it can be more profitable to have fewer products and still maintain or grow their market share.
David: Who else is in the good guys group in my supermarket?
Cristol: Any product that is not giving you more shelf facings than you actually need. The impact of this in any one category isn't such a big deal. The impact is that every consumer intersects with hundreds of these categories and when you just want to run into the supermarket and get some milk and bread and a six-pack of Coke (NYSE: KO), you want to be able to get in and get out and it's very difficult to navigate through all of these choices.
David: And some very interesting implications for investors, which we'll get to in a second. Steven, let me play devil's advocate here for a second. When I'm going to buy a car, I want more options a lot of the time, not less. I want the pricey fog lights, maybe, or a CD changer in the trunk. I may want heated seats. Are you trying to take away my heated seats here?
Cristol: I'm not trying to take away your heated seats. What I am trying to say is that for every company that's selling cars, they're going to have one segment of customers that's really into it and really into sorting out those options and that those are likely to be more the aficionados. They're going to have a whole other segment that really wants to have these choices streamlined for them so there's not such an overwhelming, time-consuming proposition. That's probably why when Toyota Motors introduced their Tundra truck last year with the fewest options any truck in its class has ever had, it was the most successful product launch in the history of Toyota USA.
David: And I know that you've pointed in the past to the iMac and its incredibly successful launch for Apple Computer (Nasdaq: AAPL) as a great example as of fewer options and simplicity.
Cristol: Right. "No floppy drive? Hey, what are its chances?" But look at how incredibly successful it was, and how it reverses the forces of Apple, because somebody was able to come forward and say for that lower end of the market that found it formidable to buy a PC or a computer, here's one decision, one price, one box, $1,299. It does everything you need it to do and it takes a monitor and a CPU and speakers and it puts them all, with the network interface, into one box. Suddenly you've consolidated all of these choices and transactions and decisions into one product and one purchase.
David: Okay, let me then accept your premise, particularly in the book, that the winning companies of tomorrow are going to be those that have already begun simplifying our lives today. I want to spot you up with some companies and get your thoughts. Specifically, we're going to present you with some pairs of company names and we'd like to hear who's done the better job of simplifying our lives.
Cristol: This sounds like a quiz.
David: Let's take Amazon.com (Nasdaq: AMZN) versus eBay (Nasdaq: EBAY). Who has done the better job between those two in simplifying our lives?
Cristol: I'd probably have to pick Amazon.com, because Amazon was so early in getting it with simplicity. They've really executed on just about every simplicity strategy there is. I think eBay's done a good job too, but I have to confess I've had less experience with eBay.
I'm a heavy Amazon user, but I will say from one-click ordering, which Amazon pioneered, to many other facets of how they streamline your navigation through that whole process of selecting merchandise and paying for it, it's been quite remarkable. The one thing I worry about with Amazon is when they extend their brand horizontally to include all these other different things besides books and music, they risk having a more complex user experience. That's something they have to watch.
David: How about two more: Dell (Nasdaq: DELL) versus Gateway (NYSE: GTW).
Cristol: If we really just look at simplicity, I'd have to say that Gateway has probably done the better job historically. If you remember when all the PC companies were using lots of flash and high-tech kinds of images and metaphors, Gateway had that cow out in the pastures just recognizing that people just need to kind of be able to relax with this a little bit, and make it as unthreatening as possible.
David: I don't know whether you use a Gateway computer or if you're that familiar or not, but is it just the cow branding or does it actually translate through into my experience? Is it just the cow box or is it something more?
Cristol: No, I think what we've seen is over the past five or ten years, the companies that have really just used simplicity as a window dressing haven't really been very successful. At the ones where the CEO says "I am the brand manager," the way Lou Gerstner is the brand manager at IBM (NYSE: IBM) -- and it comes from the top down -- it becomes a whole reengineering of company processes and it's simplicity that shows up for the customer in a very big way.
But when it's just an ad campaign or a tag line, you know it's not likely to be particularly effective, so yes, I think Gateway took that mentality and internalized it and did a lot of things to make computer buying less threatening. Dell's done some great things too in terms of the simplicity of buying on the Web, but it wasn't at the essence of the brand the way it was originally when Gateway decided to take that tack.
David: Okay, how about AOL Time Warner (NYSE: AOL) versus Yahoo! (Nasdaq: YHOO)?
Cristol: They are both really terrific simplifier brands. Yahoo! certainly aggregates all of these different points of light into one integrated user experience, but I have to say if I look prospectively, AOL really has a tremendous opportunity with the merger when you consider the way they will be able to package and bundle, with Time Warner integrated, one-stop, value-added solutions for people by controlling both the content and the pipe it comes through. There's a tremendous opportunity for them to emerge as the great simplifier brand of the 21st century.
David: They are going to have to do a lot of work to get there, because when I think of Time Warner I see a lot of redundancy in terms of their offerings. Their magazines sometimes have similar titles and very similar cable stations. It's not quite clear to me how TNT is that different from Turner, or many of their other holdings.
Cristol: That's why I do think that the leg up Yahoo! will have is they will certainly be more nimble, now more than ever, and they're doing a lot of smart things. I know they certainly "get it" in terms of the simplicity piece.
David: When you are picking stocks to invest in, and I know you invest in individual stocks as I do and as so many people listening do, what role does this concept of simplicity play?
Cristol: In the last few years since I've been writing about this, it's played a huge role. I'm picking stocks the same way I'm picking clients as a consultant -- the companies that are going to succeed are going to make me look better as a consultant. I've noticed that if you really think about the kinds of brands there are going to be as we move forward now, there's really only going to be two kinds.
There are going to be "stress heroes," the kinds that really recognize that they have to reduce customer stress if they want to have long-term loyal customer relationships, and there are going to be "stress villains," the kinds of brands that create stress. You know, the kinds that really annoy you and call you at dinner, giving you hard times and really making it difficult to do business with, or are always throwing out something new and additional for you to deal with in your life.
I'm using that as a principal lens to say, at least when I get down to a couple of finalists on a stock investment, which one really gets the simplicity thing and is really doing something about it in a meaningful way.
Next Page: The other side of the simplicity coin is stress. »
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