The Super Bowl, Big Brands, and Managing the Competition

A Mini MBA on Porter's Five Forces and what to do when the competition tries to eat your lunch.

I work in advertising, and the Super Bowl is our Big Moment. It’s like Oscars season, with the entire industry jockeying around before, during and after the game to lodge themselves deep in the psyche of the country, the culture, or at least one consumer. 

In prior years, I’ve done reviews of the ads that hit the airwaves to glean some bit of the zeitgeist. This year’s Ad Bowl was a bit of a yawn; the zeitgeist is decidedly safe, veering to the tried and true formula of big celebs and big humor--minus, of course, a few odd interludes, like ads for Jesus and for RFK Jr’s presidential run. 

But for the most part we learned the fundmentals of advertising. Use the brand name—a lot (see Dunkings, Cerave). Build on prior work (the endless parade of Clydesdales). Make things over the top and memorable (State Farm, and the brand that we repped this year in the ‘Bowl, Popeye’s). If you’re up for it, create a little controversy (Duck Plump by Nyx).

The Super Bowl is the home of large, safe brands, for the most part, buying up the most expensive airtime on the planet for a shot at getting in front of hundreds of millions of viewers. Occasionally newer companies get a shot at making waves at the Super Bowl, and they’re often the more interesting ones. Liquid Death has always sought to capitalize on the attention without paying for the advertising (this year selling ad space on its can), and social media powerhouse DuoLingo ran a 5-second spot that got its fans excited. 

And even though a few UFOs and robots showed up, one of the big clouds looming over advertising barely got a mention--that is, AI. Google, in the fight of its life with OpenAI, ran a tear-jerker about a blind man taking photos, instead of hawking one of its competitive AI products (Bard? Gemini? Does someone need branding help?) 

All day every day companies are piling in to eat each other’s lunch. If one company is successful, what is the first thing that most other companies do? There will be new entrants figuring out how to get a scrap or crumb, and there are current competitors who want to duke it out

So what do you do? There’s a few things to do, based on a a fundamental business school model on analyzing a market called Porter’s Five Forces. Each of the forces shapes a market, and allows businesses to assess how to proceed. In advertising, we typically look at a competitive set and the bargaining power of customers, but pay little attention to the supplier power.

1. Build a brand that people recognize and like

Building a strong brand is a sizable barrier to entry for new companies. How many cola brands have died so that Coke could live? 

When you see America’s number one donut brand Dunkin, charm us with a boy band consisting of Ben Affleck, Matt Daimon and Tom Brady (much to JLo’s chagrin), they’re continuing to drive that brand recognition and affinity that they’ve built over decades.

When you see Arnold Schwarzenegger blow things up for State Farm (and struggle with the pronunciation of its jingle, thereby repeating it umpteen times) it’s there to get attention and get stuck in people’s heads. 

2. Build a loyal customer base—and make it hard to switch.

Switching costs. We complain about ‘em when it comes to cellphones, banks, and wifi companies. These aren’t necessarily financial costs, but costs in time and effort. Move all my money from here to there? No thanks. Learn a whole new cellphone system--and figure out how to bring your photos with you? Ugh. That’s one of the many reasons Apple built a closed system of music, entertainment, and even communications. And that’s why Samsung, on the flip side, has tried to make it easier to switch, with a smart switch button that tries to lower that barrier to entry.

Many consumer goods, like consumer packaged goods or quick service restaurants, don’t have that product-level ability to make it hard to switch. So they rely on loyalty: both brand loyalty driven by their marketers and customer loyalty programs like points. Starbucks is in a very competitive industry; there’s a coffeeshop on every corner these days. But they not only award points, they have you preload your Starbucks app with your own money.

3. Be threatening, through retaliation and regulation

This is the area that keeps lawyers employed.

We see the threat of retaliation play out in the business media everyday. It’s why Disney sues childcare centers for the use of their IP. It’s of course to right the horrible wrongs of painting an unlicensed Disney character to amuse children, but it’s mostly to maintain control and to strike fear into the hearts of others that this is a litigious organization. It’s why Apple and Samsung were in court for seven years for patent infringements. 

Government regulation is not just to protect us consumers, and in spite of the business-friendly right railing against regulation, it’s also a tool for dominant businesses. More regulation makes it harder for new entrants. The recent AI executive order from Biden, for example, has been accused of stifling competition by bringing regulation that protects the current major players.4. Make it expensive to get in the game

AI is a great case to look at for the high cost barrier to entry as well. Companies looking to rival OpenAI (and Google and Facebook and whatever Elon Musk decides to do with AI) need high capital expenditures to invest in all the servers and compute costs. They need to be able to pay an increasingly high salary for in-demand expertise--and attract them when other companies not only have the money but the brand cachet and the staying power that start-ups don’t. The decades of research put into developing large language models make it difficult to start from scratch.

Legacy car companies have set up a complex system of suppliers (materials, parts, and even deals with certain companies for what gets manufactured where) and distributors (all those car dealers), and because of their scale have been able to manage these costs.

Until Tesla came along and questioned everything. By vertically integrating and micromanaging its parts manufacturing, and by circumventing the dealers and owning its systems of distribution through Tesla stores, it reinvented the auto industry. Now, Tesla has the economies of scale--knowing how to set up plants and distribution systems for EVs and working on bringing the costs down. Meanwhile, legacy car companies needed to reinvent everything in order to compete, and new entrants like Rivian and Lucid don’t have the scale to bring costs down as aggressively. 

Tesla, of course, is facing new competition. China’s heavily subsidized EV market is coming to eat Tesla’s lunch.

So the saga of competitive markets will continue. 

And an extra, a little breakdown of Porter’s Five Forces, via Edrawmax.