• by Sarah Mahoney  @mahoney_sarah, March 7, 2011

Alex Hiam is this close to flinging his iPhone out the car window. "I can do everything on it, except make a call that won't get dropped midway through," says Hiam, the author of Marketing for Dummies and instructor of the University of Massachusetts business school. He calls it core product neglect, a term he's coined for big companies that have forgotten what their brand is supposed to stand for. Marketing Daily asked him to explain what causes these strategic blind spots.

Q: How does neglect start?

A: When marketing intensifies, companies get swept up in add-ons. Of course, it happens in small companies, too -- lukewarm or burned coffee will lose customers for your local coffee shop, no matter how good the breakfast paninis are. But executives at larger companies are more apt to get carried away with the exciting extras. Minivans are now mobile personal theaters, for example. But extras only win customers when the core is dependable. The core of any phone is its ability to make phone calls, not deliver cool new apps. Customers defect more quickly and permanently over core-product issues than over any of the fancy apps and whistles.

Q: What companies do a good job of protecting that core?

A: Google. It keeps getting bigger, and adding new products and functions and features. But its core product -- the search engine -- gets better all the time, too. I think that's why it's been relatively unchallenged. Bing is smart to go after Google on this core function, but it doesn't have any significant advantage. Apple is also really good at this -- products like the iPhone and iPad get plenty of buzz. But its computers improve all the time.

Q: So how do you make sure your core is healthy?

A: Compete on the strengths of your core. Once customers buy your product for secondary reasons, you become vulnerable to attack from more core-focused competitors. And I think companies should be spending 80% on core functions, even if all your competitors are focused on add-ons.

Q: That sounds pretty obvious. What makes a company take its eye off the ball?

A: When your competitors stop talking about this core benefit, it's easy to get swept up in that, and do what they do. Even if others are not talking about core strength -- engine performance and mileage, for example, or stylish, affordable clothes -- there will be a crisis moment, when someone comes along that is better at that core function, forcing all the market leaders to scramble. Stay ahead of the cycle so you won't be another victim of it.

Q: Retailers face special challenges -- they have to manage the store's brand, as well as the national brands they sell. Which chains do it well?

A: Whole Foods Market has really been true to its liberal hedonist positioning. And it continues to do well in that niche -- it knows its audience, and constantly improves on what it does best.

Q: But it doesn't always work. Wal-Mart has been true to its core premise -- everyday low prices -- and is having a bit of a struggle right now. Why?

A: Wal-Mart has definitely got some core product malaise, and is a good example of a company who clings too stubbornly to its core product identity. The landscape is different. There have just been too many new stores over the years that also offer low prices, but something more, too. And Wal-Mart just keeps staying the same, and trying to fix the trimmings. And it's not just Wal-Mart. Many of the big-box retailers are struggling to compete in this new landscape.

Q: Many marketing executives would argue with you, and say that brand extensions are often more important than the core.

A: They are important. If a company makes corn chips that are a hit, then they have to make them in new flavors, in new packaging, in new sizes, to keep it fresh and innovative. My point is that companies have to do all that, and make sure the chip itself is the best-tasting thing going. It has to be perceived, first and foremost, as yummy. If it's not, the minute a better-tasting chip appears -- and it will -- it's vulnerable.