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Deposition Designation Station
 
May 2004

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Steve Mckee

Few companies relish the idea of competing in an old, staid industry, spending millions of marketing dollars to gain a few share points. Yet even fewer companies find a way to reinvent themselves, developing new lines of business that are exciting and profitable.

The reason? It�s hard to change established ways of thinking. Most companies fall into the common patterns of trying to be better than their competition. In our advertising agency we specialize in working with growth companies and we�ve learned that what sets them apart is a focus not on being better, but different. In fact, we believe that any company can revolutionize its industry by looking at it in a fresh light, subdividing it in a way no one has yet thought of. This is not a new idea; in fact, industry subdivision has been a common occurrence throughout business history. Consider the automotive industry: You used to be able to get one car, the Model T, in one color, black. Today you can get a cherry-red sport utility 4x4 soft top with a built-in ten-disc CD changer. This industry�s evolution has included a number of market subdivisions, from automobiles to cars and trucks, from trucks to 2x4 and 4x4, and from 4x4 to pickups and sport utilities. Today, if you want a sport utility you first have to choose from among four different sizes. Just when it seems there are no more variations, a new one is introduced. It�s endless.

The same thing has happened in the magazine industry, from general titles like "Life" and "Look" to highly focused publications like "Dog Fancy"; and the soft drink industry, from Coke and Pepsi to Diet Caffeine Free Dr. Pepper. It has happened with computers (from all things IBM to the handheld Palm), investments (Dean Witter to Schwab and E-Trade), and even meat�now we not only have red meat and white meat, but "the other white meat" and even green meat (Veggie Burger anyone?) Blockbuster Video and the Weather Channel are all examples of companies that have fostered and taken advantage of industry subdivision.

Identifying a new niche that your company can exploit is not all that difficult. It just takes imagination and a willingness to throw out the old rules. There are basically five global possibilities on which you can focus: something, someone, somewhere, sometime or somehow. The most obvious area of specialization is a new, focused product, or something. Eggo was the first toaster waffle, Gatorade the first sports thirst quencher, Volvo the "safe" car. Such a focus can have dramatically powerful results. Witness Subaru, who in 1995 quit trying to be all things to all people and focused on its traditional strength of four wheel drive cars. The following year, sales shot up 30 percent and have been growing ever since.

Similar to focusing on a unique product niche is a focus on a unique audience niche, or someone. This can be defined by demographics, such as Mountain Dew focusing on young teenagers or "ESPN Magazine" focusing on 18 to 34-year-old men, a group the company�s research showed "Sports Illustrated" was not serving well. Or it could be a psychographic subdivision such as that pursued successfully for years by BMW, whose core constituency is people who "love to drive."

Enterprise has carved a very strong niche despite being a tiny player in the rental car industry by positioning itself along �somewhere� lines: the company to call when you need to be picked up (predominantly hometown rentals). It has done so with only a fraction of the budget of Hertz, Avis and Budget, demonstrating the power of a tight focus. In the computer industry, Dell has developed a powerful franchise based on direct (telephone and Web) sales of computers.

The "sometime" strategy is primarily one of convenience. It�s what built Federal Express from an also-ran shipping company to a dynasty�as soon as it determined to focus on packages that "absolutely, positively had to be there overnight", the company differentiated itself into market leadership. This is also the strategy pursued by Kinko�s, which on more than one occasion has rescued me by being open 24 hours a day.

Saturn has built a new car brand using the �somehow� strategy. Its focus was not the cars, even though they were stylish and well-built. What Saturn used to set its brand apart from the competition was a different way of selling cars. Even the company�s tagline reflected this position: "A different kind of company. A different kind of car." Saturn�s appeal to women and non-traditional car buyers is now legendary. Similarly, the Girl Scouts came up with a way to sell cookies�more than 190 million boxes last year�not because they tasted so good but because customers couldn�t say no to the sweet little urchin at their doors. Nordstrom is another good example of leveraging the power of "how" to strengthen a brand.

Many people want to make marketing more difficult than it is. Economic models and statistical forecasts are useful tools, but they won�t ever replace imagination, insight and judgement about what�s next. After all, no one ever asked for a microwave oven. From where do new niches come? They come from forward-looking leaders who aren�t afraid to challenge the conventions of their industries, see where things are headed and lead the way.

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Steve McKee is the president and co-founder of McKee Wallwork Henderson, one of the nation�s fastest growing advertising agencies (number 232 on the Inc. 500 list). Steve is considered a growth company marketing expert and understands the unique challenges growth companies face.

See his Listing on Experts.com.

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