We are in the “specialization age” and for an entrepreneur and small business owner, that’s good news. But some business owners want to target the largest market possible. These entrepreneurs view the specialization concept and the focusing on narrower targets as being too risky, as limiting their potential to capture a larger market.
Bigger is always better, so why limit one’s business in any way at all? The truth is, you must have a unique quality or expertise to separate your business from the competition. My experience tells me that being known for something and focusing your business strategy around this concept will, in the long term, be a key element in a formula for success and give your business the competitive advantage.
The late advertising guru David Ogilvy said that a key to his business’s success was it being known for something: creative research. The advertising agency he founded, Ogilvy and Mather, did what all agencies do: create and place advertising. Many of these competitors provided those same services at much lower rates than Ogilvy and Mather. But Ogilvy and Mather separated itself from the competition by positioning the itself differently, by creating a unique identity and leveraging that difference to its advantage. David Ogilvy embraced the specialization risk and created a much higher value set for his clients. Information from creative research provided better advertisement targeting, which meant more value for clients.
Being known for something means transcending the “what I do” description of your business to “who I am,” a unique quality that differentiates. We all know that in reality Starbucks sells coffee, Disney World is an amusement park, and McDonald’s sells hamburgers. That is what these businesses do. However, they are known for something completely different. Disney World is “the happiest place on earth,” Starbucks is a social place, and McDonald’s is a marketing expert that is inexpensive, fast, and easy to find. What they do is far less important than who they are.
Being known for something means you are unique, not a jack-of-all-trades; you are a specialist. As a specialist, you command more respect because you are perceived as the expert. For example, an auto repair shop that specializes in Porsche repair is seen as more high tech than one that has no specialty (a general practitioner), even if the actual services preformed are similar. Changing oil or replacing brake pads on a Porsche is not much more difficult than changing oil or brake pads on a Chevrolet. Yet, speaking from experience, the Porsche owner willingly pays 3 to 4 times more because an “expert” Porsche mechanic is servicing it.
Market differentiation and a competitive marketplace edge emerge from the business identity and the general consumer perception of that identity. Knowing who you are is key in a competitor-filled market fighting to capture and maintain market share, no matter what your business does. Your customer must clearly perceive how your company’s product or service provides a discernible benefit and greater value than your competition’s does, because that’s who you are.
When used to build your business and marketing strategy, the concept of being known for something points you in the right direction. To create a marketing plan, the specialist defines a market to target based on the business’s identity, and this market has reasonable boundaries. The general practitioner, on the other hand, has no practical means of focus within his vast boundaries. It may appear to be advantageous to address an unlimited market size, but it’s really a disadvantage for two reasons: First, general practitioners have more competitors to deal with than do specialists. Second, because of more competition and a larger group to reach, general practitioners must spend more to market.
How do I know this concept of being known for something is valid? I lived it for 30 years with great success. My business was direct mail marketing, a generic industry that was completely focused on its product – machine throughput and offering the cheapest price. My partners and I decided this was not a “game” we were willing to play so we created a specialization focused on an industry and specific need: generating leads. The risk for failure was high, but if successful, the payoff was well worth it. We purposely eliminated 99 percent of the potential market for direct mail-marketing services and became experts in providing qualified leads to timeshare resorts across the country with a unique direct mail product. Those within our target market knew who we were and our reputation as a lead generation expert for the timeshare industry made it easy for our sales team to communicate our value proposition—we fill your resort with qualified leads so you can sell.
Having a business identity is making sure that everyone knows who you are. This includes the outside world, of course, but more important, it means the inside world of your own staff. Every person we employed had to know who we were, and we developed a culture around our core business values. Everyone from the leadership to the guy loading the truck—and everyone in between—has to buy in. The entire company must pull the rope together with equal enthusiasm. You can achieve this only by instilling a culture that first promotes the company identity within the company.
Ambiguity in a customer’s mind results in avoidance. People have a low tolerance for uncertainty; if potential customers aren’t sure what your company’s value is, then they avoid doing business with you. Through creating a specific identity based on the customer value we provided, one that potential customers could easily understand, we formed the foundation of our marketing message.
Narrowing our value proposition to the single most important need of our customers and qualified prospects, and embracing a consistent marketing strategy around this value, allowed us to capture a huge market share in a short time. We were so far ahead of the competition and so early that as of this writing, they still haven’t caught up. The perceived risk of such a strategy is unfounded. When you are known for something instead of for what you do, you position your company as the obvious choice for a customer looking for a solution.
Tom Panaggio, author of The Risk Advantage: Embracing the Entrepreneur's Unexpected Edge, has enjoyed a 30-year entrepreneurial career as co-founder of two successful direct marketing companies: Direct Mail Express (which now employs over 400 people and is a leading direct marketing company) and Response Mail Express (which was eventually sold to an equity fund, Huron Capital Partners). As a result, he can give a true perspective on starting and running a small business. His practical approach to business concepts and leadership is grounded in the belief that success is the result of a commitment to embracing risk as a way to ensure opportunity. Today Tom lives in Tampa with his wife, Shemi. When he's not speaking or advising entrepreneurs and small businesses, he's spending time with his family -- his three daughters, Ashley, Christine, and Elizabeth, are all pursuing their college degrees -- or he's out on a racetrack. For more information please visit http://theriskadvantage.com.
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