Micromarkets Part 2

A few weeks back, I wrote about the dichotomy of micromarkets and mass markets. On a recommendation from Tom Austin, I just read The Rule of Three -- a book which nicely ties together my musings on how small, focused companies can thrive in the shadow of industry giants.

The Rule of Three, by Jagdish Sheth and Rajendra Sisodia, posits that over time, every industry comes to be dominated by three large generalists, with any number of small niche players also thriving. Examples abound: in athletic shoes, it's Nike, Adidas, and Reebock coexisting with specialists such as Saucony. In airlines, it's United, American, and Delta, with focused niche players like Southwest.

Niche specialists thrive by earning high margins serving a small percentage of the overall market. Generalists focus on efficiently addressing the needs of a large share of the market. Niche companies that try to grow too fast, and generalists who fail to achieve critical mass, are in danger of falling into the dreaded "ditch," as illustrated below. Their market share is too small to enable them to compete effectively against the giants, while their product and market focus is too broad to enable them to compete against the niche players. Northwest Airlines, which is currently flirting with bankruptcy, and K-Mart are examples of ditch companies.



Markets are dynamic, of course, and the makeup of the big three can change over time -- and sometimes in a very short span of time. For example, IBM, the undisputed leader in PC manufacturing in the 1980s, is no longer even much of a niche player in the space. Niche players can become market leaders (though the path is fraught with peril), smaller generalists can leapfrog leaders with new technology, or smaller generalists can combine through mergers and acquisitions to emerge as big-three companies.

The Rule of Three also provides a wealth of strategic advice for companies in each market position. Market-focused niche players will be most successful by developing new products for their tightly-defined market. Product-focused niche companies succeed by finding new markets for existing products (the ever-expanding number of uses for baking soda is a classic example).

Market leaders are advised to be fast followers rather than innovators. For example, Microsoft is the leading provider of word processing, presentation, and spreadsheet applications -- although it didn't invent any of them. The third-largest company in any industry normally is -- and needs to be -- the most innovative. For example, Chrysler brought back the convertible and developed the minivan.

The structure applies to b2b companies as well as b2c firms. In the business software market, Gelco Expense Management is a classic product nicher; it has one narrow product (online expense reporting) that suits multiple industries. SoftBrands is a market niche company -- it sells a broad suite of software and services to a narrow slice of the manufacturing market: midsized companies that produce assembled products. The company's strategy may appear confused because it also sells software to the hospitality industry. However, as The Rule of Three points out, niche companies can successfully compete in more than one niche -- as long as operations remain separate and focused. The danger for niche companies is the temptation to grow by becoming generalists. If SoftBrands tried to compete head-to-head in business software applications with SAP, Oracle, or Microsoft, it would find itself pulled into the ditch.

The Rule of Three does an excellent job both of explaining industry structures -- how micromarkets and mass-markets co-exist -- and of providing strategy advice to companies large or small who want to thrive and avoid being pushed or pulled into the ditch.

*****

Terms: The Rule of Three, micromarkets, niche marketing, business strategy, strategic focus

The Web marketing portal: WebMarketCentral.com

Contact Tom Pick: tomATwebmarketcentral.com

RSS feed

Web Marketing Tools and Wisdom

Two new resources for Web marketing assistance have recently been added to the Advice page on WebMarketCentral, the Web marketing portal.

First, Mike's Marketing Tools guru Michael Wong offers reviews of a large selection of Web marketing tools, including ad tracking software, autoresponders, keyword bid management, email marketing, search engine optimization, and Web site traffic analysis. The site also features a collection of Web marketing tips on topics such as Three Ways to Get Listed in Google and Top 12 Tips To Writing Effective Google AdWords Ads, as well as a selection of useful free tools (Mike's search engine position check tool provides a fast and easy way to see how well your site is showing up in the major search engines).

Second, Mike Schultz's RainToday site provides articles (free but registration required) on management, marketing strategy, marketing tactics, sales strategy, and rainmaking tactics; research reports (fee-based); and other resources designed to help service providers grow their business.

*****

Terms: Web marketing assistance, Web marketing portal, internet marketing tools, service provider marketing

The Web site marketing strategy portal: WebMarketCentral.com

Contact Tom Pick: tomATwebmarketcentral.com

RSS feed

The Life of a Consultant

Being a consultant or contractor has its advantages -- flexibility, challenge, constant opportunities to meet new people -- but it also means that you're a perpetual "outsider." My friend Dan Rutman has written a wonderfully witty piece entitled The Contractor's Guide to Corporate Culture that humorously captures the intangibles of fitting in with the company that's providing your temporary revenue. Although Dan is a professional contractor, his observations apply well to consulting also.

For example, on the importance of an on-site cafeteria: "Asking someone `Can I join you for lunch?' has more appeal than `Want to head over to the machine for some Jujubes and a Fresca?'"

Or his commentary on employee activities: "Good Companies: Boat Cruise Day, Massage Day, Cake Day. Bad Companies: Interpretive Dance Day, Foreign Film Day, White Noise Day, Bamboo Under Fingernails Day." He overlooked "Causing Severe Psychological Discomfort Doesn't Really Count as Torture!" day, but perhaps he hasn't had the opportunity to observe the enjoyment of that one.

Dan had also asked me about blogging. I pointed him to Why Write a Blog for Business? on WebMarketCentral, as well as to 5 Tips for Promoting Your Blog to Popular Bloggers on Peter Davidson's excellent BeConnected blog. Peter provides some wise advice about how promoting your blog to bloggers is completely different from traditional PR.

I hope that you enjoy Dan's article, and that all of your engagements are with "good" companies.

*****

Terms: consulting, company culture, temporary contracting

The Web marketing plan design portal: WebMarketCentral.com

Contact Tom Pick: tomATwebmarketcentral.com

RSS feed

Want to generate business? Write a book.

If you've ever thought about writing a book and wondered if the effort would be worthwhile, a new study suggests the answer is a strong "yes." Mike Schultz of RainToday.com interviewed 200 authors of business books to find out how they did it and how it impacted their ability to do business. RainToday offers articles, case studies, and research designed to help service business rainmakers and marketers work more effectively.

The results:

- 53% of authors reported a "strong" or "very strong" influence on their ability to charge higher fees

- 76% indicated publishing a book had at least some influence on their ability to close deals

- 83% reported at least some improvement on business with current clients as a result of publishing a book

In short, consultants and agency execs seem to agree that publishing a book helps them to be seen as gurus whose services are in demand. Mike has published his findings in a report for those who are interested in learning more about how publishing impacted the authors, how to go about getting a business book published, and how to market it effectively.

A few more statistics from the report:

Management consulting, marketing, and training were the most common book subjects, collectively accounting for more than half of the 590 books published by these 200 authors. IT consulting followed with 11% of the total.




63% of authors said that publishing a book had a "strong influence" or "very strong influence" on their ability to generate new clients.


The three most effective methods of marketing were internet marketing, trade media coverage, and direct marketing to existing clients.

Go ahead, unleash your inner author. It's worked for my friends Yvonne DiVita and Jay Lipe -- it may also be a path to greater success for your business.

*****

Terms: publishing a business book, writing a book for business, book marketing

The Web marketing portal: WebMarketCentral.com

Contact Tom Pick: tomATwebmarketcentral.com

RSS feed

Katrina's Forgotten Victims: The Disabled

Due to accident, illness or age, many Americans depend on their wheelchairs. To people who have lost the use of their legs -- or, in some cases such as the late Christopher Reeves, the use of most or all of the muscles below their neck -- a wheelchair is much more than a mode of transportation. It is their freedom to move, their legs, and the place where they spend a great deal of their waking hours.

Particularly to those who need a true "rehab" wheelchair, their chair is a very personal item. It has to fit their height and weight, support them properly given their limited muscle control, and have a drive control mechanism appropriate for their specific disability: toe-controlled, finger-controlled, or, like Christopher Reeves, controlled by the puff and sip of their breath.

During and immediately following Hurricane Katrina, hundreds of wheelchair-bound people were rescued; that's the good news. The bad news is that, in most cases, their chairs were left to the ravages of rising Lake Pontchartrain. Our federal government, in its wisdom, couldn't find money in the $262 billion dedicated to hurricane relief efforts to buy appropriate replacement chairs for these individuals.

Yes, yet another example of your tax dollars not at work.

Just before Christmas, I had the opportunity to make the acquaintance of Bruce Bayes, the CEO of Custom Mobility. Bruce's business acumen (he has built the largest rehab dealership in the southeastern U.S.) is matched only by his passion for serving those with disabilities. After Katrina, he felt that he had to do something. His efforts have helped many disabled victims of Katrina, but more remains to be done.

So how can you help? Please visit this site.

God bless you.

RSS

Web Marketing News Headlines

Granted, this is a lazy way to post, but if you haven't checked them out, the Web Marketing News and E-Commerce News pages on WebMarketCentral are a great way to keep up with what's happening. Here are a few of the headlines you may have missed if you haven't visited those pages lately (or grabbed the RSS feeds from them):

Amazon.com Reportedly Considering Ad Network
Information Week 8 Feb 2006
Amazon.com is reportedly looking for beta testers for a possible contextual advertising network that would place third-party links to products on the online retailer's partner Web sites...

SMB community targeted by spam
Computer Weekly 8 Feb 2006
Spammers are hitting SMBs harder than larger companies, according to the annual report by Postini, a provider of integrated message management products. The report suggests that SMBs were sent nearly 50 spam emails per day per user in 2005, almost four times the number that large companies were sent daily...

Anti-spam initiative
Computer Crime Research Center 8 Feb 2006
Maybe this is where it starts to change. Two of the world's largest e-mail providers, America Online Inc. and Yahoo Inc., have said that they will soon start giving companies the option to pay for guaranteed delivery of e-mails to the inboxes of their subscribers...

E-Mail Marketing Best Practices
E-Commerce Times 8 Feb 2006
Producing consistent, predictable results at the push of a button is the dream of every marketer, but can only be accomplished by following some simple rules. Although an important step forward, the CAN-SPAM act only provides a legal platform for e-mail marketing...

*****

The portal for Web marketing resources -- WebMarketCentral.com

The Age of the Micromarket?

Back in ancient times (that is, before 1996), big companies and big brands ruled the market. Then came the dot-com boom. With the internet and manufacturing lot sizes of one, virtual companies were supposed to spell the end of big brands and usher in the age of the micromarket.

What we've ended up with instead is an odd dichotomy of mass and micro. On the one hand, big brands still rule in many cases: Coke and Pepsi; Bud and Miller; GM , Ford, Daimler-Chrysler and handful of other large auto makers. Even the internet -- supposedly the ultimate micromarket vehicle -- is dominated by Amazon, Yahoo and Google. And of course, no industry is more dominated by one brand than computer operating systems, where all alternative operating systems combined don't generate 10% of the revenue of Windows.

And yet, simulateously, markets are indeed becoming more micro. When I was in high school (too long ago), there were only a handful of teen subcultures: you were either a Jock, a Nerd, a Burnout, or a Quiet One. Today, the pelthora of adolescent cliques include auto shoppers, band geeks, Crombies, emo kids, goths, preps, wavers, rejects, skaters, punks, hippies and several more.

Radio station formats in my youth were pretty much limited to top 40, country, news, religious, and polka (seriously). Now, radio formats include adult album alternative, classic hits, classic rock, college, modern rock, oldies, and just plain "rock," just within the rock category alone.

In "Nobody Home," Pink Floyd's obligatory big band doleful missive about life on the road, David Gilmour complained of having "thirteen channels of sh*t on the TV to choose from." Thirteen? Today, basic cable usually comes with more than 100 channels, and satellite systems offer 500 channels or more.

Micromarkets are a hot topic in publishing, restaurants, and etailing among other industries. There are few markets more mature than the insurance industry, which began in London in the 1600s. And of course there are a handful of very, very large insurance that most people are familiar with: AIG in life insurance, Allstate in homeowners, and State Farm in auto. Yet the industry is still amazingly dynamic, and includes its own micromarkets such as insurance specifically for "black cars" (taxis and limousines) and for classic cars.

So, where are we exactly? We're at a stage where the best entreneurial opportunities exist in micromarkets. To return to the beer analogy for a moment, nobody's going to line up investors to create the next Budweiser, but they might get funding to create the next Summit. Small companies innovate, big companies consolidate. The best new ideas still come out of garages. The challenge for marketers is to choose the right subculture or micromarket, and then use today's micromedia to bring the right message to the right people.

*****

Terms: teen subcultures, Pink Floyd, micromedia, etailing, micromarket

The portal for Web marketers: WebMarketCentral.com

Contact Tom Pick: tomATwebmarketcentral.com