As marketers, we can easily feel overwhelmed when going up against much bigger rivals. The big dogs can have an impressive legacy, unique branding, and deep pockets. Does that mean we can’t compete with them? Hardly! Many examples of smaller companies eventually outflanking their much bigger rivals exist.
Before getting into the how, let us first visit the more fundamental question of what marketing is and what it isn’t. As Philip Kotler, the father of modern marketing said, “Marketing is not the art of finding clever ways to dispose of what you make.” Sadly, however, we do see companies putting the cart before the horse by confusing marketing with selling.
According to Kotler, “Marketing is the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It defines, measures, and quantifies the size of the identified market and the profit potential. It pinpoints which segments the company is capable of serving best, and it designs and promotes the appropriate products and services.”
In other words, marketing needs to be upstream from other company functions in figuring out company’s place in the customer marketplace—not the other way around.
So, if you are an underdog, how do you market effectively?
Aim for Your Competitor’s Achilles’ Heel
If the primary function of marketing is to identify unfulfilled needs and desires, one doesn’t have to look very far. As resource-rich the bigger rivals may be, they often can be their own worst enemies. They can become vulnerable precisely because of their own strengths.
1. Scope: Larger companies often ignore certain customer segments because they may be unprofitable or difficult to serve. By identifying and targeting these underserved or neglected non-consumers, entrepreneurs can open new doors for themselves.
Bigger rivals have more resources, but they are also prone to rigid, my-way-or-the-highway policies. By being creative in product and service offerings, entrepreneurs can capitalize on those customers who dislike the cookie-cutter approach.
For example, Southwest Airlines initially started with three planes and targeted those passengers who couldn’t afford to fly and were either driving or taking the bus instead. Now, Southwest Airlines is the largest carrier with the most domestic passengers. At the same time, Southwest has remained true to its maverick image.
By bucking the trend to nickel and dime passengers with annoying fees, Southwest has endeared itself to the 109 million revenue passengers it carried in 2012 and has taken its “No Change Fees & Bags Fly Free” marketing strategy to the bank.
2. Service. When the unemployment rates are high, it is common (but not apparent) among big business employees to have an “it’s-just-a-job” mindset. Larger companies have installed Customer Relationship Management (CRM) software, but instilling a true, customer-first culture is difficult for them because of many challenges related to their huge size, multiple locations, internal politics, inward focus, and misplaced incentives.
For example, in an industry where fast food is synonymous with poor service, questionable hygiene, and astronomical employee turnover rates, Chick-fil-A has distinguished itself by building a top-to-bottom culture of servant leadership and earning top honors in customer service. Chick-fil-A does an extraordinary job of developing customer loyalty and employee engagement by being incredibly selective about the people it will bring on as franchisees, aka operators. The saying inside Chick-fil-A is: “We’d rather restrain mustangs than kick mules.” The operators enjoy a lot of flexibility, model the leadership behaviors themselves, hire well-mannered, sincere employees, and train them meticulously on the littlest of things—including folding the last sheet of toilet paper into a triangular point.
3. Scale. As larger companies make huge investments, they also have much higher expectations of market penetration and numbers of customers to justify their decision. They also have shareholders and investors breathing down their necks on a monthly and quarterly basis with high expectations of growth and profit margins. This outside pressure often leads larger companies to make short-term, myopic decisions.
For example, Paychex saw an opportunity that the heavyweight ADP was focusing on employers with 50 or more employees and only had 5% of its revenue from smaller employers. ADP’s product offerings, internal processes, information technology, resource allocation, and incentive structure were all geared toward serving larger employers. So, Paychex set out to make payroll outsourcing easy and affordable for small businesses. ADP’s best managers weren’t interested in a less glamorous job with future potential. By the time ADP came to its senses, it was too little too late. By then, Paychex had already gained a substantial footing.
Outsmart Ignorant Antagonists
If these examples of upstarts outwitting the incumbents appear one-off or outdated, think again. Clayton Christensen, one of the world’s top experts on innovation and growth, has done in-depth research on how industry leaders get blindsided precisely because they focus too closely on their most profitable customers and businesses. He coined the term “disruptive innovation” to describe a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up-market, eventually displacing established competitors.
Christensen in the book The Innovator’s Solution describes how this process starts with sustaining innovations, which are targeted toward demanding, high-end customers with better performance than previously available. These innovations can be incremental in nature or transformational, but the common theme is that sustaining innovations entail making better products that can be sold for more money to attractive customers.
What marketers need to keep in mind is that established competitors almost always win these sustaining battles because they see any attempt to poach their best customers as a clear and present danger and marshal all their resources to defend what they perceive as encroachment on their turf.
But a curious phenomenon repeatedly and systematically takes place. According to Christensen, as companies tend to innovate faster than their customers’ needs can evolve, most suppliers eventually end up producing products or services that are actually too sophisticated, too expensive, and too complicated for certain customers in their market. Companies pursue these sustaining innovations at the higher tiers of their markets because charging the highest prices to their most demanding and sophisticated customers at the top of the market and achieving the greatest profitability is what has historically helped them succeed.
However, by doing so, established companies unwittingly open the door to disruptive innovations at the bottom of the market. An innovation that is disruptive allows a whole new population of consumers at the bottom of a market access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill. The larger competitors systematically ignore this threat because they are not interested in competing against what they perceive is an inferior product or service at a lower cost. They are simply not interested in courting unskilled, unsophisticated consumers.
Remember the time when established mainframe computer makers labeled the personal computer as a toy, when digital cameras were mocked by professional photographers, or when online education was ridiculed by major universities?
David vs. Goliath
The caveat for marketers is to avoid taking the Goliaths head on by going into battle with a sword. Instead, the challenge is to acknowledge one’s own weakness and to choose an unconventional strategy—such as five smooth stones that would make the established rivals laugh and say, “Yeah, right!”
Marketing 101 teaches us that people don’t buy drill bits, they buy holes, but figuring out what customers want is not easy. As Steve Jobs said, “It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”
According to Anthony Ulwick, an innovation expert, companies go about listening to customers all wrong. In his book What Customers Want, Ulwick challenges the customer-driven paradigm of using customer “requirements” to guide growth and innovation. He recommends that marketers need to stop asking customers what they want and instead focus on the “jobs” customers need to get done and the outcomes they hope to achieve.
The social, local, mobile revolution we are witnessing presents an incredible opportunity to marketers everywhere. In many ways, it has leveled the playing field and bridged the gap between the big dogs and the underdogs. At the same time, it is important to remember that technology, no matter how revolutionary, is simply an enabler. There is no doubt that e-commerce is passé and m-commerce is in. But let us also not have selective amnesia about the dot.com bust from only a dozen or so years ago. That is not to say that technology doesn’t revolutionize our lives; it absolute does, but ultimately it is still a means to an end. The end being the jobs customers need to get done and the outcomes they hope to achieve. Of course, technology can be of enormous help to get the jobs done faster, more conveniently, and less expensively, but there is a danger in letting the tail wag the dog.
Entrepreneurs can make innovation more predictable and sustainable once they understand what important jobs need to get done and how big the gaps are in accomplishing them. The four immutable “Ps” of marketing—Promotion, Product, Price and Place—specifically based on this deeper understanding can create a compelling and sustaining value proposition.
Rather than fearing their resource-rich rivals, marketers need to attack the soft underbelly by targeting over-served customers with a low-cost business model, focusing on products and services that customers can “hire” to get the jobs done they can’t easily or cheaply do today, and make the pie bigger by pulling in under-served non-consumers.