Archive for the ‘Long Tail’ Category

Niche Marketing: Narrow, Not Small

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An article published today in Advertising Age really resonated with me. It makes the case that the maturing marketplace, combined with the hyper-connected, in-control consumer “has created a seismic shift from one-size-fits-all mass markets to millions of markets of self interest.” That assessment carries huge implications for retailers who are trying to move product that was once a specialty, but is now a commodity. Strategy consultants Booz Allen Hamilton explain it this way:

As every market matures, choice increases. Then competition drives up quality and convenience to the point at which offerings become commoditized. The only businesses that then thrive are those that move beyond “me-too” or incremental offerings to marketing more-relevant and more-differentiated products and services. The only way to accomplish this is to focus on a narrower target.

Technology & The Long Tail

Technology has played a major role in facilitating this shift. Marketers are now able to micro-target specific groups, engage customers with more frequency and intimacy, and customize to consumer specs. Moreover, technology has enabled consumers with the tools to seek out suppliers that offer just the thing they want.

Think about it. If you are a retailer focused on selling lots of stuff to lots of very different people, you are probably fighting a loosing war of diminishing margins, market share and profitability. On the other hand, brands that have figured out how to excel at attracting and keeping loyal a narrowly focused niche will probably continue to do well. And why is that? Once you, the customer, has experienced having your ever-increasing levels of self-interests met by a niche provider, you have a hard time going back. For example, why would I continue to go back to a retailer for accessories that I know from previous experience, they probably will not have (not even on their website).

As even a senior Wal-Mart official recently said, “no customer today will stand to be treated as part of a mass market anymore.”
This is a major disruption and marketers who fail to respond to it quickly will suffer. According to Advertising Age, the value propositions of those who ignore niche marketing…

“…will be less relevant than those of competitors. For those slow to adopt niche marketing, the future also is bleak. Attempts to recoup share will be difficult because competitors will have preemptively established closer customer relationships.’

A number of brands and marketers have embraced niche marketing. Names like Target, Crocs, Red Bull and American Girl. The all have the same objectives as any other marketer, but they have sensed the disruption and have responded by finding a new way of going to market.

Narrow, not Small

The other thing that has changed is what niche marketing really means in today’s environment. It’s still “the targeting of a more narrowly defined customer group seeking a distinctive mix of benefits”, but niche markets are not the “marginal opportunity” that they were once viewed to be. Today, niches are viewed much more positively.

In today’s marketplace, niches are flourishing. Some niche brands are generating hundreds of millions in sales. Sometimes, narrow niches, fueled by mavens and connectors, become the next big, disruptive thing. The big point of the article is that niches should not be equated with small. Instead, think of narrow. Then target very specific groups who will relate to and find differentiation in your offering. At this point, you are no longer a commodity and you can increase your margins by charging a premium. Do this over and over with different products and services, and you can generate volume and growth that makes up for your narrow targets.

Smaller targets, larger focus
Ten years ago, the medium was still the message. Eight years ago, we could still think of the 4P’s — product, pricing, place, promotion — as essentially independent strategies. Five years ago, everyone started to buzz about customer-relationship marketing. About two years ago, we got really excited about digital-marketing tactics and started to apply them without any real strategic purpose. All this has changed.

So what’s really new about the new niche marketing? It’s realizing that while our targets have to narrow, our definition of marketing communications has to broaden. Today, everything communicates what a brand stands for, all the time.

It’s like the old saying: If you are on the wrong train to begin with, every stop along the way is the wrong stop.

The article closes with 10 principle to harness the power of niche marketing:

  1. Position your brand as narrowly as is economically possible.
  2. Become the specialist that anticipates the needs of your target.
  3. Rapidly work with the target niche to co-innovate.
  4. Set as your goal such consumer centricity that the target niche will want to co-brand their identity with yours.
  5. Live by a higher standard of ethics.
  6. Embrace a business model and metrics that grow the most valuable assets of the new niched economy.
  7. Reap first-mover advantage by learning how to identify a niche of opportunity.
  8. Re-imagine your role as that of entrepreneurial founder of a special interest group.
  9. Forget push marketing; excel at pull marketing.
  10. Realize your brand is now “media” competing against all other media

What do you think? Does this make sense to you ? Can you think of companies that could immediately benefit from leveraging niche marketing?

(Source: Advertising Age)

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CBS, Sling & SecondLife???

In case you haven’t see this, CBS will be joined by Sling Media and SecondLife in a presentation at CES today.  I’ll update the post after the details are out.

UPDATE:  So the keynote is over and here’s the skinny.  For the past year of so, we’ve all been talking about “The New Media”,  “Generation C(ontent)”,  “Web twodotwhatever” and so on.  We’ve also been saying that traditional media “doesn’t get it” or is no longer relevant. 

Apparently good old CBS isn’t going to go away quitely.  Instead, they have spent the last year developing lots of new partnerships with everyone from social networking sites for lesbians to SecondLife where a virtual replica of the Starship Enterprise (CBS property) will be made available to residents.  Perhaps that’s a bit over the top, but this is afterall the age of “Individual and Interactive”.  There is no niche too small (right longtailers?) and we all want to play a starring role.

In his keynote address, CBS President and CEO Leslie Moonves showed off quite a few of his new friends to demonstrate that CBS “gets it”.

“The symbiotic relationship (between online and television content) will only tighten,” Moonves said. “What’s a big media company like us to do? We’re embracing it big time. We’re doing just about everything we can to see what’s going to work now and in the future.” That often means bringing in people outside CBS to do so, he said.

The partnership with Sling media involves Sling’s latest technology called Clip + Sling. It allows users to clip content from live or recorded TV and share it with anyone, including non-Slingbox owners. The clip can be sent in an e-mail that plays the video from a hosted portal.   It’s not exactly YouTube, so to cover all the bases, CBS also has a joint venture with Google’s latest toy in the form of a contest in which users submit 15-second videos to YouTube about anything they’d like.  The highest-rated video will be broadcast on CBS during this year’s Superbowl.

The message from Moonves is that “there is no such thing as old media and new media.  There’s just media.” Is this kind of media mash-up going to save the traditional guys from extinction?   What do you think?  While you ponder that, I think I’ll head over the the StarTrek sim in SecondLife.  I hear there’s a helluva dance party going on in the shuttle craft bay 🙂

Chris Anderson: Less Is More

Chris Anderson is the editor of Wired Magazine. He is also the guy who first observed, researched & documented the phenomenon known as “The Long Tail”.  In early 2004, Anderson was asked to estimate how many of the 10,000 albums accessible via a Web-connected digital jukebox had at least one track played at least once per quarter. Sensing that traditional sales metrics, which would indicate an answer of about 20 percent, didn’t apply to this Internet-enabled example, he ventured an extreme-sounding guess of 50 percent. “I was, needless to say, way, way off,” he writes in his influential book, The Long Tail: Why the Future of Business Is Selling Less of More (Hyperion, 2006). “The answer was 98 percent.”

That revelation inspired Anderson to research the new rules of distribution and customer choice in the Internet Age. In a Wired article, then a blog, and now in his book, he argues that familiar sales charts are obsolete. From Amazon.com Inc. to eBay Inc. to NetFlix Inc., the data bore out his observations: The Internet allows companies to put a far wider range of goods in front of customers than a physical store ever could—and customers respond by buying not just the popular items bunched at the peak of the sales curve, but also the obscure products out on the long tail of the curve.

Moreover, those obscure products far out on the tail might only sell a tiny number of units, but when you add up all the individual items, they make up a large market. Long-tail products don’t replace hits, they replace the monopoly of hits enforced by the limitations of physical retail space. The long-tail phenomenon deals mostly with electronic media and deep-catalog businesses like books and DVDs, but Anderson touches on its impact on manufactured goods and commodities as well. In a recent interview with CIO Insight Magazine, Anderson spoke about the many long tails around us.

Our culture and economy is shifting from mass to niche markets. One size fits all was never a good model, but today, consumers have the power to reject it completely. The internet has allowed the customer to experience one size fits me and they increasingly expect and demand it.

Anderson comments that a growing number of industries as far ranging as heavy machinery to shoes now understand the long tail concept and are working it into their business strategies. In response, Anderson is extending his research by actively learning about those industries.

One observation is that applying a long tail strategy on a commodity business by introducing variety actually decommodifies it. Where have we seen this? The article suggests grocery stores (how many varieties of Coke and Pepsi have se seen in the last few years?). Most mass merchants and CE retailers started selling low-end guitars last year. I saw a few weeks ago where Target is changing the model this year by selling guitars autographed by various musicians. They have taken a commodity, added differentiation, and in the end, generated buzz, demand, and higher margins.

How will this play out in other businesses and what does it mean for physical retailers in general? Make no mistake, producers and retailers will have to answer the call of the long tail. It will soon be the cost of staying in the game. They will need to employ new tools to help them Sense & Respond to the desires of their consumers.

The rise of the Social Internet is making this easier for companies. People are actively sharing their ideas and opinions about products and brands all the time through blogs. That is a fantastic tool for companies. Instead of guessing or depending on feedback from a fraction of customers, they can access the relatively undistorted, honest feedback that is happening in the marketplace among the customers themselves.

The power has truely shifted from the organization to the individual and one of the bid enablers is the ability to search:

We are training a generation—the instinct to use Google to research a company is pretty hardwired in anyone under 30. Google measures links, the expression of respect and interest of other individuals. It’s kind of the ultimate filter for every issue. Your brand is no longer what you say your brand is. Your brand is what Google says your brand is, what individuals think your brand is. When Dell can spend hundreds of millions of dollars talking about its great customer service, and a couple of bloggers can make “Dell hell” show up on the first page of search results, the power has shifted from institutions to individuals.

The smart companies will embrace the long tail and partner with their customers to co-innovate, co-design, co-create. Essentially, enable the customer to have it their way.

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