In the last post we started the series by looking at the four main ways to grow your business.
In today's post, we're looking at your category health.
Check out the full presentation below.
The following text is the video transcript.
Now what's interesting about this category is that you can conduct all the analysis and all the McKinsey type reporting you want, but we still need to remember that a category lives in our customer's minds. It's how our customers think about our categories which determine the success of the category.
A specialist generally beats a generalist
One of the principles here is a specialist would generally beat a generalist. The more specific we can be about our category, the better chance we have to be remembered and the better chance we have to be related to.
Let's take an example. A massage therapist, quite general, quite generic, versus a sports massage therapist. Well that gives us a clearer idea of a target audience and a specialty. Then you can look at a performance athlete rehabilitation massage. Out of the three, we can ask, who is better, who would you pay more to see and who would you be more likely to talk about or recommend?
Inch wide, mile deep, niche market positioning
That's just one example of what we call inch wide, mile deep, niche market positioning. You don't need to change your business to be a niche marketer. When we talk about inch wide, you want to be narrow enough so that you can be in the one, two, or three at the top of that category. Yet it needs to be deep enough that there's enough customers coming through that you never run out of business.
If we can do this effectively, because we're tighter about our target audience, our cost of acquiring a customer goes down. Our ability to convert a customer goes up. The margin we can charge goes up because customers are happy to pay more for a specialist.
The referability goes up, the ability for us to refer and get referrals, but most importantly, the customer satisfaction goes up. If you set up a positive expectation that's then self-fulfilling a customer will be more satisfied with your service. It's one of the behavioural economics things that happen when you define a niche market.
What category are you in?
So the question is; what category are you in now?
One of the funny things when we look at it is that you can change categories or evolve categories without necessarily changing your brand.
Nokia actually started in 1865 in the town of Nokia, and they started as a pulp and paper manufacturer with a pulp mill. They then moved into electricity and by the 1960s, they were in rubber works, they were making gum boots. Then came cable, and then came electronics and in the 1990s they emerged as a global superpower and became number one in mobile phones. Now of course, the landscape's moving yet again. Since 2011, they've been reforming a new partnership with Microsoft to try and reinvent themselves again and move into the smart phone market.
Another example I really like is WPP. I think that they're the world's second largest communications company. That actually stands for wire and plastic products; they used to manufacture shopping baskets. Then Sir Martin Sorrell bought them; they started to acquire advertising and communications companies. Once again, a company that moves and changes categories.
It's open to you, it's a big decision. But you just need to look at your category health and ask, are you in the right category? So, hopefully that opens something up for you.
In our next post we will bring you the next instalment in the History's Greatest Strategists Reminder Series.