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How Underdogs Can Out-Market Bigger Better Leaders www.gkic.com

underdog.indd 1 5/11/2016 10:09:26 AM


One of the questions I am most asked by GKIC Members begins something like this:

“I’m up against a competitor who is ... (a) muchbigger than I am, (b) has lot more money than I do and/or (c) is so big he offers much cheaper prices

than I can ... how can I compete?”

Here are the answers, plural, not necessarily in any priority order...

underdog.indd 2 5/11/2016 10:09:26 AM


EVANGELICAL ZEAL Small companies often topple big competitors – like David topping Goliath – because of a sense of right, of being on the side of the angels, of having a profound mission that makes theirs more than a business. Consid-er this: Amway carved a huge chunk out of the soap, detergent and household cleaning products market AND became the largest, most enduring multi-level marketing company not because of “competing with Proctor & Gamble,” but because of its co-founders’ evangelical zeal for making the free enterprise system accessible to all, for the “American way.” Amway’s first decade of growth was ALL about this.

Another example is MCI vs. AT&T. If you remember, MCI was the long-distance company that was in-strumental in legal and regulatory changes that led to the breakup of the AT&T monopoly. They were bought by Verizon in 2006, but their story is still applicable. MCI founder, Bill McGowan, once described the early MCI as “a law firm with an antenna on the roof.” MCI was driven by a mission of deregulation, of “what’s right,” more than just business motivation. Its leadership was able to get its people, even its customers, caught up in its mission.

These days, one of the keys to small, downtown, main street merchants banding together, to compete against a new Wal-Mart, is the creation of evangelical zeal for “preserving the small town way of life.”

FAST REACTION TIMES Bigness has its advantages, but also its disadvantages. Each thing’s (or person’s) greatest strength is also its greatest weakness; the yin-yang concept. The hardest thing for a big, bureaucratic corporation to do is respond quickly – to anything. This SHOULD be a major strength of the smaller, leaner, meaner competitor. Maybe you can respond to timely events and news, to economic or industry trends, to customer input, or to new opportunities. This can be a huge opportunity for your smaller business, and should be emphasized to your clients.

NICHE DOMINATION The smaller competitor has to do what the giant cannot, or will not, do. One of these things is niche domination. The giant chain sporting goods store, for example, will always maintain a balanced, diversified inventory. The chain has preferred-vendor deals with certain manufacturers that must be honored. They have stores in 200 cities to manage, and certainly cannot react to every little “blip” in any one community’s activi-ties. But if I’m an independent, with one, two or three stores in Akron, Ohio, when the World Championship of Bowling comes to town, I’m going to capitalize on that isolated, single-market, timely event by going after the niche of bowlers with a vengeance: ads, mailings, a huge product expo in my store with manufacturers’ reps, and a champion bowler in store for demos and coaching, a contest, and so on.

Or, on an on-going basis, you may be able to make a business out of dominating three or four niches, too small to be given even cursory attention by your bigger competitors.

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NEVER BUTT HEADS DIRECTLY The small mom-’n-pop coffee shop, for example, just cannot take on Denny’s or McDonalds. In any comparable setting, the business with the smaller ad budget loses, at least in the short-term.

The independent bookstore is a good example. The small, independent bookstore, still trying to stock all categories, all titles, and do all the same things like Amazon, Borders or Barnes & Noble does, is dying left and right. The future of an independent bookstore is doing a better job with certain niches; the “mystery bookshop” for example, or the re-invented business, now a cookbook/cooking/gadget/gifts for cooks/and gourmet cooking seminar business. However, in Denver, the legendary independent bookstore “The Tattered Cover” has a big, loyal following unshaken by big chains. And “The TatteredCover” special orders about 400 books a day for its customers. If they don’t have a book, they WILL find it.

Dominos took on all the established pizza businesses, including the giant Pizza Hut – and won by “re-fo-cusing the competition,” by going where they weren’t; delivery. That edge is now gone, but it built the business from upstart to industry leader.

If you are in a “commodity business,” you must find ways to re-invent, re-focus, add-value, so as to essentially create a new, one-of-a-kind business within your industry.

DATABASE MARKETING & CONSTANT, FREQUENT COMMUNICATION

Giants in most industries are slowly, sluggishly coming around to database marketing. The smaller the company, the easier it is to do a superlative job of segmenting your list by interest, size, other factors, and cus-tom-tailoring offers and communication to them. The bigger the company, the communication and relationship with the customer is often less “personal.” That offers great opportunity for “the little guy” willing to go the extra mile.

LOOK AND ACT A LOT BIGGER THANYOU ARE – OR NOT

Sometimes it is to the advantage of the small company to appear much larger than it actually is. If so, this is not hard to do. Positioning is more of a matter of self-destruction and self-declaration and managed per-ceptions than it is reality. Even the issue of company names matters. Years ago, I was president of a company called “General Cassette Corporation.” I noticed that I was often treated with great deference because of this: The instant subconscious link was made with “General Motors Corporation.” “General” meant “huge.” Contrast that with being Dan Kennedy, President of the Kennedy Cassette Corporation. Smaller, right? You bet.

Conversely, little things can help impart a sense of bigger size, like having your receptionist tell the call-er: “He’s not in his office, but he’s in the facility. I’ll page him for you.” A big, fancy, expensive image brochure (even though it WON’T sell a darned thing) can sometimes be useful in playing this “mine’s bigger than yours” game. (Re-read Robert Ringer’s book “Winning Through Intimidation.”)

underdog.indd 4 5/11/2016 10:09:26 AM


Thrifty Car Rental very deliberately imitated the “look” of its then larger rivals, Hertz and Avis, includ-ing state uniforms, on airport counters in full image regalia, network TV commercials – and it paid off, as user surveys showed leisure and business travelers both named Thrifty as one of “the big three.”

However, there are instances where you may want to, instead, place great emphasis on the fact that you are “a little guy.” It has always been interesting to me that solo entrepreneurs are often in a mad rush to appear as big, nameless, faceless institutions even though the marketplace frequently displays its preference for NOT dealing with nameless, faceless institutions.

My best recommendation is NOT to “middle” this. Pick one extreme or the other, and play it for all it’s worth. Be extreme, and be sure to translate whichever position you choose into meaningful BENEFITS to your customer.

CHARGE MORE. NOT LESS You can never win price wars with bigger, better-financed competitors – so why try? If you’re going to concede anything, give away the segment of your market that makes its decisions purely or predominately based on price. That segment is the first to fall apart in recessionary times. Even if you win a price war today, you’ll lose it tomorrow; live by price, die by price. In virtually every industry, there is a segment of the market that does NOT choose based on price. If you cannot win by lowest price, then don’t pretend; charge a higher price, admit it, maybe even brag about it, but then make yours the better VALUE.

Test-prep service “The Princeton Review” uses its competitors’ prices (Kaplan Educational Centers) as its guide to charge slightly more for every service. Princeton emphasizes smaller classes and better technology, but acknowledges higher prices.

SPEND YOUR MARKETING MONEY VERY CAREFULLY Test, test, test. And insist on accountability. It seems that the bigger the company, the bigger the waste. Big entities are VERY sloppy about how they spend their money.

You may also be able to focus on media and methods ignored by bigger competitors. Several years ago, I consulted with an entrepreneur in a particular business where there were three “just-like-him” but bigger, better-financed competitors. They all used large ads in daily newspapers as their No. 1 media. Going up against them there was a prescription for disaster. In his case, MONEY MAILER proved to be the answer. It allowed him to make market areas work that were too small for his competitors to stake out an exclusive position (Mon-ey Mailer will not take directly competitive advertisers in certain categories) and to lower his costs-per-sale.

The infomercial has turned out to be a means of building a brand from scratch in giant-dominated industries. In cosmetics and skin care, for example, both Victoria Jackson and Victoria Principal have become $30-million-a-year businesses and “household name” brands without spending a penny on the awesomely ex-pensive full-page ads in women’s magazines, famous super-models, etc.

For most businesses, very targeted, carefully tested direct mail is still the weapon of choice in compet-ing with bigger companies. The giant is simply too lazy, or very incompetent to test thoroughly, to do sequence mailings, and to track results.

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DIVERSIFY PRODUCTS & SERVICES When competition makes acquiring new customers difficult and expensive, the smartest strategy may be diversifying so as to do a lot more business with each customer you do have. The cost-of-sale for the second, related service, third related service, etc. will be negligible compared to the costs of the first sale.

My friend and colleague, Joe Polish, teaches owners of carpet cleaning companies how to sell their customers super-duper, high quality (high-priced) vacuum cleaners and air purifiers after cleaning their carpets, using sales letters. This gives his “students” a very significant, mostly hidden economic edge over competitors. Here’s why, in very simplistic terms:

Let’s say you are a carpet cleaner, selling an average job for $200, at an average net of$100. Your competitor has the same economics. Now how much can you afford to spend to get a new customer? Probably $99 and not a dollar more. How much can your competitor spend? Same $99 and not a dollar more. But if you average a vacuum cleaner sale to one of every eight customers, on which you can make $400, that’s an extra $50 profit per customer. Now you can afford to spend up to $50.00 more to get a new customer than your competitors can.

MATCH A COMPETITOR’S STRENGTHS BUT EMPHASIZE ITS WEAKNESS

Denny’s ran a very successful advertising and marketing campaign for almost a year, pushing “Five-Minute Lunches Guaranteed” (thus matching the speed of fast food joints), but emphasizing the fact that you sit down and relax while being waited on (emphasizing the flaw in the fast food joint.)

underdog.indd 6 5/11/2016 10:09:26 AM


--------------------------------------------------------------------------------------------------------------------------------- Note: Some of the information in this report is based on the book “Underdog Marketing” by Edmund Lawler,

published by MasterMedia.© 2005 (Revised Edition) Dan S. Kennedy

underdog.indd 7 5/11/2016 10:09:26 AM

www.gkic.com1.800.871.0147

underdog.indd 8 5/11/2016 10:09:27 AM

how underdogs can out-market bigger better …magnetic...how underdogs can out-market bigger better...

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