How can you compete with big brands?

This question came about when Deborah Lanyon posted an article from Marketing Week in the Everyone Hates Marketers private Facebook group:

It features new research from the Ehrenberg-Bass Institute for Marketing Science stating that “narrow targeting is counterproductive to B2B growth.”

It confirms earlier research that uncovered the Duplication of Purchase Law: brands share customers far more with the bigger brands and far less with the smaller brands.

This holds true for B2B or B2C businesses, subscription markets, or multi-brand markets.

What does it mean for you?

“No matter how niche your product or positioning, the most efficient way to grow your brand is by using your marketing efforts to reach your entire market.”

But how do you plunge into an entire market and compete with bigger brands with only minimal resources?

Say you’re a solopreneur. Or a small business owner with a handful of employees. Or a new startup that tries to stand out in a saturated market.

Are you supposed to target everyone under the sun that buys your category of products or services? Are you supposed to forget everything that you’ve learned about niching down?

The answer is a bit more nuanced.

Go after a Goliath with an average product in a massive, established category (think banking or automotive), and they will crush you (unless you have billions of dollars to spend for years to come).

That’s because big brands benefit from three massive forces:

#1: The Double Jeopardy Law

It’s an empirical law also discovered by the Ehrenberg-Bass Institute which states that brands with less market share have so because they have far fewer buyers (first jeopardy) and these buyers are slightly less brand loyal (second jeopardy).

In other words, as market share declines, both penetration and brand loyalty drop together.

Small brands have to work much, much harder to retain and attract customers.

#2: Advertising is 16x more profitable for big brands

​This means that big brands have a 16x multiplier for every dollar they spend on advertising.

It may not seem fair, but it’s the harsh truth.

#3: You might not even have a brand... yet

I’m going to let brand consultant Mark Ritson put the final nail in the coffin:

"The brand game doesn't really get going for about four or five years. So in terms of working with brands, and I've worked with relatively young brands when they were 7, 8, 10 years old.

I worked with Sephora, for example, the big cosmetics chain, and we have a little, a wonderful program called incubator where we take the two hottest, fastest-growing little brands and, going fast, and we work on them, and we help them. And we incubate them, but even those brands, they still need four or five years already before we can really get into brand strategy.

The first three or four years are about finding your way, getting some loyalty, understanding the path. There’s not a lot of brand strategy work that you can do in years one to five. All you would say to anyone with a new brand is don't create more than one brand.

Don't be a fuckwitt. That would be my consulting advice in an envelope to everyone with less than 5 million euros in revenue."

Read the work of Byron Sharp, Director at the Ehrenberg-Bass Institute, with care: it doesn’t apply to you if you’re a young business.

In short, don’t believe the “David can beat the shit out of Goliath” stories. Not only will you be crushed, but you will also try to enter a game you can’t even play.

There’s a better way to compete with big brands, even in saturated markets and with few resources.

How to compete with big brands when they own a large portion of market share: Find a large swimming pool

Allow me to come back to Seth Godin and his book This is Marketing for this one:

You can’t compete head-to-head against the Goliaths dominating entire oceans but, by finding a swimming pool that’s big enough, you can make a difference and stand the f*ck out.

Those big brands are not focused enough to look after those swimming pools.

There lies the root of radical differentiation:

• Find the smallest category that can sustain your business and that puts your product in the proper context (that’s the big swimming pool)
• Obsess over an underserved segment of category buyers that Goliaths have been neglecting that you can own and defend
• Give them a compelling reason to switch from whatever they’re doing right now
• Benefit from word-of-mouth from early adopters and reach as many category buyers as possible
• Dominate the market, rinse, repeat with an even bigger swimming pool
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6 steps to compete with big brands without really competing

Step 1: Start giving a shit about the people you want to impact.

It can’t be a selfish endeavor where you obsess over making millions and millions. Help others make progress in their life. This is why “niching down” is not just a box to tick; it’s a generous act aimed at finding a group of people whose big brands and competitive alternatives have underserved.

Step 2: Think in terms of underserved segments.

This is why most businesses are started by folks who are pissed off about the current solutions they’re using: they’re underserved and want to do something about it.

A few ideas to get you started…

Your segment may be underserved because:

• Of a lack of skills. They don't have enough skills to get the most out of a category.

• Example: My Wall Street is an investing app where you can invest in the top 1% of stocks (handpicked by experts). No need to be an expert trader to start investing.

• Of their finances. They don’t have the means to access a specific solution.

• Example: Lambda School is an online coding school that covers your tuition until you're making at least $50,000 a year. Compare that to the costs of most universities worldwide, and it’s easy to understand why it’s such a compelling offer.

• Of switching costs. They may be using a product/service that’s difficult to cut ties with (for financial, emotional, convenient reasons).

• Example: Marketing agencies used to rely on multiple, expensive tools to understand what users were doing online. Then Hotjar came in with an all-in-one solution that replaced all of them.

• Of their habits. They may have rituals that prevent them from getting the most value out of a category.

• Example: Back in 1992, most Americans didn’t have access to the internet and used other solutions to get their news or connect with friends. AOL dropped millions of disks in mailboxes around the country, offering a few hours of free time online. The number of AOL users grew 125x from 200,000 in America to 25 million in 10 years.

• Of a lack of time. They may not have the time to get the most out of the category.

• Example: Blue Apron sends “delicious recipes directly to your door.” No need to go to the supermarket or flick through recipe books.

• Of functional dependencies. The category must interact with a related but separate product or behavior.

• Example: Tesla Solar Roof Tiles replace an existing roof to power your home (that’s the ‘product’ you already have).

• Of their worldview. What they believe, fear, want.

• Example: Meat lovers who want to contribute to saving the environment can now enjoy plant-based meat alternative food from companies like THIS.

• Of a lack of access. They may not have access to the category because of their location, environment, or context.

• Example: The Office (the British TV show created by Ricky Gervais) grew in popularity in Europe, but Americans didn’t have access to this kind of grimace funny humor. So NBC bought the rights and developed a version for the American public.

• They feel incompetent. They want to feel capable of their own actions.

• Example: IKEA took over the world with easy-to-build furniture you can assemble yourself.

• They can’t determine the behavior of something. It’s all about control; they don’t really understand how something works.

• Example: I teach people how to radically stand out in my program Stand The F*ck Out because no one, not even experts, explains how to actually do it.

• They are not getting enough attention. They want to get recognition for their actions.

• Example: Tesla made electric vehicles mainstream by appealing to people’s egos; “Look at me, I drive an electric vehicle that doesn’t look like shit.”

• They struggle to maintain control when things become more complex as things scale.

• Example: Companies tend to use Google Drive or Dropbox to share digital assets. As their number of employees grows, things become more complex: they need a Digital Asset Management system to centralize everything in a single source of truth.

If you want even more examples, take a look at the Value Pyramid, compiled by Bain & Company:

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Step 3: Ask yourself, “Who tends to feel this way the most?”

Go to the edge of the map when it comes to the people who are the most in pain, who tend to feel the most underserved. Who are they? What do they believe? Who do you like working with the most? Who can say ‘Yes!’ to your solution right now?

Here’s how Seth Godin describes a typical JC Penney shopper, clearly underserved by more premium retail outlets:

"The typical JCPenney shopper has a household income of $20,000 to $50,000, at the bottom end of the American household income scale. We know that these are not people who are showing up at the Metropolitan Museum Gala. They are scraping by.

But!, and it's a big but, shopping at JCPenney represented a chance to beat the system, to put in the thing you have (time), to get the thing you don't have, which is status.

If you won, you would get something that was in short supply in your life - that feeling of superiority over the system."

Step 4: Pick the right swimming pool (aka category).

‍What is the best swimming pool to put our product into so people understand what you do and how you can help them? Don’t pick the most enormous body of water possible (the oceans are all taken by gigantic brands).

Instead, choose a swimming pool big enough to sustain you and small enough for Goliaths to care.

For example, “pet food” is a category. “Cat food” is a category within that bigger category. “Cat pâté” is a category within a category within that bigger category. And “organic cat pâté” is a category within a category within a category within that bigger category.

Step 5: Write down your radical differentiation formula.

You can become:

The only product in that [swimming pool aka category] that provides [value] to this [underserved segment].

Step 6: Drop all the dye you have in that swimming pool (aka reaching everyone in that category).

‍Mix short-term sales activation to generate sales now from early adopters ready to buy and long-term brand building from all the category buyers to influence future sales:

To summarize

• The Ehrenberg-Bass Institute of Marketing Science advice to target everyone in a category is misinterpreted.
• You might not be a brand yet, and trying to compete head-to-head against giants is a fool's errand.
• Instead, find an underserved segment, a large swimming pool, and do everything you can to serve them.
• Drop all the dye you have to turn the swimming pool purple (or whatever other color you fancy).