Ways to Differentiate: The Market Specialist

The Ways to Differentiate series continues with a focus on the Market Specialist position. Mark and Lorraine share how one of the best startup strategies is to enter the market as a specialist to position against the established generalist/leader. Also, take the specialist quiz with Lorraine and see how you score against her answers. [This is the third episode in the Ways to Differentiate series - see previous episodes for the positions of Owning an Attribute and the Leader.]

Spend 30-ish with Mark and Lorraine to learn more about advertising, marketing, and positioning.

Chapters

• 0:00 Intro
• 1:24 Ways to Differentiate: The Market Specialist
• 7:23 The Dictionary Definition of the Market Specialist
• 17:06 Examples of Specialist Retailers
• 24:52 Conclusion
• 27:16 Outro

Transcript

Mark Vandegrift:
Welcome to the latest episode of the Brand Shorthand Podcast. I'm your host, Mark Vandegrift, and with me is the specialist of positioning, Lorraine Kessler. Lorraine, any thoughts before we dive into today's topic?

Lorraine Kessler:
Well, let's see, I've started a new book called The Wager, which I very much enjoyed. The author? Don't ask me his name. But I did read another book by him called The Flower Moon, I think, murders or killings about the Osage Indians. And so I recommend it to anybody who likes historical stories. You won't believe these. They were fantastic.

Mark Vandegrift:
Very good. I know you're into some of those deeper thinking type of novels that expand our thinking beyond just our focused topic.

Lorraine Kessler:
Yeah, yeah, I do like historical, either fiction or just plain history. I have to say I read David McCullough's 1776, and that was a little difficult. I don't know why. Maybe I wasn't that interested.

Mark Vandegrift:
Well, good. Today's topic continues our topic on the Ways to Differentiate. The 11 categories we've determined that organize how clients can think about finding or focusing on their position. We'll focus today on being a market specialist, and we typically just refer to that as “specialist.” So Thing 1, let us know why going to market as a specialist can be so powerful.

Lorraine Kessler:
Well, you know, when you're a specialist, you get to focus on one idea, one concept, and build on what we would call your core strengths, which come from both competencies and capabilities, and as well as what you're passionate about beyond making money. And in a world of over-competition, the generalist is always at a disadvantage against the specialist. We just naturally, psychologically, tend to believe that a specialist will have more experience in a particular category or subject matter. It could be in a product competency. It could be in a market that they serve better than anybody else, whether it's, let's just say, women versus men. It could be an industry such as making cars versus making cars and airplanes and other types of equipment. 

So, you know, you can specialize in different ways, but the point is a generalist is always vulnerable to the specialist position. And it's common sense. If you went to your primary care doctor and they began to tell you a lot about your heart and what they thought you needed for your heart, and you also went to your cardiologist and there wasn’t agreement, the tendency is you're going to believe the cardiologist over the general primary care practitioner. So that's just the way we're made up, it plays on that. 

But there's another reason to really specialize, and proof of it. And there's a great book by Chris Zook and James Allen, who are from Bain Capital, called Profit from the Core. And this book was actually given to me or recommended to me by one of our clients who are financial planners. And it's a fantastic book because it shows that studies validate that the strongest companies with the most profitable growth come from those that have a well-defined core. So right away when I say that, when you have a well-defined core, you are a specialist of some type.

Mark Vandegrift:
Very good. Well, that's really something that we face all the time, because as an agency that's full service, a lot of people think of us as the generalist and we go up against, let's say a web shop or a PR shop or something like that. But that is also where the weakness can be. So before we dive any deeper, share with us the inherent risks of being a specialist.

Lorraine Kessler:
Well, I think that the inherent risk is, or the greatest strategic error you can make, is from inaccurately understanding what your core is. And so the first question around a specialist has to be, “what is our core?” Al Reese in the book, Focus – the future of your business depends on it, and I highly recommend that book. But he makes the comment that size is not a determinant of success focuses. However, that doesn't mean that big companies can't be highly focused. 

And I'm going to give you an example. For example, that's Yum Brands, right? They broke from Pepsi Cola somewhere in the late 90s, I think 98 or so. And they focused on franchised restaurants. And if you look at their holdings of who they have in their franchised restaurants, you're going to see that they have Taco Bell, KFC, Pizza Hut, and one called the Habit Burger Grill. 

Now, interestingly, what I just said, you wouldn't go to Taco Bell for fried chicken. You wouldn't go to Kentucky Fried Chicken for a taco. You wouldn't go to Pizza Hut for Mexican, and you wouldn't go to the Habit Burger Grill for any of those things. So, the beauty is they own specialized brands that stand for largely one type of food item in the mind. And they have grown to be the world's largest and most successful restaurant kind of holding company. And they did that because they have a very good core. They understand, they know how to run, how to manage, franchise restaurants. And then they look for restaurants that have a very differentiated specialized menu.

Mark Vandegrift:
Yeah, that's really the good point that we want to bring to bear today. And built into that, I think with when we talk about an inherent weakness, the other side of the coin of that is you can't go to Taco Bell to get a burger. Similarly, if in our industry where we talk about the specialist, you can't go to a web shop to get a logo or you can't go to a web shop to get public relations. And so that is the inherent weakness of being a specialist. 

But there's so much power you – just pointed it out – in being that specialist, that there's this elevation in the perception of expertise. And so let's share our dictionary definition of a market specialist from our ways to differentiate tool. You already hit on these points, but let's read it as a quick summary of our conversation thus far. 

So from the Ways to Differentiate tool, the rules of play are: People are impressed with those who concentrate on a specific activity or product. They perceive them as experts. And as experts, they tend to give them more knowledge and experience than they sometimes deserve. Conversely, the generalist is rarely given expertise in many fields of endeavor, no matter how good he or she can be. Common sense tells the prospect that a single person or company cannot be expert at everything. The specialist has the advantage of focusing on one product, one benefit, and one message. 

The good news/bad news scenario is: the specialist has the opportunity to become the generic for the product or category. The bad news, the specialist must stay specialized. A company can't chase other businesses without eroding its perception of being the specialist. An example of being a specialist that we cite is most department stores are generalists and they're in trouble today. The big specialists, which we'll talk a little bit, are those that are boutiques or very specialty type stores. 

So this all shouts of the attribute, if you will, of being an expert or having expertise. If you focus on one thing, the buyer is going to automatically give you that bump as an expert. But once you get off that particular focus, then you're kind of at zero. To me, the online world has been a gift to the specialist position, because developing trust online really is essential. 

Since everything on the web is true, right? Not! We all want to figure out a level of trust that isn't inherent if we haven't interacted with your brand before. So, focusing on one specific specialty immediately gives what I call a “trust bump.” Can you maybe give us some examples, Lorraine, of brands that skyrocketed online that did very little advertising to start just because it gave them that trust bump that I'm talking about. And without doing any other advertising, you would think they'd be at a trust disadvantage. So maybe give us some brands that might come to mind that you can think of that just they were specialists and got that immediate trust bump.

Lorraine Kessler:
Well, I guess we use this example a lot, and that's Amazon in books. I don't recall seeing advertising for Amazon books. It was more word of mouth and PR. And certainly, Bezos established the idea of being able to sell books. At one point there was even argument around positionists, whether he could expand to, you know, anything for everybody, which is what his vision was. And indeed he has. So I want to go back to, I want to use this as an example. 

When Jack Trout and Al Ries wrote Positioning, they came out of an era that was very product focused and category focused in terms of product. I think Positioning has evolved past that. So they're not here to tell me I'm wrong, but I've just observed that there's other ways to position. It's not always just product. I mentioned market or an industry, but also a concept, also having… either building something that is unique. And what Bezos built was a distribution system that used online that didn't exist. And so that really was his differentiation. It wasn't selling books. So, if you get hung up on the product, books, then you lose what really happened. So yes, Amazon moved very seamlessly into everything for anybody. They were able to make that work because people created an experience of trust when they got the books and they said, this was easy, and it came to my home. Oh, now they're going to sell this. And it's Amazon and I associate that with me ordering online and getting it quickly. So that's the idea and that's the focus. And that was the core competency.

And in our example, Innis Maggiore, we haven't benefited greatly from brand advertising on a mass scale, right? We've benefited from the same kinds of things: word of mouth, public relations, our own owned assets. Our idea isn't we just build websites, product category. We just do advertising, product category. Or we do advertising and PR, or we're even integrated marketing, Because that's table stakes today.

We focus on a philosophy that came from our core competencies that the people we hired and the leader of our firm was strategically bent. He had a strategic competency, capability, and appreciation. And so, we built the agency based on strategy first, tactics second. So, we don't have to compete in the same way. 

So, these are ways that I feel like focus being a specialist. Certainly, we're still specialists in that we're an ad agency, but we're an ad agency that has a specialty in a strategic bent way of approaching any problem that a client may have. So, I hope that helps.

Mark Vandegrift:
Yeah, it's very good. Amazon, I always think of, we started using the term “frictionless transactions.” And I think Amazon is the business that really created that. The whole goal of easy shipping, free shipping, if you're a Prime member, very quick, sometimes same day, easy to return things. The one button, buy now. So the idea that the point between me and my product is there's very little friction along that path. And I think you're right. They building that system using books was genius. And really, it's interesting because if you think about it, they went from books to digital cameras. That was kind of the, a lot of people forget that era because they went from books to being everything so quickly, but they actually had that interim step of electronics and it was like they were testing into it to say, can we get bigger? 

So, there is a path along the idea from being a specialist to getting something that was much bigger. And like you said with us, you know, that idea that if you went to a web shop to get a website, the idea is I'll get something better than going to a generalist or just an integrated agency. But what we discovered over time is that, no, that website is your greatest marketing tool. Why wouldn't you want to go with a company that understands positioning like we do to create that separation from your competition? So, there are benefits to being a specialist, but there's certainly an inherent weakness in that, because that web shop can't move any other direction. 

Lorraine Kessler:
It depends. Again, it goes back to that fundamental question. Have we defined our core appropriately? And more mistakes are made. If you're just a web shop, it's very narrow in the field of broad communications. And so, you can make hay for a while in the sun of web development, particularly when it was new, and no one knew a lot about it. But once people catch up, competition catches up, you have to revisit that core and say, well, what's the core competency that allows us to build websites and do them well and make them work for clients and what have you and what do clients want? And you have to reimagine and rethink. 

Again, you can only move as a brand or company where the customer prospect will allow you to go mentally, like perceptually. So, a lot of web shops completely moved into things like CRM and digital backend and a lot of the digital advertising and things because there was a natural kind of connection between them. So, to be stuck in that, you're going to be very small. 

And why I pulled out somebody like Yum Brands is even I don't always think of specialists as big, right? So, specialists can be big and they can get bigger when they stick to the core. Now Yum brands didn't run around and buy candy companies and bread companies and food companies, right? They're sticking to restaurants which makes them the world leader and the fastest growing in the category. So again, that first decision in making the decision for the most accurate core is absolutely the most important strategic decision I think a company can make.

Mark Vandegrift:
Yeah, that's a good point. Before we get too far along here, and I know we're already more than halfway through our podcast, but let's do a quick word association to help our listeners understand how a specialist works. Let's use retailers because that was our example in our ways to differentiate. And we're comparing this against the generalists. So, Lorraine lists a few generalists so everyone understands what we mean by that.

Lorraine Kessler:
Okay. Well, generalist department stores like Macy's. Let's say we've seen a lot of carnage over the last 30 years. Department stores just couldn't make it. Dayton Hudson's started Target, but Dayton Hudson's, the department store out of Detroit didn't do well. Jacobson's, I think out of Detroit is gone. John Wanamaker, one of the great department stores, gone. Strawbridge and Clothier, Lit Brothers. I mean, you can go on and on. Gimbals. 

I’ll tell you when a general department store or generalist store works. When you are in a more rural market, right, and people need a lot of things, but they don't have access to a lot of places. Now, this is somewhat pre-internet, but it's still kind of worked. Walmart, I might call a generalist, right? But they started in D markets. That's where their strength was. What they build on as a core competency was their backend system for inventory management and their buying, their way of buying, which really put them ahead of retailers. But their structure and their technology became a core competency. So, Walmart today is the number one world's retailer. They're a generalist, I would say, right? They've got food. They've got automotive products. They’ve got flowers. And Online, they're really killing it doing a good job online They're connected with Medicare for anybody my age and the OTC market optical. So, I don't know of anybody who's a more generalist than Walmart and they're the number world's number one retailer. So, Amazon's number two. So how did they maintain that against specialists? Right? Because again, their premise is you're going to save money, low cost, right?

You're going to save money and you're going to live better. And they have stuck to that premise throughout. So that becomes, and that is a result of their structural change on how goods are both purchased and then accounted for and warehoused and sold.

Mark Vandegrift:
Yeah, so now let's go through a list of specialists because the question would be, “well, I can't take on Walmart. What can I do?” Well one answer to that is open as a specialist. So, I'm going to give you a couple Specialist concepts, you name the brand behind it, because again this points out to the way positioning works. It's a concept in the mind… very basic concept… two to three to four words and you should be able to name a brand behind it. So here goes, you ready? Makeup Beauty Products.

Lorraine Kessler:
The store,  physical store, Ulta.

Mark Vandegrift:
Okay, Sporting Good Store.

Lorraine Kessler:
Dick’s.

Mark Vandegrift:
Okay? Furniture and home goods.

Lorraine Kessler:
Well, I could come up with two really quickly. Wayfair, number one. I don't know if they fit this, but IKEA.

Mark Vandegrift:
Okay, good,

Lorraine Kessler:
They have less home goods. 

Mark Vandegrift:
That's kind of a certain slant to that. They're even more of a specialist, right? You think of European-small.

Lorraine Kessler:
Everything has a certain northern Europe style, right? That very sleek, modern style. Where Wayfair is you pick your style.

Mark Vandegrift:
Yeah, so that was furniture and home goods. And you mentioned Wayfair and IKEA. Let's go to kitchenware.

Lorraine Kessler:
William Sonoma is what I would with that brand. Oh, okay, good.

Mark Vandegrift:
Yep, good. Bathroom and personal care.

Lorraine Kessler:
So, personal care like kind of scented stuff… Bath and Body Works that kind of sensory stuff?

Mark Vandegrift:
Yeah, and it's in their name, Bath and Body Works. I mean, that's a great specialist

A harder one, since you're so removed from it, baby clothing.

Lorraine Kessler:
I don't know. I'm close. I just say I had grandkids and I'm now expecting them. Now my niece is expecting twins a boy and a girl so I've been shopping with Carters. I would say that's an easy one.

Mark Vandegrift:
Good. Um, I don't know how much of a crafter you are, but my, my wife shops here regularly… an arts and crafts supply store.

Lorraine Kessler:
Well, I'm not sure if this one's national, but the one that I'm a I know it's bigger than just Ohio: Michaels comes to mind.

And maybe Hobby Lobby. I haven't really ever visited their stores, but that's just a perception I have.

Mark Vandegrift:
Yeah, and then: fabric store.

Lorraine Kessler:
Oh, Joanne Fabrics. And that's an interesting problem because I put them in the same category like Michaels, but their name is JoAnn Fabrics. Now I think they've tried to drop the fabrics and they have some slogan or tagline, something about creativity or whatever. But they started with fabrics and then expanded into other crafts, where Michaels I think has always been crafts that then kind of has fabric stuff. And this is kind of an interesting thing for me because, I've been thinking a lot, what's the difference between a Meijer, which they're building a lot in Ohio, and a Walmart? And some people say, well, Meijer's a Walmart with class. Okay. It's a little better shopping experience. But I think if you go back to the history,

Mark Vandegrift:
Wait, isn't that tar-jeah (TARGET)?

Lorraine Kessler:
…well, kind of, but that's another. Target and Walmart both started as goods and added grocery. Meijer started as a grocery store and added goods. And there is a distinct difference. So, who do I trust more for groceries? Meijer. That's me personally, because I've shopped Target for groceries, and Walmart, but I just feel a better experience at Meijer. That's their core that they built on, and the other two built on it in inverse.

Mark Vandegrift:
So, what you're saying there in terms of a door that you might enter, if you're thinking grocery first, you're going to go to Meijer and then, oh, that's right, they have some goods there that I might go for. If the first thing you're looking for is a good, you might go to Walmart if it's cheap and low price or Target if you want something a little bit more reasonably priced but a little more upscale. Is that kind of where you're going with it?

Lorraine Kessler:
Absolutely.

Mark Vandegrift:
Well, I have one more and this is an online only store and that is: unique and crafty gift store.

Lorraine Kessler:
Oh, Etsy.

Mark Vandegrift:
Etsy.

Lorraine Kessler:
Etsy,

Mark Vandegrift:
Yep.

Lorraine Kessler:
absolutely.

Mark Vandegrift:
Very good.

Lorraine Kessler:
They cornered the market.

Mark Vandegrift:
Yeah, they really did. So, you know, these are, I think I listed seven or eight and you added some more brands to it, but this is an example where a specialist can shine. Most of these businesses are doing really well. 

We've seen others go out like Bed Bath and Beyond. Where are they today? Well, they were a great specialist, but as we've talked about, we even, wrote a blog about it here. I think the pressures of Wall Street to become more than the specialist was their undoing. And we talked at length on that on another podcast. But that is, you know, again, the risk. You've pointed out very well that you can go from a specialist to a generalist or you can be a bigger specialist. But once you go outside of that specialty, there are a lot of risks associated with that. Do you have any comments on that?

Lorraine Kessler:
Yeah, I think I'd like to make this comment. Walmart started as a generalist in small markets. So in those markets, it was a specialist in its own way by claiming geographies. There's different ways to define it. And they always had this specific promise of low cost. They've never lost that as they've expanded out. If you're going to go against the Walmart, and I think you said this, then you have to find a niche, right? You have to find a way to be a specialist against Walmart in some way or anybody else, even a grocery store. So maybe you become a cheese shop versus a full line grocery store. So, when you're starting out, you have to start small, whether you narrow your geography and find that as a niche, you only go into D markets, that's niche marketing. Or you decide to find a particular product or service that's very narrow, like Amazon did with books, and you prove your model, and you strengthen it, and then you grow from there. So, there's different ways to go at it, but no doubt any company at its beginning has to think about where it can narrow to a core where it has a competitive advantage based on competencies in the market and the competition in the market.

Mark Vandegrift:
Very good. Well, I think that's it for today's episode. Always remember to like, share, and tell others about the Brand Shorthand Podcast. Thank you for joining us, and we look forward to seeing you on the next episode, where we'll dive deep again on some core concepts of positioning. Until then, have an amazing day!