Companies of all stripes make the mistake of assuming that narrow is the same thing as small; that if you’re focused in one area, you somehow limit your growth potential.
While seemingly logical, this is simply not true. Of the top 25 advertising agencies in America, more than half are specialist firms, not “full-service” agencies. In Minneapolis, a city that has spawned more than its share of talented advertising agencies over the past few decades, the largest agency is not Fallon or Campbell Mithun—firms that help put Minneapolis on the advertising map—but rather Carlson Marketing, a specialist in customer relationship marketing. With revenues of some $265 million, Carlson Marketing is nearly four times larger than any other agency in the city.
There’s no such thing as a general market
Logic would suggest that you’ll grow faster by targeting the “general market.” But the most enduring brands are squarely focused on a particular segment of the market. The most successful brands deliberately cultivate a narrow line. They know that depth is a much more effective strategy than breadth. This is particularly true for professional service firms, whose product is their intellectual capital.
Imagine a sculptor not willing to risk chipping away enough of the marble to reveal the fine detail of what makes a beautiful human form. This is similar to the behavior of companies not willing to risk a clearly defined strategy. They’re afraid to keep chipping away at the generalities of their business strategy until they get to something concrete and specific. This is because they perceive “general” to be less risky than “specific.” But just as no art collector is going to buy a vague sculpture, no customer is going to buy a vague brand.
The fact is that defining your firm’s positioning strategy is usually very counterintuitive. It requires a new mental map of what truly succeeds as a business strategy. The “more is better” model that most of us carry around in our heads is the wrong mental construct. What works is narrow, not broad.
Vertical success vs. horizontal success
Most companies have the unrealistic aspiration to compete across all segments of the market. But success doesn’t require you to serve all segments. It just requires that you serve one well. This is the difference between horizontal success and vertical success. Very few companies are able to achieve real horizontal success, although many attempt it because it has the illusion of being the richest strategy. And even those horizontal players struggle mightily to earn a profit. Take General Motors—a horizontal player if there ever was one—versus Porsche, a car company that focuses on one vertical segment of the market. For most of the past decade, GM was the least profitable car company in the world. Guess who was the most profitable?
Consider the massive energy and resources required to maintain a horizontal positioning strategy, even in a relatively small industry. It only stands to reason that a vertical positioning strategy allows you to make a better product, offer better service, and potentially charge a higher price. This is why the premium brands in categories from golf clubs to outdoor furniture are niche players, not conglomerates. The very definition of excellence is to be good at something in particular. It’s not only impractical for a company to be excellent at everything, it’s quite impossible.
Excerpted from the new book “Positioning for Professionals: How Professional Knowledge Firms Can Differentiate Their Way to Success” by Tim Williams.