2007 BRANDWORKS UNIVERSITY SPEAKERS:

(click each name to view a summary of the remarks or scroll down)

WHY NICHE MARKETING AND ITS NEW BEST PRACTICES ARE THE FUTURE OF ALL MARKETING ››

Marsha Lindsay, CEO of Lindsay, Stone & Briggs

NICHE MARKETING FOR GROWTH AND PROFIT ››

Chris Anderson, editor-in-chief of Wired magazine, and author of the business best seller “The Long Tail.”

NICHE IS ABOUT FINDING THE RIGHT DIFFERENCES ››

Prof. Tevfik Dalgic from the University of Texas; author of the recently published “Handbook of Niche Marketing: Principles and Practice.”

BRAND BROADLY, NICHE NARROWLY ››

Prof. Roland Rust, chair of marketing at the Robert H. Smith School of Business at the University of Maryland, and editor of the Journal of Marketing

WHY NICHING IS WORTH IT ››

David Rubin, Robert Behnke, Stephen Ranzini, Daryl Urquhart, Ann Marrier- Lloyd

INTERACTIVE WORLD ENABLES A NICHE STRATEGY ››

David Lawee, Google’s marketing vice president

HOW ALL MEDIA ARE EMPOWERING NICHE STRATEGIES ››

Jonah Bloom, executive editor of Advertising Age, moderated the panel, which also included Sean Cunningham, the president and CEO of the Cabletelevision Advertising Bureau; Philippe Guelton, executive vice president and chief operating officer for Hachette Filipacchi Media U.S.; David Goodman, president of marketing for CBS Radio; Adam Berrey, VP, marketing and strategy for Brightcove, Inc.; and François de Gaspé Beaubien, the chairman and chief coaching officer of Zoom Media

SEARCH IS THE FUTURE OF MARKETING ››

Rob Goldman, the former general manager of the niche aggregator Shopping.com

HOW FOCUSING ON THE ATTITUDES AND MOTIVATIONS OF YOUR NICHE ››

Francesca Schuler, marketing vice president of the tiny Method brand of cleaning and personal care products

WHAT EMERGING TRENDS HOLD ››

Vickie Abrahamson and Mary Meehan, co-founders of Iconoculture

ARE WE COMING TOGETHER OR FLYING APART? ››

David Brooks, Political commentator, author and New York Times columnist

WHY NICHE MARKETING AND ITS NEW BEST PRACTICES ARE THE FUTURE OF ALL MARKETING

Marsha Lindsay is CEO of Lindsay, Stone & Briggs, a brand-based marketing communications agency that is the originator and producer of Brandworks University.

She argues the evolution of our mature marketplace, along with the technology that allows consumers to be in control, has created a seismic shift from one-size-fits-all mass markets to millions of markets of self interest. All mature markets inevitably evolve into this kind of economy, driven by ever narrower markets of desire and ever narrower facets of individual self-identities.

Of course, niche marketing is nothing new, but today, it is encouraged and enabled by technology. Marketers are empowered by more detailed consumer data, able to micro-target messages, interactively engage consumers with a whole new level of intimacy and frequency, and customize to consumer specs with small-batch manufacturing and new distribution options.

One of Lindsay’s main assertions is that niche marketing means something different than marketing segmentation. Segmentation groups people of diverse emotional and social motivations together to form a demographic target large enough to underwrite the traditional costs of mass media and mass distribution. While segmentation looks for similarities among a diverse group, niching looks for differences within a similar group. It then finds opportunities to customize products and services to the narrow interests of each niche. In this way, nichemanship is a complement to segmentation. In fact, you could call it optimized segmentation.

She says brands that will survive and thrive in the new economy will be those that give up illusions of massiveness and figure out how to excel at attracting and keeping loyal as narrowly focused a niche as is economically feasible.

While the classic definition of niche marketing (“the targeting of a more narrowly defined customer group seeking a distinctive mix of benefits”) still rings true, it no longer implies what it did five or ten years ago: A small, low volume, erratic market opportunity that is transactional, likely unsustainable and unscaleable—a course taken by less sophisticated businesses.

Rather than equating niche with “small,” think “narrow.” As in narrowly targeting a group whose self interest/self concept is so clear that a marketer can offer something ultra relevant and vastly different from alternatives. Then the scarcity principle allows the marketer to charge a premium, reaping higher margins.

Offerings that resonate with the target for which there are few alternatives create a loyal customer base with all the benefits: More predictable revenue streams, lifetime value and word of mouth advocacy on your behalf. This, along with consumer-generated content and online communities, create marketing efficiencies that further drive growth and profitability.

Lindsay says harnessing the power of niche marketing to achieve your business objectives in the new economy requires these principles:

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NICHE MARKETING FOR GROWTH AND PROFIT

In the niche marketplace of the future, the tail will wag the whole dog, according to Chris Anderson, editor-in-chief of Wired magazine, and author of the business best seller “The Long Tail.”

The tail, in Anderson’s analysis, is the 80 percent of products that account for only 20 percent of sales – the oft-ignored step-children of the 80/20 rule. In the past, it was uneconomical to serve those markets because production inefficiencies, marketing costs or distribution challenges sucked up any potential profit.

But the Internet has radically lowered marketing costs, eliminated the shelf-space bottleneck for many products and even cut the cost of customized production. Which means there is a lot of profit in small niches down on the long tail of the Pareto Chart.

We have seen the biggest effect in the music, movie and media industries, but those are just the first of many industries to feel the change.

Anderson cited the example that 40 percent of the music purchased today is not available in the largest music retailer – Wal-Mart. Soon it will be 50 percent. The same trend is true in print and broadcast media.

“The media ratings decline is not a management failure. This will go on forever. The old era is over. We are now in a time of infinite choice. Two years ago this was radical and controversial,” he commented. “Now it’s conventional wisdom.”

Some of what are now niches hold the potential to displace the channels and products that now occupy the dominant roles. For example, green products are poised to make the leap, he predicted.

Despite Anderson’s role as editor of Wired, he said the cause of the shift “is not just technology. Rather it is culturally driven. It’s a culture shift to ‘we want to be ourselves,’ not ‘we want to be like everyone else.’”

Anderson has led Wired magazine to five National Magazine Award nominations, winning the top prize for General Excellence in both 2005 and 2006. He was named Editor of the Year by AdvertisingAge in 2006.

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NICHE IS ABOUT FINDING THE RIGHT DIFFERENCES

The next time your boss asks you to explain niche marketing, try this definition from Prof. Tevfik Dalgic from the University of Texas; author of the recently published “Handbook of Niche Marketing: Principles and Practice.” Segmentation is all about finding similarities among groups; niche is about finding differences among otherwise similar groups.

Segmentation lies somewhere near the middle of a continuum of marketing strategies that range from mass marketing at the top, in which a single product is offered to all customers, down to one-to-one marketing in which a different product is specifically designed for each customer. Niche lies between segmentation and one-to-one. It’s based on identifying a group not currently served in the market because it has not been economical to serve it, or it wasn’t seen as important, or even recognized as a group.

Segmentation is a breakdown approach trying to see similarities in the market in terms of demographics and other common characteristics. Niche marketers looks for dissimilarities. They look for someone who is ignored, who doesn’t look like the others and ask “would that person be a viable option for me?”

Dalgic has been published in the Columbia Journal of World Business, the Journal of Marketing, the Journal of International Marketing, the Journal of Market Segmentation. The American Marketing Association has recognized him with their Best Paper Award. The UN and the Dutch government have each called on him to consult on marketing and international trade. He serves on the Board of Trustees of International University of Geneva Switzerland. And his academic career has included The Ankara (Turkey) Academy of Economics and Commercial Sciences, Trinity College in Dublin, The Dublin Institute of Technology’s College of Commerce, Henley Management College and Utrecht Business School both in the Netherlands.

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BRAND BROADLY, NICHE NARROWLY

Prof. Roland Rust, chair of marketing at the Robert H. Smith School of Business at the University of Maryland, and editor of the Journal of Marketing, predicted that in the future, companies will need more brands to reach ever-smaller niches.

“The ultimate is one-to-one, a brand for every customer,” Rust asserted. “You will need more brands because the optimal segment size will continue to shrink. Whatever the optimal level is right now for your company, five years from now, a smaller segment will be optimally viable.

Some companies say they are trying to reduce their brands because fewer brands mean less cost, but I predict they’ll fail. It’s a one-way street going in the direction of smaller segments.”

The good news, Rust said, is that the brand resides not in the product, but in the customer. “In niche marketing, you want to make brand management much more customer-centered,” he advised.

“Ultimately you want to measure customer equity,” which he defined as the total of customer lifetime value across all the company’s brands. The beauty of measuring customer equity is that “that’s how accountants measure the value of the firm. It equals the discounted cash flows the company gets from customers.”

Increasing customer equity is how marketers can justify the cost of marketing to management and can measure marketing ROI in the new niche markets.

Rust holds many lifetime achievement honors including the American Marketing Association’s Gilbert Churchill Award in Marketing Research, and the Outstanding Contributions to Research in Advertising award from the American Academy of Advertising. His “Best Article” awards span esteemed publications such as the Journal of Advertising, Journal of Retailing Marketing Science, Journal of Marketing Research, Journal of Marketing. His book “Driving Customer Equity” won the AMA Book prize.

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WHY NICHING IS WORTH IT

Brandworks University participants received lots of practical advice in a group of five-minute mini-presentations by marketers from widely different industries who are all pursuing niche strategies. Here are some highlights:

David Rubin, brand development director of Unilever’s Axe brand, said knowledge of the consumer is “your only weapon in a niche world.”

“If anybody knows young men and how they pick up girls better than Axe, we’re in trouble. We spend nights in fraternity houses. We go to speed dating events and video game tournaments. The key is what you do with the knowledge.”

The Axe brand platform of grooming products is focused on the niche of under-24 year-olds who are unmoved by such functional benefits as “be sweat free” or “smell attractive.” Instead they “obsess about hooking up with girls.” Rubin and Axe have won numerous awards, including Cannes Lions, Guerrilla Marketer of the Year from Brandweek, AdAge's Top 50 Marketers of 2004 and several Reggie awards for promotions and events.

The success of University Islamic Financial is an example of the maxim that the customer who complains is your best friend. Stephen Ranzini, chair and president, said the idea to serve the Muslim community came to him via a customer who complained that there were no financial products for Muslims. University Islamic Financial became the first banking institution in the U.S. to address the needs of the growing U.S. Muslim population, whose religious practice prevents them from paying or receiving interest—a tough problem for most banks to overcome. If you want to know how they make “loans” and take “deposits” without interest, check out www.university-bank.com.

Customer satisfaction and community building are the keys to reaching any niche, said Shouldice Hospital director of business development Daryl Urquhart. An example of the trend to “single specialty” health care facilities, Shouldice’s specialty is hernias, but it is famous in management circles for its exceptional service delivery model. “If you’re not hitting a nine or ten on the satisfaction scale, you won’t get the word of mouth that is vital to niche marketing success,” Urquhart warned.

Finding the customers is the biggest challenge of marketing to a niche, said Robert Behnke, co-founder of Fair Indigo, www.fairindigo.com, a one year-old apparel business focused on “Style with a Conscience,” or “fair trade.” He offered five suggestions for a successful start-up:

Ann Mamer-Lloyd, vice president, marketing, at ConAgra Foods responsible for Slim Jim snacks, focuses relentlessly on teenage males. Even though they actually make up a minority of her customers, they define what’s cool about Slim Jim. She ignores the 40 percent of her customers who are female, despite the fact that Slim Jim might well appeal to fitness-obsessed women. “I get suggestions for a Slim Jane all the time,” she said. “You will never see a Slim Jane.” The advertising and Web site also ignore the 50 percent of customers who are 18-plus. The laser-like focus on teen males is critical to maintaining the snack’s coolness factor both for the segment that defines the Slim Jim niche and for the near-niches that make up the majority of buyers.

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INTERACTIVE WORLD ENABLES A NICHE STRATEGY

Marketers who are used to measuring cost per thousand eyeballs and evaluating ad campaigns after weeks or months of exposure will need a new paradigm to live in the online search world, warned Google’s marketing vice president, David Lawee.

“You will place thousands or even millions of ads because people search for many different things.” The ads you create for search sites will be different from the ads you place on content sites because the expectations of the consumer are different at the two different points in the buying cycle.

Ideally your Web site will hold thousands of different landing pages so you can optimize which ads people see on each landing page and you can see which visitors become customers.

Similarly the profit model for search-based marketing is different. The better you understand your consumer’s behavior and the more accurately you predict how they find your product, the more efficiently you can buy keywords from the search engines and the cheaper will become your cost of customer acquisition. “The more niche you can go, the less you pay.”

Finally, you can measure everything in real time. You can see who becomes a customer on the site, so you can optimize the experience. “Test like crazy to see which key words bring people to which landing pages and who ultimately converts. The cash-strapped entrepreneur is already doing that, but everybody should be doing it.”

For example, on YouTube “you can see exactly when people stopped watching your ad so you can learn what’s working and what is turning off your viewers. You can examine your data instantly and over time to see if you are getting increased traffic from your ad campaigns or other marketing activities.”

“You will make mistakes,” Lawee warned. “Accepting failure is an important part of niche marketing. As you go down these niche strategies, you will be able to recognize and correct your mistakes much faster. With mass advertising, it’s hard to tell. That’s not a part of every corporate culture. You need to build that into your corporate culture.”

David Lawee has global responsibility for all of Google’s marketing activities. His worldwide mandate encompasses product marketing, field marketing, customer analytics, creative and advertising, as well as directing all of Google's regional marketing groups in Europe, the Middle East, Africa, Asia-Pacific and Latin America. Before joining Google, Lawee co-founded Xfire, a leading online gaming community, where he led product development, marketing and international business development. Within two years of launch, Xfire became the fastest growing Internet gaming site with over five million registered users. Xfire was sold to Viacom in early 2006.

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HOW ALL MEDIA ARE EMPOWERING NICHE STRATEGIES

A panel of six media executives told Brandworks University attendees the mass media are dead, but they all see a second life as niche media.

Jonah Bloom, executive editor of Advertising Age, moderated the panel, which also included Sean Cunningham, the president and CEO of the Cabletelevision Advertising Bureau; Philippe Guelton, executive vice president and chief operating officer for Hachette Filipacchi Media U.S.; David Goodman, president of marketing for CBS Radio; Adam Berrey, VP, marketing and strategy for Brightcove, Inc.; and François de Gaspé Beaubien, the chairman and chief coaching officer of Zoom Media.

Here are some highlights:

Berrey predicted that online video will become the communications medium of choice in the future and recommended two strategies for niche marketers:

In either case, you must incorporate the opportunity for community-building, whether the video content is created directly by consumers or remixed and interpreted by you.

“The Internet is fundamentally social,” Berrey advised. “It’s not about connecting you with the customer; it’s about the customers connecting with each other. They’re going to do it whether you want it or not. Ask yourself if you want to participate in the conversation.”

David Goodman touted radio’s long roots as the original “community based, narrow-casting, wireless entertainment medium.”

The future of radio is Internet radio, he asserted. Currently, 60 million people listen to Internet audio, mostly during working hours. “It is sitting on somebody’s desktop during work on average 12 hours a week.

That opens opportunities for advertisers like travel and shopping sites, and even monster.com. “There is no better place to advertise a new job to you than when you’re in the middle of your current miserable job.”

Special interest magazines already think of themselves as niche, said Guelton, but they will have to “move beyond ink on paper” and create all kinds of Web-based specialized content, events and community-building opportunities.

“We used to put the brand at the center,” Guelton confessed. “Now we put the consumer at the center. But we need to understand their needs better. We know that information-seekers aren’t the same as enthusiasts, so we have to segment our database.

The content will still be free, he predicted. “Very few have succeeded in paid content. But in the future we will require gated content.”

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SEARCH IS THE FUTURE OF MARKETING

Online search is the future of niche marketing, believes Rob Goldman, the former general manager of the niche aggregator Shopping.com.

That’s because search-based selling offers brands the ability to find profitable customers in tiny niches “at prices you didn’t think were possible,” he enthused.

When Shopping.com tried to attract customers via traditional advertising channels, it had a cost per customer of $6, which isn’t bad. But online, the cost per customer was 12 cents. “That’s an unbelievably low customer acquisition cost.”

However, Goldman warned, it’s not easy to understand how customers use search terms to find you. Shopping.com tracked as many as three million search terms daily. “The misconception is that data collection is easy and analysis is hard. Data collection is really hard.” Most of the remainder of his presentation illustrated just how hard it is.

The art of search-term marketing comes in understanding what words and phrases – including misspelled words – customers use to search for your product.

“People find an infinite number of ways of saying the same thing,” Goldman offered. “One product on shopping.com had 300 different keywords.” People looking for GPS devices used 1,293 different queries.

Because of the ability to precisely measure the revenue stream generated by every search term you buy, “we are starting to see search marketing being treated like sales, not marketing. You can set and reward profitability goals.”

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HOW FOCUSING ON THE ATTITUDES AND MOTIVATIONS OF YOUR NICHE

Francesca Schuler, marketing vice president of the tiny Method brand of cleaning and personal care products, showed how focusing on the attitudes and motivations of your niche can gain huge payoffs, even against giant competitors in a stagnant category.

“We have no demographic,” she claimed. “Method buyers are all kinds of people, all ages, but they are all ‘People Against Dirty.’” They are motivated by good design, sustainability, and an emotional attachment to their homes. “To them, ugly is dirty. Toxic is dirty.”

“We want to do for cleaning and home care what Nike did for running: move it from a chore to an experience. We seek to capture the emotion of your house in your cleaning product. Our mission is to inspire a happy, healthy home through the marriage of style and substance.”

Method’s style starts with outstanding package design that not only looks good on the retailer’s shelf or your counter, but solves practical problems. Fragrance also is “huge,” said Schuler. “We try to be a trend leader in fragrance. We are blurring line between home décor, home care and personal care. Method is not a packaged goods company; it’s a fashion company. We want to create a moment of delight when people see the product.”

On the substance side of the equation, Method has its roots in the fast-growing green and sustainable movement. “Why do we pollute when we clean?” Schuler asked. “Why do we fill our homes with toxins when we clean?” There is a perception that “green doesn’t clean,” she said.

Method is trying to disprove that, but quietly. “We view ourselves as part of a movement, not leaders of the movement. Sustainability is about progress, not perfection.

We are interested in finding people who are passionate about ‘people against dirty,’ and selling them everything for their home.”

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WHAT EMERGING TRENDS HOLD

According to Vickie Abrahamson and Mary Meehan, co-founders of Iconoculture, a company that tracks global trends, there are at least seven niches to watch. Although some have billions of members and somewhat stretch the definition of niche in terms of size, they conform to niche behaviors and attitudes.

The Aging. They’re not ready for bingo night and rocking chairs. Europe and Japan already have created stores just for seniors with large print signage, wide aisles, senior-friendly goods and community areas. The U.S. will follow soon.

YoCos. YOung COsmopolitans. Sophisticated global citizens, 18 to mid-40s, multi-ethnic with a buying power of $900 billion. They’re driven by curiosity and creativity and attracted to places, products and brands that satisfy those needs.

Grandparents: Not who you think they are. The average age of a first-time grandparent is 48. They are younger, and more active than the stereotype and are eager to spend for the grandchildren.

Economically challenged. At the bottom of the economic pyramid, the poor are the long tail of the economic spectrum and have been ignored by many brands. But brands that understand their special needs and cater to them are doing very well.

LGBT: 50 million lesbian, gay, bi-sexual and trans-gender individuals in the U.S. are struggling to stay true to themselves and their identities. They gravitate to brands that share their values and let them know it.

Immigrants: Three percent of the world population and 12 percent in the U.S. started out somewhere else, and many maintain their old ties. Brands that speak their language and share their dreams are rising with the immigrant tide.

Race and Roots: African-Americans and other ethnic groups are searching for their roots and identity; they value the services and brands that help them find it.

Hidden Geographies: The mobile consumers, may be students, road warriors or others who live wherever they are demand a high level of service and can be very profitable. The geographically isolated, whether rural or urban, may be hard to reach, but if you can reach them, they are a valuable market. The virtual consumer is an emerging niche being served by new brands most people don’t know.

Contrarians. This attitudinally driven segment prefers rogue or rebel brands over big brands and conventional wisdom.

Iconoculture developed and launched the industry’s first theoretical framework for translating trends into growth ideas and opportunities for brands around the world. Their proprietary methodology and classification system has reinvented the way businesses approach, interpret and apply consumer behavior, changing the way CEOs, ad execs and product developers view the consumer.

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ARE WE COMING TOGETHER OR FLYING APART?

Political commentator, author and New York Times columnist David Brooks closed Brandworks University 2007 with a prescient analysis of the meaning of social change in American society. With gentle, but biting humor, he painted a picture of a society increasingly fragmented into self-selected niches.

Nichification may be all right, and even desirable in marketing, he opined, since it leads to increasing choice. But in politics, it is worrisome.

“In politics we have become an incredibly segmented society,” he said. “You would think the more education you have, the more independent you would become, but the opposite is true. Those with a high school education are more likely to split their tickets than the college educated. One of the reasons we are become more polarized is that we’re becoming more educated.”

Even within income groups, differences are based on psycho-demographics, how we identify ourselves. Those identities develop early and are hard to change, especially among the wealthy and successful. “People with money want to buy an idea and then stick with it.”

As a result, people now tend to associate with others who share the same values far more than in the past, even in their choice of which neighborhood or suburb to live in. “We not only niche in retail, but also in who we live amongst.” Clubs, churches and associations that used to mix different people are declining and disappearing, leading to fewer opportunities for people to hear opposing points of view.

On the bright side, Brooks sees a deep desire for community. “People long for restoration of a national sensibility and a restored sense of authority. They have lost the sense that there are central institutions they can trust and rely upon. That’s true of churches and corporations, not just politics. They are looking for brands that create a sense of trustworthiness.

“In future years, our challenge will be how to take a nichefied society and create bonds despite the segmentation.”

Brooks appears twice weekly on the Op-Ed page of the New York Times: He is a regular analyst on the “News Hour with Jim Lehrer” and NPR’s “All Things Considered.” His two books on today’s U.S. culture are as funny and entertaining as they are revealing, and one—“Bobos in Paradise”—was a New York Times Best Seller.

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