Beset by Opportunities; How Can We Take Advantage of Them?

 

Every large, mainstream company in this country from Levis, to JC Penney to Fidelity Mutual Funds needs credibility and brand recognition with at least some piece of this generation. It’s not an over dramatization to say that their future depends on it.

 

They are struggling to figure out how to reach this generation. Some are doing better and some are doing worse. Some are screwing up unbelievably badly but don’t even know it. However well they are doing, they are changing skateboarding right long with other pieces of the action sports business. The resulting broader, growing market isn’t just about selling skateboards to skateboarders. It includes a growing number of customers, or potential customers, interested in the lifestyle, fashion, culture and attitude that’s being toned down and homogenized for this larger market.     

 

Is this an opportunity, an inconvenience or a big mess? Since it’s not going to go away, and many of these behemoth companies wouldn’t have a significant financial event if they suddenly controlled 100% of the skateboard market, I guess we better make it into an opportunity.

 

 

Not running ads. Not going to trade shows. Not promoting team riders. Not sponsoring events. Those are promotional tactics. Maybe they are good ones. In the past, in most segments of action sports including skateboarding, they could pass for marketing because customer identification was simple. Anybody who bought skate product could reliably be assumed to be a skateboarder. It was an enthusiast market where your customer segmentation was done for you. You sold skateboards and skateboard products to skateboarders. There was nothing to figure out.

 

Now there’s a lot to figure out. It’s not only skateboarders buy skate shoes anymore, to use what’s probably the most obvious example. Who are your customers now if they are not all skateboarders, and why do they buy from you if it isn’t just to skateboard? Now we’re talking real marketing- something the industry has never had to do before.

 

“Figuring all that out sounds expensive, time consuming, like a pain in the butt and generally no fun,” you say. “It is,” I agree. “Well, I’m not going to bother,” you announce. “I’m going to sell what I’ve always sold to the people I’ve always sold to.”

 

No doubt that’s a viable strategy for some people. Why might it be right for fewer and fewer?

 

 

I guess this is either everybody’s fault or nobody’s fault, but hard goods have become a commodity. That is, they are easy to make, more or less the same, there’s too much product and manufacturing capacity, quality is generally high and uniform, and the customer knows it. Barring a major strategic breakthrough in how the industry functions or a technical breakthrough in how product is made, neither of which seems to be on the horizon, I don’t see that changing.

 

Soft goods have some of the same issues, though it seems to be easier to differentiate shoes and clothing because of distinct visual differences and new materials than it is with boards, trucks and wheels. It use to be conventional wisdom in the snowboard business that you sold boards first, and boots, bindings and soft goods would follow the boards right into the customer’s hands. When that changed- when the board became something you just needed to sell because you were in the snowboard business after all, then it was time to manage differently in the snowboard business. That’s where the skate board business is right now.

 

If you do business the same old way, you will be competing by the numbers. Here’s how the numbers can get you if you find yourself in that position. If you are perceived to be selling the same product everybody else is selling to the same people everybody is trying to sell to, then you’re competing strictly on price. Your gross margin will fall. To achieve the same level of profitability, you have to increase your unit volume. But the only way to do that in this kind of competitive situation is to reduce your price. It’s an ugly, vicious circle that ultimately forces a lot of people out of the business.

 

You may, of course, be determined to differentiate your product to avoid margin deterioration. If your product is actually not different from your competitors, the only way to differentiate is through advertising and promotion. Hype, to coin a phrase. But hype costs money. Lots of money. You may maintain your gross margin, but higher operating expenses will leave you with the same depleted bottom line, everything else being equal.

 

Sounds hopeless, but it’s far from it. Like I said in the title, we’re beset by opportunities if we just know what to do with them.

 

 

Typically, competition by the numbers works only for one or two large players in each industry. So it’s a condition to be avoided- especially in an industry where there are no large players. What’s the choice?

 

Your only choice (other than to count on being lucky, which will work from time to time) is to be able to answer the following questions:

 

·         Who buys my product?

·         Why do they buy it instead of another brand?

·         What are the attributes of my product and, given those attributes, who besides my current customers might buy it?

 

What a pain in the ass. It’s such a pain, in fact, that I’ve heard executives of larger companies who have to find a way to deal with the emerging demographics say they have to earn their revenues from the baby boomers while positioning themselves with the kids.

 

It’s a great idea. But I anticipate the execution, if that’s as far as the analysis goes will leave something to be desired. If you try to appeal to everybody, you often end up appealing to nobody. It’s a seductively simple sounding solution. “There- I’ve done my market research.”

 

In skateboarding, the similar rationalization may be “My customer is the 13 to 17 year old male who hasn’t discovered girls or cars yet.”   That may be true for many companies and no doubt represents successful customer segmentation for some. But it can’t be valid for everybody and if you don’t remember why reread the Competition by the Numbers section and reflect on the overall profitability of the industry.

 

 

Retain a team of students from the local university MBA program to do a market research project for you. They may work nearly free, will get credit for the project, and they will be guided by a faculty member. Read some books on marketing. Get your team riders asking the people at skate parks some focused questions. Have employees canvas customers. Work with a shop to get fifteen of their customers together for pizza and ask them what they bought and why. Call up the brand managers or marketing people at Levis, Pepsi, Proctor and Gamble or another large consumer products company. Have lunch or a long phone conversation with them. You could help them figure out what’s up, and they could maybe help you structure your marketing research or even supply you with some data. I suspect you might uncover some mutually beneficial opportunities to work together. There’s a lot of that going on.

 

Once you’ve taken a shot at answering the questions posed above, be prepared to step out of your comfort zone. If selling the same stuff to the same people in the same way doesn’t represent a good business opportunity anyway, what do you have to lose?

 

Doing your marketing, and answering the questions above (or similar questions that seem more appropriate for your circumstances) will typically identify both opportunities and inconsistencies in your current market approach. Imagine being able to identify your most profitable customer groups and the marketing tactics they respond to. What’s that worth not only in incremental sales, but also in more efficient use of advertising and promotional dollars?

 

There was a time when straying outside the core specialty market threatened your credibility with that customer group. Maybe it still does, though to a lesser extent. In any event, if focusing on that core specialty market exposes you to competitive conditions where you can’t make any money, who cares?