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How to Differentiate Your Startup in a Red Ocean Industry

27 March 2019

The OP is about tech startups, but PG was interested to see the parallels between authors in the indie book business who are working to stand out from the crowd of competitors and startups in the tech businesses.

From ReadWrite:

We all dream of coming up with the next ingenious idea that redefines [an] industry, or creates one from scratch. (PG note: Industry could also mean a genre or sub-genre)

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[B]lue ocean opportunities, as defined by the popular book Blue Ocean Strategy by professors W. Chan Kim and Renee Mauborgne. In case you aren’t familiar, they posit that there are two types of market opportunities when you create a startup from scratch.

There are red oceans, which are filled with blood from fierce competition. These oceans, representing mature industries in a free market, are incredibly difficult to enter—at least without paying a price, either in more aggressive marketing and advertising costs or by settling for a smaller market share.

Blue oceans, by contrast, are all but free from competition, giving you more flexibility, lower costs, and domination over nearly 100 percent of the market share.

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The Truth About “Red Oceans”

If we’re following the ocean analogy here, then we need to address the true nature of the competition. These red waters aren’t uniformly infested, nor are they infested in every corner. Instead, there are pockets of blue ocean to be found within those red oceans. In more literal terms, even mature industries, filled to the brim with competition, have untapped market segments and new opportunities for those willing to look.

For example:

Specific product features. The product itself may not change, but you can certainly add something to it. New product features may be enough to differentiate the product, and enter a world free from competition, even within a competitive industry. For example, the fast food industry is currently saturated with burger joints, but McDonald’s has introduced and maintained the Big Mac, a unique burger that can’t be replicated without violating copyright laws; if you want this specific taste, you can’t simply go somewhere else.

Target demographics. You can also target a different demographic, or capitalize on consumer preferences that aren’t being met by the leading competitors. For example, in the past few years, Dollar Shave Club practically took over the subscription razor industry, and giants like Bic and Gillette quickly followed suit. Yet in the razor battle, Shave.net was able to enter the mature shaving industry and make a name for itself by focusing on the smaller niche of wet shavers who prefer straight razors and safety razors.

Price points. One of the more obvious points of differentiation is price. If all your competitors are selling something around the same price, you could easily capitalize on their existing audience, or target a new audience by offering it cheaper. You could also capitalize on a luxury market by charging more (assuming you can offer a higher-quality product).

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Peripheral services. It’s also possible to stand apart from the competition by offering services that aren’t available from mainstream competitors. For example, the Home Depot initially stood out as a competitor to traditional lumber yards because they offered a wider variety of products in one location, as well as classes to help DIYers.

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The Role of Brand Differentiation

The secret to finding success in a mature industry is twofold; first, you need to find a way to differentiate yourself, and second, you need to make that differential element evident to the people you’re trying to persuade. That often means adjusting your brand values, your core products, or your overall marketing strategy for these key benefits:

Competition reduction. Pursuing a path of your own instantly reduces the number and ferocity of competitors you’ll face. Fewer competitors means you won’t have to worry about someone else poaching customers from you, and you’ll probably spend less on marketing and advertising.

Increased visibility. Being different immediately helps you stand out. Capitalizing on what makes you different from the major players in a mature industry is a strategy certain to attract attention naturally, aiding you in your marketing and advertising efforts.

Niche exploration. Exploring a specific niche within the mature industry can help you cultivate and nurture a sub-industry. The more you learn about these customers and the more you cater to them, the more loyal they’ll become—especially if they never had an options like yours before.

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Define your differentiators (or make new ones). The most obvious answer here is to play up what makes you different in your advertising strategy. A simple message, like “sick of paying high prices for ____?” can be a good start (though you’ll want something a little more original). Are you cheaper? Higher-quality? More convenient? Targeted to someone different? Make this clear in your ads from the get-go, and try to include at least one brand element that encapsulates this, like a company name or tagline.

Leverage untapped channels and outlets. There are invariably marketing and advertising strategies that your main competitors aren’t currently using. That could be because the strategies are new and unfamiliar, or because these channels haven’t historically worked for the industry. But because your company is different, it may be able to leverage these channels more efficiently. For example, if your competitors are all over Facebook but you’re differentiating yourself by targeting a more professional, older audience, you could turn to LinkedIn for your needs.

Exploit key differences. Chances are, what makes you different from your existing competitors is a pain point for their current audience. You can use this to your advantage by portraying these unpleasant experiences or perceptions.

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Piggyback on existing brand value. As long as you aren’t lying about your competitors, you can mention them directly in your marketing and advertising campaigns, as a way to capitalize on the brand value they’ve already established. You can do this with a side-by-side comparison, or with a catchy tagline, such as “like COMPETITOR, but ________.”

Link to the rest at ReadWrite

Advertising-Promotion-Marketing, The Business of Writing