Care in staking out a market niche is good strategy vs. imports
The high-fashion setting and elaborate department store display practically preclude the need to glance at the price of the soft leather handbag. You know it's expensive. The tag reads: ''Scratches in the leather are evidence that this is real leather.''
This is an example of ''marketing segmentation'' - a technique used by a growing number of American companies to carve out market niches. It is especially popular with those trying to survive in the face of foreign competition.
Three years ago countries such as Taiwan and South Korea captured much of the US leather garment market, sending domestic suppliers scrambling to keep a share of the rest. Employees at the Carr Leather Company in Lynn, Mass., were worried: Would they be laid off, as workers in the auto industry had been?
After a marketing segmentation strategy on the advice of Lawrence Brewster of L. S. Brewster & Co., a Boston consulting firm, Carr's marketing staff looked for a less price-sensitive segment in which to market its product. It hired a fashion consultant to sell retailers and manufacturers on a new look: shoes and accessories of ''nude leather.'' Nude leather does not have the hardening gloss usually used to cover scratches and other imperfections.
Today, when many other tanneries in the nation have folded, Carr Leather Company maintains three shifts a day, six days a week, according to marketing director William Gwynn.
''There was a great deal of competition from domestic and foreign imports,'' Mr. Gwynn says. ''In pointing out our assets and recognizing the need in the industry'' for Carr's nude leather, Brewster was instrumental in helping the company become a leader in its special niche, he adds. Now, Gwynn says, ''our other products are starting to gain strength.''
Marketing segmentation is nothing new, says Mr. Brewster. But squeezed by foreign competition and shrinking markets because of the recent recession, companies need more than just a good product to keep or enlarge their market share.
Massive demographic shifts have occurred in the last 10 years. From a relatively homogeneous consumer market of households with a working father, housewife, and two kids, the United States now has a more varied market, with a high proportion of single households and two-earner households, notes John Quelch, assistant professor specializing in consumer marketing at the Harvard Business School. Because of this, he continues, it is important to develop products that are aimed more specifically at a market segment.
Stouffer's Lean Cuisine is an example that was aimed very successfully at the growing two-earner households. It caters to people with very little time for cooking who are willing to pay for the convenience of an easily prepared gourmet meal.
But Brewster says some companies - such as steelmakers - that sell to industrial customers have overlooked specific marketing segmentation strategies that have worked for consumer-oriented producers. Although some ''specialty steel'' operations have developed their own niches, mainstream steel companies continue to do poorly against foreign imports.
Instead of lobbying for protectionist laws from Congress, Brewster argues, steel company executives can succeed against competition from abroad by finding a market niche that takes advantage of foreign companies' weaknesses. He says quick delivery and good relations with customers are examples of strengths that can be leveraged.