Tuesday, June 03, 2008

Honing the pitch: niche markets during a downward trend

There was a cautionary article in last week’s New York Times Magazine about bloggers whose personal lives become too transparent in this public forum. That isn’t about to happen here, but anyone reading these posts will be hard pressed not to notice my penchant for chocolate and iPhones– and perhaps some of my biases about market research and advertising. One message I can't avoid is the delicate dance between mass and niche markets. There will always be magic products that sell across demographic lines, but in the current economic climate, most companies need to know who their real customer base will be for the long haul.

Of course, some big groups -- older people and teens -- will simply remain important because of their sheer size. It’s smart to target ads to baby boomers as they age and to teenagers, who set and build trends even when they aren’t spending at the same amazing rates. Just recently, three interesting stories pinpointed why niche markets need specific products and marketing campaigns:

First, Marketing Daily notes that while sales of home repair and yard maintenance goods are on the downward trend, sales of certain luxury goods remain high – and the buyers are men with money. It doesn’t mean it’s an easy sell. According to Mires+ Ball, these men require a particular sales pitch:

For higher-end clients, that means "you have to tell a pretty smart story, but then back it up with something tangible, and performance driven. Anything that looks like frivolous excess - visuals that show a house with eight cars in the driveway, for instance-just doesn't play." While affluent men are still spending, he says, all the dour economic headlines have also meant that they're likely to be far pickier, using higher standards to justify splurges. "Men will scrimp and save on everyday things, so that they can make that one big purchase that's really meaningful -whether it's a surfboard, a guitar, a wristwatch or a car."
Second, a new study confirms that gay brands are good business. Some companies, like Subaru, Absolut, and Levi’s have already recognized the power of brand marketing to gays and lesbians. While market research tends to overestimate the wealth and disposable income of gay households, it is true that gay and lesbian consumers are a loyal and vociferous group. A study for the ad agency Prime Access and media group PlanetOut found that advertising makes a huge difference in perception and purchasing decisions by gays and lesbians, who preferred gay-friendly companies. LGBT folks were also much more likely than their straight counterparts to boycott or reject products from companies with anti-gay agendas.

Add in two more facts: first, a large percentage of gay and lesbian consumers are perceived by their peers as influential because of their “ahead of the curve” knowledge about cultural trends and new products. And second, brands with gay-coded appeal are also almost always perfectly okay to straight markets. That is, gay consumers “read” products as gay-friendly while straight consumers are often oblivious to all but the most obvious gay tags. Even when the message is overt, straight consumers are generally neutral about companies that market to gays. In fact, sometimes LGBT branding adds cache to an otherwise ordinary item.

The third is the most misunderstood niche targeted by advertising: racial and ethnic groups. According to BIGresearch, African-Americans and Latinos use more new media and are often quicker to adopt new technologies (especially video games, text messaging, video on phones, and iPods) than Whites and Asians. But even this data makes the mistake of using homogeneous racial categories, which hide differences and nuances within groups. For African-Americans, age, social class, and geography create cultural differences that are glossed over even in traditionally black media outlets. Latinos are also a wildly diverse group, especially when linked back to particular national or regional cultures. Would it be too revealing to point out that almost none of my friends (even those of different races and ages) can relate to the stereotyped subcultures that are portrayed in popular media?

Video games are a great example of the inability of the companies to get African American interests and needs right. African Americans are heavy users of video games but very few games have black men who are not villains or criminals or black women who are not victims.
On potential reason for that is that almost no game developers are black. One of the few African American women professionals in the gaming industry, Shana Bryant said:
There are a number of games in which inclusive design — of both women and minorities — would constitute a significant improvement. It’s something as simple as including ethnic characteristics in a character creation engine instead of just offering a palette swap or allowing someone to create a female player in a sports title. In a lot of cases, there’s very little overhead, and the payoff is noticeable.
It’s also important to consider that African Americans and Latinos represent only a fraction of the academic fields of engineering, technology development, research, and marketing. In a recent MTV blog series, all the black professionals in the gaming industry who were interviewed mentioned that engineering, game development, and marketing were not thought of as career paths among young African Americans.

As the dollar gets tighter, these niche markets will matter more, as people will tailor their spending in directions that are less risky and less questionable in terms of defining themselves according to a mass market. And, remember, the great thing about niche markets is the boundaries are fluid: Even though lately I’m anything but trendy, there’s a Subaru in my driveway, some Levi’s in my closet, and an iPhone on my wish list. But for now I think I’ll hold off on the men’s luxury clothes and Grand Theft Auto III, and just make sure there’s enough chocolate in the pantry.

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