A focus strategy is one where a company decides to concentrate the resources of its marketing strategy on either expanding into a narrow market or segment or by entering it in the first place. It is typically implemented when the agency involved already knows its targeted demographics and can meet the needs of each consumer effectively.
It is a strategy that was first developed by Michael Porter, business professor at Harvard University, in the mid-1980s. The focus strategy is one of three generic strategies that Professor Porter created at the time: cost leadership, focus, and differentiation.
The idea here is simple. By creating, marketing, and selling a product or service intended for a niche market, then it becomes possible to become the recognized expert in that market better than those promoting a generalized strategy instead.
Here are the advantages and disadvantages of the focus strategy to examine.
List of the Advantages of a Focus Strategy
1. It helps to build strong relationships within each target market.
For a focus strategy to be successful, businesses and brands must actively listen when hearing about the needs and concerns of their targeted demographic. Then a specific value proposition is created because the products or services are built around the needs and concerns previously discussed. It creates a relationship because consumers feel like your brand created something specifically for them, which builds loyalty over time.
2. It improves the pricing structure for the business.
When there is a higher level of loyalty within a consumer base, then a business is able to charge higher prices for their products. That is because consumers find value in supporting the brand because the brand supported them by meeting a specific need. We often call these “power brands” because they are more than just a business. They are also a cause. There are several power brands on the market today, such as The North Face and Apple.
3. It brings expertise into the products or services.
To create the best possible products or services for a targeted demographic, there must be an underlying expertise present within the company. Product knowledge is an asset that cannot be ignored. That is because natural expertise creates a barrier to entry within the market to competitors. With a focus strategy, a company establishes itself as the best, and most people prefer to work with the best when they have a need that must be met.
4. It allows you to identify your future customers with specificity.
Because a focus strategy requires a business to get in-touch with their targeted demographics, there is an opportunity to clearly identify who the client base will be. That makes it easier to create specific messages to encourage awareness of the products being development, which stretches your marketing dollars further. Instead of putting money into advertising and marketing areas that offer a generic message, you can place targeted funds with a specific message that is more likely to keep a brand at the top of the mind for a prolonged time period.
5. It may limit the competition.
When you create a focus strategy, you are looking for natural ways to limit the competition. If you are the best at what you do within a specific niche, it becomes difficult for others to counter such a claim. The quality of your products or services stands as a testament to your overall expertise, which counters most marketing messages that a competitor might offer. When you’re able to narrow your niche to limit your competition, you create a natural destination business for people in your targeted demographic.
6. It typically offers lower production costs.
When you are focused on providing a niche product to a targeted demographic, you have more options from which to choose within your production cycles. You are not going to be able to produce goods at a large enough scale to generate cost savings, though you can give yourself a competitive advantage here if you focus on cost-sensitive materials and lower production costs. Then you can target the customers who will appreciate the lowest costs to expand a market share.
7. It is a chance to provide a higher quality product.
For many consumers, there is a desire to have the best possible product available when having their needs met. Many will pay more when there is confidence in the ability of a niche product to meet their needs. It is considered more of an investment than a purchase. When a business chooses to embrace a focus strategy as part of their marketing push, it creates an opportunity to provide higher quality levels without worrying about a reduction in consumer interest.
8. It can restore the reputation of a brand.
Over time, a brand may experience enough negative interactions that its reputation is placed into a vulnerable position. A focus strategy can be implemented to resolve these issues as well. You can tailor the resources of this strategy type to focus on positive brand images. These images can promote new products or services at the same time, creating new interest in the product.
9. It can improve customer service.
Another way for a company to compete with a focus strategy is to emphasize the satisfaction rates of their customers. These creates an advantage within the targeted demographic because future customers are able to directly relate to past customers when the qualities of the product or service is discussed. Although hiring people with excellent customer service skills can be an expensive proposition, the higher pricing that is often available for goods or services involved with a focus strategy can often cover the cost.
List of the Disadvantages of a Focus Strategy
1. It may limit the initial demand of a product or service.
Working with a niche demographic can produce amazing results. It can also produce zero results. When you’re working with something that is very specific, the number of sales generated within the market may be minimal. Even if you’ve specifically designed a product or service to meet a specific need with a demographic, the reputation of the brand may not be strong enough to attract enough attention to it.
2. It can limit future growth.
If a business specializes in a niche service or product, then future expansion may be difficult. The processes of a focus strategy must be repeated to create new opportunities because what has been created already was specific to the demographic. There are limited cross-demographic promotional opportunities when this marketing strategy is used because there is such a level of specificity when creating a value proposition.
3. It may focus on a temporary demographic.
When one specific demographic is targeted, there is always a risk that the demographic may go away one day. Walmart has created this issue for numerous businesses in several communities. Because they provide generalized product access at cheaper prices, local specialty stores have found themselves sometimes struggling to stay in business. It is even possible for a company to copy the processes created to offer items at a lower price because there aren’t the same research and development costs involved.
4. It does not eliminate the threat of disruptors.
A focus strategy is a natural force of disruption because it tightens the focus of product or service development to a specific demographic. That creates a narrower focus, which offers the potential for niche expertise development and product sales. There is nothing in place to stop another brand from adopting an even narrower focus strategy, creating an ultra-specific product that is also disruptive.
5. It could be too specific for the market.
There is always a danger that providing a niche product can be too limiting for a business. Some niches can be so specific that only a handful of people qualify as a targeted consumer. Even if you achieve a 100% conversion rate with 20 customers, you’d likely earn more money with a 10% conversion rate on 300 potential customers. Although there is always a market share to find through ultra-specificity, not every market offers a chance to be profitable.
6. It offers lower equipment utilization rates.
Unless a business implements the purchase of business assets after adopting a focus strategy, there are often manufacturing inefficiencies present with this type of effort. Equipment utilization may be as low as 25% for some companies that have a narrow niche which they focus upon. That means it can be more difficult to plan or control production, deal with personnel scheduling, or manage inventory.
These focus strategy pros and cons show that this generic process creates an immediate impact on the demographics it targets. At the same time, there is a risk to face in the fact that any other company can provide a narrower point of focus to create disruptions. That is why a focus strategy must be carefully managed, focusing on the value proposition being offered, to generate the best possible results.
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