Specialization means bigger sales

Vol. IX, No. 6, July 2009

Which is the best strategy for making your product or service most profitable: adopt a broad focus to appeal to the masses, or narrow the focus to appeal to a specialized market? Results of the latest consumer research may surprise you.

New research from Stanford Graduate School of Business indicates that offerings clearly associated with one or two product categories have better sales than those spanning multiple categories. The more focused producers of products and services throw off subtle hints that they know their stuff a little better, which is not lost on consumers making purchase decisions. The study substantiates what social scientists have known: appeal is an intangible based not only on the intrinsic value of goods and services, but also on the degree to which they fit neatly into predictable categories consumers understand.

The researchers tested consumer responses to Hollywood films. Looking at how critics and consumers rated films over a three-year period, they found that films identified by audiences as belonging to one or two genres — such as western, comedy, or science fiction — rated more favorably than those slotted into more than two genres. For example, a comic sci-fi story set in the Wild West would not appeal to most people’s tastes.

Additionally, the research found that the more genre-restricted films were more successful at the box office. Films classified in only one genre grossed 40% more at the box office than films with an average level of genre-crossing. This held true even when other factors were taken into account, such as star power, budget and the number of theatres showing the films.

The research shows that focus pays off. To put it in marketing terms, it’s much easier to win a large share of a narrow but carefully targeted market than to win a small share of a very large market. Think in terms of Dave & Buster’s and Chuck E. Cheese’s. Both fall in a distinctive category and focus on a particular market. Imagine the results if you tried to combine them into a single venue.

Vol. IX, No. 6, July 2009

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Vol. IX, No. 6, July 2009

Specialization means bigger sales

Vol. IX, No. 6, July 2009

LOCATION-BASED LEISURE & ENTERTAINMENT