Very important, short article
.....I wrote about why distinctive customer targeting is a smart strategy. But over time, this strategy has to evolve. Consider two iconic companies, the National Football League and Walmart.
In 1966, the National Football League merged with the American Football League and hosted the first Super Bowl. Fifty years later, the league attracts more male fans than just about any other professional sport in the United States. Walmart, meanwhile, spent the last five decades developing massive, full-line discount stores across the United States. Today, the company has few places left to build.
Both the NFL and Walmart are nearing the limits of their target market. They are outgrowing their target customer. To continue growing, both need new markets to conquer. But that’s easier said than done. For example, in August 2015, the NFL’s Tampa Bay franchise introduced a campaign to attract more women to its games, but many found its approach condescending and insulting. Likewise, in early 2016, Walmart announced that it was shuttering its small-store format, Walmart Express. Express was an attempt to grow in urban areas and towns too small for a Walmart superstore.
An important lesson here is that when you’ve outgrown your target customer, you have to stretch every element of your strategy — namely, your target market, value proposition, and capabilities system — in a coherent way.
Consider Gap Inc. It created Old Navy in 1994 when its namesake business was nearing the saturation point with the target market for its classic-style, moderately priced clothing basics. Old Navy, now the jewel in Gap’s crown (although it just suffered a weak holiday season), sells on-trend clothing at a lower price point with a materially lower-cost store design. Its value proposition was designed to attract a different target customer, while leveraging the same design and supply chain capabilities that distinguished the original business.
Now contrast Gap’s Old Navy and Walmart’s Express strategies. The latter requires new capabilities — for example, inventory and supply chain management that involve smaller, more frequent direct-to-store delivery drops — and a financial model that is low-volume, high-margin (the opposite of large stores). And it has a value proposition (locational convenience) that the general population doesn’t associate with its brand. As I predicted back in January 2014, it was doomed to fail.