Home How to Differentiate Your Startup in a Red Ocean Industry

How to Differentiate Your Startup in a Red Ocean Industry

We all dream of coming up with the next ingenious idea that redefines an industry, or creates one from scratch. Netflix opened the floodgates to the world of streaming content, and they benefited enormously from being the only players in town (at least, for a few years). Uber capitalized on an existing need–transportation–but provided a fast, convenient, and cheap service that essentially created the new industry of ride-sharing.

These are examples of “blue ocean” opportunities, as defined by the popular book Blue Ocean Strategy by professors W. Chan Kim and Renee Mauborgne. In case you aren’t familiar, they posit that there are two types of market opportunities when you create a startup from scratch. There are red oceans, which are filled with blood from fierce competition. These oceans, representing mature industries in a free market, are incredibly difficult to enter—at least without paying a price, either in more aggressive marketing and advertising costs or by settling for a smaller market share. Blue oceans, by contrast, are all but free from competition, giving you more flexibility, lower costs, and domination over nearly 100 percent of the market share.

To many aspiring startup entrepreneurs, this is disheartening news, and a borderline tragic way to look at things. Coming up with a blue ocean strategy is hard, if not impossible. But the good news is, red oceans and mature industries aren’t as hard to enter as the root analogy would imply; there may not be quite as much opportunity to become a tech unicorn or acquire Bezos-scale wealth, but you can certainly succeed in a mature industry, provided you take the right marketing approach.

The Truth About “Red Oceans”

If we’re following the ocean analogy here, then we need to address the true nature of the competition. These red waters aren’t uniformly infested, nor are they infested in every corner. Instead, there are pockets of blue ocean to be found within those red oceans. In more literal terms, even mature industries, filled to the brim with competition, have untapped market segments and new opportunities for those willing to look.

For example:

  • Specific product features. The product itself may not change, but you can certainly add something to it. New product features may be enough to differentiate the product, and enter a world free from competition, even within a competitive industry. For example, the fast food industry is currently saturated with burger joints, but McDonald’s has introduced and maintained the Big Mac, a unique burger that can’t be replicated without violating copyright laws; if you want this specific taste, you can’t simply go somewhere else.
  • Target demographics. You can also target a different demographic, or capitalize on consumer preferences that aren’t being met by the leading competitors. For example, in the past few years, Dollar Shave Club practically took over the subscription razor industry, and giants like Bic and Gillette quickly followed suit. Yet in the razor battle, Shave.net was able to enter the mature shaving industry and make a name for itself by focusing on the smaller niche of wet shavers who prefer straight razors and safety razors.
  • Price points. One of the more obvious points of differentiation is price. If all your competitors are selling something around the same price, you could easily capitalize on their existing audience, or target a new audience by offering it cheaper. You could also capitalize on a luxury market by charging more (assuming you can offer a higher-quality product). A key example here is the Fidget Cube, a stress-relieving toy that was crowdfunded successfully at a roughly $20 price point; a competitor, Stress Cubes, hijacked the idea and sold cubes for far less, reducing profit margins and beating the Fidget Cube to market.
  • Geographic locations. You could also feasibly find more opportunities in a different geographic area. If there’s a specific business, product, or service that’s popular in one area of the country, you could bring it to a location that’s unfamiliar with it. Rural areas tend to be fantastic opportunities here.
  • Peripheral services. It’s also possible to stand apart from the competition by offering services that aren’t available from mainstream competitors. For example, the Home Depot initially stood out as a competitor to traditional lumber yards because they offered a wider variety of products in one location, as well as classes to help DIYers.

The Role of Brand Differentiation

The secret to finding success in a mature industry is twofold; first, you need to find a way to differentiate yourself, and second, you need to make that differential element evident to the people you’re trying to persuade. That often means adjusting your brand values, your core products, or your overall marketing strategy for these key benefits:

  • Competition reduction. Pursuing a path of your own instantly reduces the number and ferocity of competitors you’ll face. Fewer competitors means you won’t have to worry about someone else poaching customers from you, and you’ll probably spend less on marketing and advertising.
  • Increased visibility. Being different immediately helps you stand out. Capitalizing on what makes you different from the major players in a mature industry is a strategy certain to attract attention naturally, aiding you in your marketing and advertising efforts.
  • Niche exploration. Exploring a specific niche within the mature industry can help you cultivate and nurture a sub-industry. The more you learn about these customers and the more you cater to them, the more loyal they’ll become—especially if they never had an options like yours before.

Marketing an Undifferentiated Startup

Of course, these brand differentiating factors aren’t exactly valuable unless you have a method of making them visible to the public and explaining why they’re valuable. This is where marketing comes into play. You can build up your brand’s visibility and perceived value with these strategies, at a minimum:

  • Define your differentiators (or make new ones). The most obvious answer here is to play up what makes you different in your advertising strategy. A simple message, like “sick of paying high prices for ____?” can be a good start (though you’ll want something a little more original). Are you cheaper? Higher-quality? More convenient? Targeted to someone different? Make this clear in your ads from the get-go, and try to include at least one brand element that encapsulates this, like a company name or tagline.
  • Leverage untapped channels and outlets. There are invariably marketing and advertising strategies that your main competitors aren’t currently using. That could be because the strategies are new and unfamiliar, or because these channels haven’t historically worked for the industry. But because your company is different, it may be able to leverage these channels more efficiently. For example, if your competitors are all over Facebook but you’re differentiating yourself by targeting a more professional, older audience, you could turn to LinkedIn for your needs.
  • Exploit key differences. Chances are, what makes you different from your existing competitors is a pain point for their current audience. You can use this to your advantage by portraying these unpleasant experiences or perceptions. For example, if existing customers are frustrated with waiting too long for a product or service, you could use a video ad that depicts someone waiting indefinitely—and someone beside them who gets the task done much quicker.
  • Piggyback on existing brand value. As long as you aren’t lying about your competitors, you can mention them directly in your marketing and advertising campaigns, as a way to capitalize on the brand value they’ve already established. You can do this with a side-by-side comparison, or with a catchy tagline, such as “like COMPETITOR, but ________.”

Truly creative startups that disrupt an industry or attempt to create a new one will naturally have advantages over those that attempt to move into already-claimed territory. However, entrepreneurs who know how to differentiate their brand, and are willing to discover and exploit niche opportunities can easily enter “red ocean” mature markets, and succeed. The trick is to learn which markets or needs aren’t currently being addressed, and find a way to work them into your business model.

About ReadWrite’s Editorial Process

The ReadWrite Editorial policy involves closely monitoring the tech industry for major developments, new product launches, AI breakthroughs, video game releases and other newsworthy events. Editors assign relevant stories to staff writers or freelance contributors with expertise in each particular topic area. Before publication, articles go through a rigorous round of editing for accuracy, clarity, and to ensure adherence to ReadWrite's style guidelines.

Frank Landman
Editor

Frank is a freelance journalist who has worked in various editorial capacities for over 10 years. He covers trends in technology as they relate to business.

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