We're (Not) #1

Benefits of Being Small

McDonnell could write a guerrilla warrior's handbook. He's sharply aware of the benefits that come his way as No. 2 to Enterprise. For instance, Enterprise employs large staffs that do nothing but hunt for locations for new rental facilities. They use complex, expensive modeling techniques to analyze each community's likely need for the service, even the exact traffic flow on certain streets at certain times of the day. For Enterprise, picking a location is a science and the result of detailed investigation. But not for McDonnell. "I tell our people to locate as close as possible to an Enterprise store-directly across the street, if possible," he says. "[Enterprise has] done a lot of good work picking a site, and we can benefit from it."

Another lesson learned: "We hunt for customers where Enterprise doesn't," says McDonnell. He claims most of Enterprise's marketing focuses on wholesale deals with auto insurers, body shops, etc. Because Enterprise is strong in those areas, McDonnell says, U-Save Auto Rental "concentrates on the individual driver, whom [Enterprise] ignores. We stress our service to the individual, and our franchisees are active in their communities. They belong to churches and clubs-and their ties bring business from their neighbors. We put little effort into B2B selling; we excel at B2C selling."

Following rich and powerful Baby Bells into markets provides manifold benefits for Balzer. "Usually, [Baby Bells] stimulate demand for broadband," says Balzer. Those telephone companies incur heavy marketing expenses to get customers excited about broadband, and a second-tier player like Vectris waltzes in afterward to pick up customers. Says Balzer, "Everybody hears horror stories about botched installations by the Bells; we stress our service angle, and it's easy for us to win customers."

Focusing on a niche also works in Vectris' favor. "We go after customers the Bells usually neglect," Balzer says. "They pursue very large corporations and consumers. Our strength is with small to midsized businesses, which fall between the cracks at most of the Bells."

Balzer's not just after smaller clients-he seeks out smaller communities with fewer competitors. "In the major markets, there might be 15 competitors selling broadband," says Balzer. "In our markets, we'll face only a few competitors."

"You need to be very focused on what you're good at," says Greg Strakosch, 38, CEO and co-founder of Needham, Massachusetts-based TechTarget.com, a network of portals for IT professionals. Strakosch fights for share against ZDNet and CNET-both gargantuan businesses-but TechTarget, which operates more than 20 specialty information sites and claims more than 500,000 registered users and 350 advertisers, is prospering because its focus is unwavering. "We serve the professionals, and not the consumer market CNET and ZDNet serve," says Strakosch. "We've identified unattended niches where we can provide service and gain market share."

TechTarget doesn't divide its resources or attention, but when it enters a niche, it aims to give the best information available. And that focus is what a runner-up needs to prosper.

Add up these lessons, and a clear strategy emerges:

  • Coast on a large competitor's research wherever possible.
  • Let the big boys stimulate demand, then be there to fill it.
  • Sell into different markets; avoid head-to-head battles.

Sound easy? Those are starting points to survive and prosper as a runner-up, but there are more lessons to learn.

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This article was originally published in the January 2001 print edition of Entrepreneur with the headline: We're (Not) #1.

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