FORUM;HOW UNDERDOGS OUTMARKET LEADERS

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An underdog's marketing practices don't have to be as good as the leader's, but better. It's no wonder an industry's most innovative practices are often the creation of the No. 2 player, whose natural scrappiness and ingenuity make them so fun to watch.

Unlike market share leaders, which are sometimes hamstrung by lumbering bureaucracies, underdogs are close to the ground and quick to market. Based on my interviews with the CEOs and marketing chiefs of 25 companies ranging from small businesses to Fortune 500s, I found these feisty competitors love the thrill of risk and innovation.

Here are nine ways underdogs outmarket the leader:

1. Instill a sense of mission. MCI doesn't see itself engaged in a business but in a crusade against telecommunications giant AT&T. Tim Price, president of MCI's long-distance unit, tells employees that AT&T is bent on denying Americans the freedom of choice in selecting a long-distance service.

Firing up the troops to take a bite out of the big dog's hide is one of the smartest things an underdog can do. "What helps MCI is that we have an enemy to focus on," says Mr. Price.

"And the enemy, God bless them, is so vicious, so big and so formidable that the meaner their advertising gets and the more mean-spirited their public comment gets, the more enthusiastic our people become."

2. Bite back. A British Airways ad in The New York Times this year bumptiously stated: "More people choose British Airways to London than any other airline." Copy ended with the word "duh," as if to suggest that BA's claim of superiority was self-evident. BA's smaller but frisky nemesis, Virgin Atlantic Airways, responded swiftly with a spread in the Times of its own. On one page was the BA ad. The headline on the opposite page stated: "More people switch to Virgin Atlantic from British Airways than any other airline. Ha!"

The media seized on the latest round in the long-running spat between the British airlines, depicting Virgin as a victim of BA's bullying tactics. The media and the public generally side with the underdog. At the very least, the underdog gets mentioned in the same breath with the big dog.

3. Practice corporate jujitsu. Based on a variation of the Japanese hand-to-hand combat maneuvers, a smaller company forces a larger opponent to turn its size and weight on itself.

Upstart disposable diaper maker Drypers used this tactic to turn the tables on Procter & Gamble's Pampers and Luvs brand diapers. To counter Drypers' everyday low-pricing strategy in its hometown market of Houston several years ago, P&G flooded the market with $2-off coupons. Drypers countered with its "convertor coupons" that stated a $2-off coupon for Pampers or Luvs could be applied to the purchase of a bag of Drypers. Retailers unwittingly aided the cause by accepting the Drypers' convertor coupons and sending the attached Luvs and Pampers coupons to P&G rather than to Drypers for redemption. Drypers got the sale and P&G got the shaft.

4. Differentiate. Not all underdog marketers antagonize their larger competitors. While keeping a wary eye on the competition, many operate in their own unique way. Denver's legendary bookstore, The Tattered Cover, provides a level of customer service that a crop of recently opened, discount-oriented chain bookstores in the Mile High City can't match.

The Tattered Cover special orders more than 400 books a day for customers from all over the world. It's been said that if the Tattered Cover doesn't have the book or can't track it down, the book probably doesn't exist.

5. Create a distinctive personality. It can be hip, irreverent, brash but most importantly, it must be memorable. Because PC maker Gateway 2000 considers its Midwestern roots and values a selling point, it selected a cow spot to help brand its personality. As Al Giazzon, Gateway's marketing director, notes: "We have a simple, recognizable personality and that's a powerful position to have in the market." He believes it's harder to come up with a quick sentence about its arch-rival Dell Computer than it is about Gateway.

6. Cast a larger-than-life shadow. Small or upstart companies need a bark that's worse than their bite to convince the market that they should be taken seriously. Thrifty Car Rental did just that by taking on all the trappings of Hertz and Avis. From the uniforms its employees wear to its broadcast spots on network TV, Thrifty emulates the look and feel of the industry's big dogs. Its shadow-casting paid off as leisure and business travelers elevated Thrifty to one of their leading choices.

7. Strike a slightly premium price. Companies such as test-prep service The Princeton Review uses its larger rival's pricing practices as an industry standard from which to charge a slightly higher price. The Princeton Review bases its higher price on the strength of what it says is innovation, better customer service and smaller classes than its larger rival, Kaplan Educational Centers.

TPR's founder and president, John Katzman, says underdog marketers should avoid price wars, noting that "bigger companies can keep their prices down until you are gone."

8. Use technology to level the playing field. Smaller companies have been early adopters of such new electronic marketing tools as home pages on the Internet's World Wide Web or customer databases. The Princeton Review got an edge on Kaplan Educational Centers by more quickly connecting all of its U.S. and international offices with e-mail. It also beat its rival to the punch by creating a home page on the Internet and major commercial on-line services as well as being first to use electronic scanners to instantly grade students' tests.

By getting ahead of the technology curve, TPR got a leg up on the competition.

Distribution may be the ugly duckling of marketing, but mastery of this under-appreciated marketing principle can be an invaluable tool in outmarketing a leader. Just ask Alan Bush, president of Computer City, the nation's No. 2 computer retailer. He says Computer City's slavish attention to inventory control and management has put it hard on the heels of industry pioneer and leader CompUSA.

Mr. Lawler, captain of Business Marketing's Copy Chasers panel, is author of "Underdog Marketing: Successful Strategies for Outmarketing the Leader" (MasterMedia Ltd.; 800-334-8232).

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