How Business Underdogs Can Take a Bite Out of Top Dogs

In business, sometimes a smaller company decides it’s better not to take on a larger rival directly.

Or as John Stollenwerk, president of Allen-Edmonds Shoe Corp. said:

“It would be stupid on our part. It’s like kicking an elephant to see if it will move. Obviously, the elephant can return the kick with a lot more force.”

To compete against the giants in its industry, Allen-Edmonds has carved out a niche as producer of meticulously handcrafted men’s shoes sold at a premium price. The Washington Post describes them as “the shoe of choice on Capitol Hill.”

The Port Washington, Wis., company, which has $55 million in annual revenue, succeeded by becoming what marketing specialist Edmund Lawler of Chicago calls a “perfecter”--an underdog company that perfects an element in its marketing mix to the point where it can’t be matched.

Lawler, a lecturer and former managing editor of Business Marketing magazine, profiles Allen-Edmonds and two dozen other upstarts in a book, “Underdog Marketing: Successful Strategies for Outmarketing the Leader.”

“Unlike market leaders, which are often hamstrung by tradition and unwieldy bureaucracies, underdogs are close to the ground and quick to market,” Lawler writes. “They love the thrill of risk and innovation.”

The book cites MCI as one of the best examples of the underdog, competing against AT&T;, the No. 1 long-distance carrier. Timothy Price, president of MCI’s long-distance unit, said the company is delighted that AT&T; stepped down from its pedestal to “knife-fight with us in the gutter.”

Not all the underdog companies are perfecters, Lawler said.

MCI, Drypers and Virgin Atlantic Airways are examples of “challengers,” taking on the likes of Procter & Gamble and British Airways with a form of what Lawler calls corporate jujitsu--turning the size of the bigger company to its disadvantage.

Drypers challenged Procter & Gamble in the disposable diaper market, which P&G; leads with its Pampers brand. P&G; printed coupons for Pampers, but Drypers responded by honoring the coupons itself, thus snatching sales away from the giant.

Three other breeds of underdog are “differentiators,” who work to draw a difference between themselves and their larger competitors; “re-inventors,” who try to bypass others by radically changing the industry; and “shadow casters,” who cast a larger-than-life shadow in the market to build momentum in their early years.

Smart underdogs, says Lawler, use their smaller size to motivate employees to try harder.

“It’s easier to convince your employees that what we’re doing is more than just a business,” MCI’s Price said.

That’s one of 10 principles that Lawler says underdog marketers use to outmaneuver the leader. Others include:

* Rarely challenging the leader, who usually has greater resources, to a price war.

* Taking on the look of a market leader through signage, advertising and other means.

* Creating a distinctive--often youthful and brash--personality.

Among the case studies in the book is the story of William E. “Mac” McWhirter, president of Peoples Bank Corp. in Indianapolis.

Seeking a way to compete with larger institutions from Ohio and Michigan that were buying Indiana banks, McWhirter emphasized that Peoples had been locally owned since 1891 and planned to stay that way.

“Our commercial loan officers were hearing from companies daily that were disenchanted over the impact of out-of-state control of the banks they had been doing business with,” he said.

McWhirter, whose great-grandfather, Felix T. McWhirter, founded the company, aggressively positioned Peoples as a hometown company that really knew what customers and local businesses wanted.

In 1992, Peoples noted the sale of two other Indianapolis banks in a series of award-winning ads.

“It won’t be the same without him,” one ad said of a formerly local competitor’s mascot.

“But if you bank at Peoples, you’ll never have to say goodbye to local ownership. Peoples is the Indianapolis bank.”