Pricing Power and Double Specialization
Happy New Year!
I hope your business initiatives this year prove to be profitable and enjoyable.
Fortunately, your goals can get that much closer when you apply a bit of strategic pricing.
Pricing Question from a Reader
You've repeatedly stated that specializing is one of the keys to maintaining a high degree of pricing power. However, I have two interests. Is it ever OK for a business to specialize in two areas at the same time?
Is it ever OK to double specialize?
Sure. Companies do it all the time.
Does it make sense if you're looking to maximize your pricing power?
The short answer is no and the long answer is maybe.
Almost everything I've ever read has been quite clear: firms need to establish a strong specialization before even thinking about expanding into other fields.
The reasoning behind this is pretty straightforward. Firms have a limited quantity of time, attention, and resources that can be devoted to earning a profit. For many firms, taking on two specializations means that their staff members will have half the time and attention to devote to each. Such diversions will necessarily cut the pace of technological advancement, the effectiveness of product marketing, and the efficiency of production. At best, such firms will be seen as jacks of all trades but masters of none.
In many cases, this general advice should be taken at face value. As they say, "he who chases two rabbits catches none."
But wait! There have to be at least a few exceptions, right? There are plenty of firms that have chased two (or more) proverbial rabbits and caught them both.
Are these lucky few merely the exceptions that prove the rule, or is there a model that we can create to explain how to predict which double specializations stand a reasonable chance for success?
I gave the matter some thought and came up with a few types of specialization pairs that might make sense for many business owners.
- Focuses that can be intersected - Many businesses and businessmen have found great success in combining two seemingly dissimilar focuses into a single cohesive offering. Georgia O'Keeffe found great success combining an interest in flowers with an interest in painting. Similarly, Chef Alton Brown became a TV sensation by combining his interest in cooking with his interest in the sciences. Sometimes the combinations are obvious in retrospect, such as in the case of aquaponics, a practice that combines fisheries with farming. Others seem to defy any semblance of logic whatsoever. I have long since given up on attempting to understand the continued success of chess boxing and Christian metal. This approach tends to work well when there exists a pool of buyers who already enjoy each of the offerings independently of the other.
- Tightly-bound Complements - There are many types of goods that are used, consumed, or experienced together but are never combined. For instance, many restaurants are known for brewing high quality beers and cooking excellent hamburgers. The food and drink are served together in order to create an offering that is more desirable than either would be separately, but each can stand on its own. Vendors utilizing this approach will often find it helpful to brand themselves such that they are known for a singular concept such as dining or relaxation.
- Supportive Specializations - Some specializations may be very different from each other but nevertheless offer a form of support from one to the other. For instance, companies that sell tennis rackets may find it worthwhile to develop a reputation for expert restringing. In much the same way, a firm that refinishes boats may be able to develop a reputation for teaching students to sail them. Because of the relationship between the primary specialization and the supporting one, each will naturally be seen as an extension of the other. This is true even in cases when no such relationship exists.
- Sympathetic Specializations - Many people and businesses devote significant time to not-for-profit causes outside of their primary areas of specialization. For instance, the late actor Jerry Lewis devoted significant energy to support those with muscular dystrophy and McDonald's supports the various Ronald McDonald charities. In both cases, the charitable focus not only assisted those in need, but also served to bolster the reputation of the parties in question through a commingling of identities.
- Chronological Opposites - Some specializations are simply not sufficiently lucrative to stand on their own. This is especially true for highly seasonal pursuits. For this reason, many firms have found success in alternating attention between two skills that can not, or for some reason are not, offered at the same time. An example of this would be that of a firm that provides lawn-mowing services in the warmer months and snow plowing services in the winter. Ideally, the two focuses will require similar tooling or skills so that the split of focuses appears logical to consumers.
It should be noted that when there exists no benefit to the public pairing of specializations, many vendors will wisely choose to adopt a new persona so as to prevent the blurring of identities. Famed creator of the Harry Potter franchise J. K. Rowling wisely adopted the pen name Robert Galbraith for her literature for adults. This approach proves especially popular with corporations that have diverse portfolios. Mars, Incorporated, for instance, has chosen to utilize different brand names for selling its lines of candy and pet foods.
Double specialization, if implemented poorly, can represent a quick path to the poorhouse. Nevertheless, it does work quite well for certain businesses in certain situations.
Without knowing more about you, your goals, and your proposed specializations, it's hard to say whether a double specialization makes sense.
That said, if you can make it work, why not?
Questions come from readers like you. If you'd like your questions answered, send them my way.
♫This Q&A and many others are now available on the Pricing After Dark podcast.
Pricing in the News
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- Amazon delivery driver arrested after taking GPS 'bait' package off Washington Co. porch - Can the pricing of labor contracts increase criminal behavior?
- Lab-grown diamond prices slide as De Beers fights back - Low prices for artificial diamonds might be forever
- Rising Instagram Stars Are Posting Fake Sponsored Content - People used to get paid to become sell outs. Now they pay for the privilege.
From the Blog Archives
- The Pricing Maturity Model - If you can't trust a salesman, whom can you trust?
Notable Pricing Quote
"What we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value." -- Thomas Paine
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