Thursday, June 05, 2008

The invention of niche marketing - breaking down boundaries in the process

We all take it for granted – niche marketing.
But do you know when it started? And with which market segment?
Niche marketing is the result of the Coca – Pepsi consumer war. The so-called “cola wars” between Pepsi and Coke began in the late 1930s when Pepsi started making gains in the market at the expense of Coca-Cola. In 1940, Pepsi-Cola Co. was in fierce competition with Coca-Cola Co.
In that year, President Walter S. Mack of underdog Pepsi decided that it was time for an innovative marketing strategy and go for the Afro-American dollar.
He decided to target black consumers with a black sales force – hence the concept of niche marketing was born.
A smart move indeed - the market segment was worth an estimated $8 billion at that time.

Between 1940 and 1952, a team of 12 black salesmen (sorry, no saleswomen yet…..) worked as Pepsi’s “special markets” sales team.
When Pepsi hired its first black salesman, Herman T. Smith, is was so groundbreaking that the New York Times mentioned it in their issue of March 18, 1940.
The sales team got a lot of media coverage from black newspaper such as the Chicago Defender. They had (correctly so) celebrity status. They were perceived for what they were: fashionably dressed and confident sales professionals.

Unfortunately, WW II and the related sugar shortage (no Diet Pepsi in those times) negatively impacted Pepsi’s business operations, including the sales team.
After the war, the charismatic Edward F. Boyd (1914-2007) took charge of the sales force. Multi-talented Boyd was a U.C.L.A. graduate, a trained singer and dancer, and actor.
Before joining Pepsi, he worked for the Screen Actors Guild, government housing programs, and the National Urban League in New York.
He became one of the first black executives in corporate America, developing a marketing strategy seeking brand loyalty among African-Americans.
His special-markets campaign featured some of the first black professional models, including a young Ronald H. Brown (1941-1996) who is shown in the foreground of the image.
(Mr. Brown later became the U.S. Secretary of Commerce, serving three years during the first Clinton Administration).
For the first time in marketing history, African-Americans were portrayed in advertising as stylish, fun-loving, middle-class consumers living the American Dream – in sharp contrast with the stereotypes normally used (such as Aunt Jemima, Uncle Ben).

Boyd’s marketing success is especially astounding considering the many obstacles he encountered. In the segregated South, his salesmen could not stay in hotels, so Mr. Boyd had them use Pullman sleeping cars on trains. This also allowed them to eat in their compartments and not in segregated dining areas.
Although his sales team was better qualified, it was paid less than their white counterparts at Pepsi.
Within Pepsi, even self-identified liberal Northerners (including Mack) used egregious slurs.
In 1949, Mr. Mack told 500 bottlers at the Waldorf-Astoria Hotel that he no longer wanted Pepsi to be known as a *black* drink. Pepsi also continued to run racist advertisements.

Despite all the odds, the salesmen succeeded in boosting Pepsi sales in every area they marketed in. For example, they forged a 13% increase among accounts called in Louisville, KY.
Unfortunately, corporate support for this special sales team faded after Mack left Pepsi in 1950.

With the creation of the special sales team, Pepsi and Boyd not only invented niche marketing, but also broke the color barrier in the US business world.
It opened the way for Indian-born Indra Nooyi to become CEO & chairwoman of Pepsi.

No comments: