Skullcandy: How A Small Company Reaches a Big Market

Last Updated Jan 11, 2011 10:41 AM EST

The hard part about a new business isn't getting the idea or producing the product. It's finding customers. Whenever I judge business plan competitions - which I do rather often - this is where even the most brilliant students regularly fall down. Build it and they will come? Almost never.

Finding your customers is tough and expensive. The key, as Skullcandy learned, is maintaining tight focus on a niche market.

Niche Need Not Mean Small
After just nine years in business, Rick Alden's Skullcandy is the second biggest seller of headphones in the U.S. - second only to the mighty Sony who have been in the business for far longer. Seen from one perspective, Alden had everything going against him: he wasn't an industrial or acoustic engineer, he wasn't a technologist, he had little money and no experience of the electronics market.

What he had was deep understanding of one group of customers: snowboarders. His first business had organized boarding events and competitions; his second had designed and marketed fastenings for snowboards. So it seemed obvious to him that the place to start with his headphones was with snowboarders.

Sell to Those You Know
"They were the only people I knew!" Alden told me. "I knew all the retailers and they knew - and trusted - me. And I knew what they wanted. So I designed for them. I wanted to integrate headphones into snowboard backpacks, beanies, helmets - to make an easier music delivery device."

Targeting snowboarders meant that Alden went to retailers who already knew and trusted him. He could partner with clothing companies that did too. He built on his strengths and his networks but most of all he focused intently on a well-defined and well understood group of customers whose needs he understood deeply. Moreover, they all talked to each other - about gear and about music. Skullcandy quickly built up a base of dedicated evangelists.

Success within this niche generated the momentum and the cash needed for the company to be taken seriously in more mainstream outlets. In a year Skullcandy became the number one headphone in 1400 FYE stores. But even though Skullcandy headphones are now ubiquitous, the target market and the core brand message remain the same.

Definition Means Saying 'No'
"We are not trying to be all things to all people. What we always say we do is: "skateboards snowboard sunboard surf hip hop indy music" That has always been our positioning. So if someone came to us and said could we do something for a symphony orchestra, we'd think : skateboards snowboard sunboard surf hip hop indy music - No. Triathlete competition? No. It kept us very focused and filtered on what we considered core brand message.

It's an interesting and important thought that the way Skullcandy got big was by focusing on something small. Doing this meant that, even with few resources, they could reach customers whose enthusiasm spread quickly and cheaper to a critical mass of enthusiasts. It's a classic marketing strategy of the kind that I hope the next business plan competition students will pay attention to.

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    Margaret Heffernan has been CEO of five businesses in the United States and United Kingdom. A speaker and writer, her most recent book Willful Blindness was shortlisted for the Financial Times Best Business Book 2011. Visit her on www.MHeffernan.com.