In 1984, Jim Koch founded the Boston Beer Co., maker of Samuel Adams Boston Lager. Here, he answers a reader's question.
Q: As a Davidesque entrepreneur in an industry of Goliaths, how do you use marketing when it is hopeless to outspend the big guys?
Dogfish Head Craft Brewery
Jim Koch responds:
Forget about media buying and ad agencies. If you're competing with people who have way more resources than you, traditional marketing isn't helpful. You have to start with a product--whether it's beer or software--that's meaningfully better or cheaper than the established competition. You also have to realize that it's going to take time to change people's perceptions. It took Sam Adams (NYSE:SAM) 10 years to get national distribution, and after 23 years we still have only seven-tenths of 1 percent of the American beer market.
The next step is finding the consumers whose needs the product meets and educating them. It doesn't have to be a lot of people. We targeted imported-beer drinkers in 30 bars in Boston. I learned that you need to convince not only the decision maker (for us, the bar's general manager) but also the influencers (the bartenders), and that you need a 10-second pitch that they can tell customers. Ours was: "Try this new beer: It's handcrafted in small batches. You'll like the taste."
When you're trying to educate consumers, do the small things that the big guys think are below them. For us, that meant table tents, promotional nights, and interacting with our target customers. Twice a week, I would go to a bar and talk to people about the beer. That helped me understand what kept people from drinking Sam Adams. I found out that people had an irrational attachment to imported beer that had little to do with the actual quality. So we put booklets on the bottles that explained why our domestic beer was better. The booklets cost 1.4 cents each--or about 2 percent of sales--but it was worth it. By our third year, we had distributed five million of them.
We didn't start doing TV ads until 1996, and they did not drive any noticeable growth. In the end, you can't fool customers into buying a product that's not any better than the next one. That's the province of well-financed companies. A small company has to be better and find ways--the more dramatic the better--to show consumers that it's better. Otherwise, go home.