AT&T has launched a new $60-a-month unlimited talk and text plan. AT&T's "Unlimited Talk and Text" plan for GoPhone is available October 12, 2009 and offers unlimited nationwide calling and unlimited texting to anyone in the United States, plus texting to Mexico, Canada and more than 100 other countries worldwide, for an additional fee.
“We recognize GoPhone customers have a need for unlimited calling or texting without the commitment of an annual contract,” says Judy Cavalieri, vice president of Prepaid Products for AT&T Mobility and Consumer Markets.
The prepaid offer comes without contract, and can be paid for completely "as you go" or as a monthly rate plan, without a contract, credit check or deposit.
The offer is evidence of a new level of competiton in the wireless prepaid business, which now is starting to compete more directly with postpaid offers. Handset limitations are emerging as the key difference between postpaid and prepaid offers, to an extent, not usage charges or even form of payment.
Wednesday, March 3, 2010
Which User Segments are Most Likely to Switch to Prepaid?
Prepaid wireless has been on a tear of late, growing to 55 million U.S. users and about 17 percent of all U.S. wireless accounts in service. And though prepaid traditionally has been centered on "banking challenged," "low income" or "youth" market segments, that is starting to change as consumers from a wider range of segments seem to be opting for
Often thought of as a "consumer" option, one also has to wonder whether at least some business users might consider switching to prepaid, for at least some employee segments.
That, at least, is what Compass Intelligence thinks could be happening at smaller firms, for example. A recent change that could be driving such interest are new "unlimited" talk and texting plans from firms such as AT&T.
In a recent survey, Compass Intelligence found that a high percentage of respondents indicate plans to give new prepaid devices to one or more employees.
Another segment Compass Intelligence found was interested in prepaid plans are "larger families." The larger the family, the more mobiles they currently use and the more likely they will replace postpaid wireless devices with prepaid options, Compass Intelligence says.
Users with multiple mobile devices also are more likely to indicate they plan to replace a postpaid wireless account with a prepaid option as compared to other segments.
About 11 percent of the respondents with three or more mobiles are willing to replace one or more of their postpaid mobiles with prepaid, while only three percent of the respondents with only one mobile device indicated plans to do so.
When adding a new device, 22 percent of respondents indicate they will add prepaid mobile.
The apparent relationship between prepaid demand and family size and number of devices is likely the result of U.S. consumers and businesses seeing wireless devices as "nice-to-have" items that are useful for more members of families and employees, along with the ability to limit financial exposure.
One of the advantages of prepaid service is that it can be terminated easily, allowing parents and business managers to quickly cut back on such service if necessary.
Often thought of as a "consumer" option, one also has to wonder whether at least some business users might consider switching to prepaid, for at least some employee segments.
That, at least, is what Compass Intelligence thinks could be happening at smaller firms, for example. A recent change that could be driving such interest are new "unlimited" talk and texting plans from firms such as AT&T.
In a recent survey, Compass Intelligence found that a high percentage of respondents indicate plans to give new prepaid devices to one or more employees.
Another segment Compass Intelligence found was interested in prepaid plans are "larger families." The larger the family, the more mobiles they currently use and the more likely they will replace postpaid wireless devices with prepaid options, Compass Intelligence says.
Users with multiple mobile devices also are more likely to indicate they plan to replace a postpaid wireless account with a prepaid option as compared to other segments.
About 11 percent of the respondents with three or more mobiles are willing to replace one or more of their postpaid mobiles with prepaid, while only three percent of the respondents with only one mobile device indicated plans to do so.
When adding a new device, 22 percent of respondents indicate they will add prepaid mobile.
The apparent relationship between prepaid demand and family size and number of devices is likely the result of U.S. consumers and businesses seeing wireless devices as "nice-to-have" items that are useful for more members of families and employees, along with the ability to limit financial exposure.
One of the advantages of prepaid service is that it can be terminated easily, allowing parents and business managers to quickly cut back on such service if necessary.
Mobile ARPU Illustrates Service Provider Issues
U.S. mobile service provider average revenue per user decreased by $0.45 over the last year, says analyst Chetan Sharma.
Average voice ARPU declined by $0.98 while the average data ARPU grew by $0.53.
Therein lies the problem: mobile service providers are growing data revenues, but losing voice revenue faster than they are able to replace the lost revenues.
That isn't to say they will not ultimately succeed in replacing the lion's share of lost voice revenue. But few executives likely believe the substitution will be one-for-one, or greater, at least in terms of broadband access replacing core voice revenues.
Average voice ARPU declined by $0.98 while the average data ARPU grew by $0.53.
Therein lies the problem: mobile service providers are growing data revenues, but losing voice revenue faster than they are able to replace the lost revenues.
That isn't to say they will not ultimately succeed in replacing the lion's share of lost voice revenue. But few executives likely believe the substitution will be one-for-one, or greater, at least in terms of broadband access replacing core voice revenues.
What Kinds of Online Content Will Consumers Pay For?
Consumer willingness to pay for online content seems to be shaped by their current experience with existing media.
Online content for which consumers are most likely to pay—or have already paid—are those they normally pay for offline, including theatrical movies, music, games and select videos such as current television shows, a new survey by Nielsen suggests.
Content users might pay for tends to be professionally produced, at comparatively high costs, and definitely not user-generated content, including social community content, podcasts, consumer-generated videos and blogs.
Respondents had mixed willingness to pay for newspaper, magazine, Internet-only news and radio news and talk shows that are created by professionals, relatively expensive to produce and commonly sold offline.
After surveying 27,000 consumers in 52 countries, Nielsen also found 85 percent prefer that existing free content remains free.
Whatever their preferences, consumers worldwide generally agree that online content will have to meet certain criteria before they shell out money to access it. If respondents already pay for a product in physical form, 78 percent believe they should be able to use online versions of the same content at no additional charge.
At the same time, 71 percent of global consumers say online content of any kind will have to be considerably better than what is currently available free before they will pay for it.
About 79 percent say they would no longer use a Web site that charges them, presuming they can find the same information at no cost.
Only 43 percent of respondents say an easy payment method would make them more likely to buy content online.
About 47 percent of respondents say they are willing to accept more advertising to subsidize free content. Some 64 percent say that if they must pay for content online, there should be no ads.
Only 43 percent of respondents say an easy payment method would make them more likely to buy content online.
About 47 percent of respondents say they are willing to accept more advertising to subsidize free content. Some 64 percent say that if they must pay for content online, there should be no ads.
More than 50 million Tweets every day
Twitter now has reached 50 million tweets a day, excluding all spam, says Twitter analytics staffer Kevin Weil.
Folks were tweeting 5,000 times a day in 2007. By 2008, that number was 300,000, and by 2009 it had grown to 2.5 million per day, he says. Tweets grew 1,400 percent last year to 35 million per day. "Today, we are seeing 50 million tweets per day—that's an average of 600 tweets per second," says Weil.
Tweet deliveries are a much higher number because once created, tweets must be delivered to multiple followers. Then there's search and so many other ways to measure and understand growth across this information network. Tweets per day is just one number to think about, he says.
Still, as with Skype's "concurrent users" metrics, it is a milestone.
Internet Users are Unique, Treat Them That Way
As this chart suggests, there are distinct Internet end user segments, some of which only require moderate bandwidth, others which require more bandwidth, better latency performance and more upstream bandwidth, if not symmetrical bandwidth.
The issue for any facilities-based service provider is that the whole network has to be built to accommodate the most advanced users, even if much, or most, of the demand is from less-demanding users.
Still, given that such investment must be made, there is increasing room to personalize and tailor broadband access and applications to individual users who actually behave in unique ways.
Though the concern expressed by many supporters of strong forms of network neutrality rightly is focused on protecting legal applications from anti-competitive behavior, there clearly are other values that conflict with the proposed solution for discrimination, which is that no bits, from any providers, can be prioritized.
In fact, prioritizing bits represents a primary tool for personalizing end user services and applications so that those favored applications are optimized for each user. Surely there are ways to ensure non-discrimination without precluding the creation of personalized services that benefit from end-user specified preferences.
The issue for any facilities-based service provider is that the whole network has to be built to accommodate the most advanced users, even if much, or most, of the demand is from less-demanding users.
Still, given that such investment must be made, there is increasing room to personalize and tailor broadband access and applications to individual users who actually behave in unique ways.
Though the concern expressed by many supporters of strong forms of network neutrality rightly is focused on protecting legal applications from anti-competitive behavior, there clearly are other values that conflict with the proposed solution for discrimination, which is that no bits, from any providers, can be prioritized.
In fact, prioritizing bits represents a primary tool for personalizing end user services and applications so that those favored applications are optimized for each user. Surely there are ways to ensure non-discrimination without precluding the creation of personalized services that benefit from end-user specified preferences.
How to compete against the big guys
Many of the big web hosting companies have a reputation for being invulnerable, but in fact it’s very possible to compete against the Yahoos and 1&1s and still win.
The key to be successful is to remember that these big companies are not a one-unit business, but rather are made up of many business units (Yahoo: Search engine, web directory, web hosting, email, advertising and, and, and). Some of those business units are highly effective, others are more vulnerable to competition.
Let’s take Microsoft as an example: One company that successfully competes against Microsoft is Logitech, which competes by focusing on technology that Microsoft doesn’t consider strategic: computer accessories
The situation of Logitech: Staying focused Microsoft is a software and tools company, but it also used to dominate the mouse and keyboard market. Microsoft then started producing gaming equipment, such as joysticks, and steering wheels. It even sold speakers. It made great products but it did not become market leader in these areas and never made the final push against the competition like it did with Netscape.
Microsoft pulled back into the mice and keyboard markets after becoming to wide-spread and after becoming not focused enough. Logitech continued to offer a broader range of products which could be combined with each other in retail packages (wireless mouse and keyboard). While Microsoft continued to build quality products, Logitech started dominating this segment with a broad line of accessories including mice, keyboards, cameras, and speakers – all of great quality.
Logitech could grow to become market leader because they don’t go around pointing out that they are beating the crap out of Microsoft. Executives often want to brag about beating the crap out of Microsoft, but it only motivates Microsoft to want to squash the competition. They stayed silent in the background and concentrated on making great products and to market those. Logitech also stays very focused. Microsoft has to watch markets that are much more strategic than peripheral hardware, but Logitech can fully concentrate onto this one segment of the market.
This is one of the best ways to go after a dominant company: find the areas where the giant isn’t focused enough, and quietly slip from behind in and start taking market share. Inside the big and dominant company, the business unit you compete with will see declining revenues over time. It’s not a large decline in a short period. Employees won’t want to take jobs in that business unit–and, once there, they’ll either be treading water or looking to get out. Once the sleeping giant realizes that you have taken over a large share of that specific market it might start acting against you, but if you play your cards right you have a great position to fight back and to keep your share of the market. Or the sleeping giant just stays where it is and holds on to the market share that it has – no retreat but also no attack. It depends on how important that market share is in the strategic planning. The 3rd option might be that the giant gives up this market segment and concentrates on its strategic important products. Example: Microsoft stopped offering broadband products like wireless routers not too long ago. It had a great product but the competition did not had to concentrate that much on other products and was (is) more focused.
Following the tactics Microsoft used 10-15 years ago, Logitech has been able to establish itself as a market leader in the accessories segment. Job well done.
Large competitors often have two big weaknesses. 1) They often have an image problem, which they refuse to even acknowledge. As a result – the leaders and upper management lose contact to their normal customers. Hereby forgetting that this is often the customer segment that made them big.
2) Large businesses also toss people into jobs without properly matching skills and position. Like many big companies, they have executives leading core units who took the job without formal training. People get the title of a CEO, and they start acting as if that instantly makes them an super manager, when in fact they simply don’t know what they are doing. This can be a real problem for a business – especially during times of extensive growth. The web hosting industry has many folks employed that have great technical knowledge but when it comes down to having proper business skills the business hits a big bump.
Large companies are very vulnerable to competition from a small, but smart company that goes after a certain market segment. Strategies for successful competition against large hosting web hosting businesses include finding a market that they consider non-strategic, and you can even partnering with the competition in areas where the companies don’t compete. You can play against the giant without getting crushed.
Thriving in Slowdown Business
What to do?
Step One:
Be absolutely clear about your strategic objectives. Slowdowns are exactly the time when the entire organization should have no question about the overriding strategic objectives. Tradeoffs will have to be made – between, for example, pursuing share growth or maintaining profit margins. Management must be both clear and fully in alignment on the strategic imperatives in four areas:
Financial Measures – Are we primarily committed to maintaining profit margins (for Wall Street credibility because we just spun this company off, for example?) or are we primarily concerned with the opportunity the slowdown provides to grab market share?
Maintaining Relationships – Which consumer, trade, and supplier relationships will be absolutely critical long-term? How then do we maintain or strengthen them? Which do we “prune?”
Maintaining Product, Service Viability – What features / benefits MUST remain part of the core offering? How do we make sure we are communicating them to continue to build brand equity?”
Competitive Attack – Which competitors should we directly attack?
Step Two:
Be sure you understand your brand, its ability to carry a price premium, and the competitive situation it faces. This set of decisions can be reduced to a standard 2 X 2 matrix:
Step One:
Be absolutely clear about your strategic objectives. Slowdowns are exactly the time when the entire organization should have no question about the overriding strategic objectives. Tradeoffs will have to be made – between, for example, pursuing share growth or maintaining profit margins. Management must be both clear and fully in alignment on the strategic imperatives in four areas:
Financial Measures – Are we primarily committed to maintaining profit margins (for Wall Street credibility because we just spun this company off, for example?) or are we primarily concerned with the opportunity the slowdown provides to grab market share?
Maintaining Relationships – Which consumer, trade, and supplier relationships will be absolutely critical long-term? How then do we maintain or strengthen them? Which do we “prune?”
Maintaining Product, Service Viability – What features / benefits MUST remain part of the core offering? How do we make sure we are communicating them to continue to build brand equity?”
Competitive Attack – Which competitors should we directly attack?
Step Two:
Be sure you understand your brand, its ability to carry a price premium, and the competitive situation it faces. This set of decisions can be reduced to a standard 2 X 2 matrix:
| Value Brand Offering | Premium Brand Offering | |
| Non-competitive environment | “Solidify Franchise”(Japanese Cars) | “Grow the Category”(Apple Computer, Federal Express) |
| Competitive Environment | “Offer a Better Deal”(Wal-Mart, generics,) | “Circle the Wagons / Build the Brand”(Budweiser, Stouffer, Owens-Corning) |
Step Three:
Re-evaluate and re-adjust your marketing strategies as appropriate. If your goal is profitable customer and market share growth, then the opposite of the current economic obstacle is the opportunity that it creates for new, brand and market strategies. Culling through the archives, we’ve developed a list of important do’s and don’ts that you should be thinking about now.
Do’s and Don’ts
| Do’s | Examples From Previous Slowdowns |
| Do find markets that you have previously under-developed (geographies, industries, age brackets, etc.) and raise your level of execution in them. | Wal-Mart, Stouffer |
| Do identify new customer segments – ones often created by the new, emotional needs that arise in times of a slowdown – and target them with tailored offerings. Be certain to make DESIGN a strategic weapon. | Japanese Cars, Owens-Corning insulation, Apple Computer, Chrysler minivan |
| Do invest in brand building: First, re-focus, if necessary, A & P spending on the most productive, brand-building efforts. And exploit emerging, under-utilized communication channels. See Jay Ehret’s treatment of text messaging. Second, update your understanding of how your current customers choose between different brands. | Budweiser, Levi’s, Chrysler minivan, Dannon Yogurt |
| Do target the customers of the competitors who are weak and of competitors who “flinch.” And make absolutely certain you can maintain a real differentiation. See John Jantsch’s post on Duct Tape Marketing. | Apple Computer, Levi’s |
| Do exploit emerging technologies, introducing new products or features and benefits. For examples of how to use TODAY’S emerging technologies (search engines, social media, etc.,) see CK’s Blog and/or Toby the Diva’s. | FedEx, Wal-Mart, American Express Gold Card |
| Do re-evaluate your portfolio of brands and allocate more funds to those brands where the brand itself plays a greater role in a customer purchase (remember, while all brands are names, not all names are brands that drive customer choice). | Heineken, American Express Gold Card, Designer jeans |
| Do patiently, consistently, remorselessly focus demand creation and activation funds (e.g. advertising, promotion) on A) Real, proven, working A & P dollars (See Drew McLellan) and B) Your value-driven brands, not on your premium priced ones. Go for the volume and ROI. | Japanese cars, Generic consumer goods |
| Don’ts | |
| Don’t devalue your existing brands by sending messages that lead with low price, unless that is the positioning that you want for them in the long term. | Atari, Farah |
| Don’t halt a focus on innovation – but do much more “emulation” rather than trying for pure, new-new innovation. Identify, prioritize and adapt the most successful, new ideas from other industries and companies rather than starting from scratch. And be sure to make “Strategic Design” a critical part of the organization’s efforts. See Mario Vellandi. | Xerox |
| Don’t abandon channels or channel partners you will want to have later. | Farah |
| Don’t lose your focus on heavy users and high value customers. Understand who they are – if they are changing – but remember that this is typically the core of a brand’s franchise and often the source of more that 100% of its profits. And make CERTAIN you understand them…their needs, their dreams, their hopes, their fears, their personas. For a very good treatment of this issue in today’s environment, see David Meerman Scott’s recent post. | Schlitz |
While slowdowns can be scary and painful, they also have salutary effects. They force companies to refocus efforts on strategies that genuinely build businesses and powerful brands. For those who accept this challenge and make the right choices, slowdowns can be a period of growth and success
What is a nice business idea?
Ideas come like a flash in our mind. We see opportunities, we ponder on it and wonder whether the opportunity is real. We are essentially going through the process of asking this key fundamental question of entrepreneurship—“What is a good business idea?”. Essentially, a good business idea (in its most ideal form), it’s a business where there is good return on investment with positive cash flows. The elements of a good business idea are as follows.
There is a true need for a service in the market, and that need is not being fulfilled by anyone. Sometimes, it is not a clear as the above. Existing supplier/ players could currently fulfill a service-need in the market. A good business idea in this context could be a new way to fulfill that need either in better way, more efficiently or at a lower cost to the customer. A more efficient way could imply the customer will get more value through the new business idea for the same amount of investment she would have made under the current situation.
A good business idea as described above is not a wishful thinking. It is grounded in reality. An organization or individual who can fulfill a market need in a unique way must have unique capability. In essence, the organization must have something that is not common, something that others within the boundary of that market do not have. This uniqueness must be such that it can be translated to deliver a unique value to the customer by enabling the customer to fulfill an unfulfilled need or fulfill an existing need better, more efficiently or at a lower cost.
A good business idea must be executable, at least by the conceiver of the idea. Sometimes, there are significant hurdles to cross to execute an idea. This may include finance, government regulation, technology etc. In many instances, the true value of the idea can only be realized when a significant hurdle is overcome. Such hurdles tend to protect the existing incumbent players, protect their inefficiencies and poor customer-value delivery. Overcoming such hurdles may need a lot of courage, doggedness and commitment. Such attributes are the stuff great entrepreneurs are made of.
It is important to recognize that sometimes a good idea may not be executable by the original conceiver because he lacks the capability to do so. This might be due to issues like capital, knowledge or technology. Good business ideas should not be killed because one cannot execute it. The opportunities to partner with others who could bring complementary capabilities to execute the idea in a fair commercial arrangement should be explored.
A good business idea also tends to be such that only the conceiver, when it is brought to live, can do it for a long time. Essentially, if I can fulfill an unfulfilled need in the market, and everyone can quickly copy it, then the idea will loose its uniqueness and ultimately its potential to deliver unique value to the customer. A good business idea must therefore have the potential to be protected, or I must be able to build barriers to entry around the business. This protection may include capital (I can raise money than anyone), technology (I have a unique technology that cannot be copied), legal (intellectual property, copyrights, contracts, regulations), knowledge (I know what others do not know, or what it will take them a long time to know), relationships (I have critical relationships that others cannot build). It is important to recognize the limits of legal protection in places like Nigeria where the institutions that can help enforce property rights are weak and under-developed.
A good business idea must also be expressible in a simple statement to a defined customer. It is amazing how many businesses fail this test. This sometimes called unique value proposition. It is essentially, a statement like “ I am X. You want something like this. I can do it for you in better (more for your spend) or do it for you cheaper (so that you spend far less). And this is why… I am the only one who can do it for you like this at least around here”. Communication is key bedrock of marketing. If it cannot be easily communicated or understood by the customer, it is probably not a good business idea.
The strength of a good business idea must also be measurable. In its simplest form, it must be measurable in the context of how many people could potentially buy the product, the likely cost of producing the service or idea, the price ranges that people will be willing to pay, the revenue stream and profits. Essentially, a good business idea must be expressible in financial terms or in a financial statement. This exercise must however be done without a delusion. It must be grounded in reality of your capability, competition, and customer purchase power and value appreciation.
As simple as the above sounds, they are not easy tests for business ideas to pass. Hence, a good business idea is not common. If it were so, success will be common. This is however not to say that one should be discouraged. Good business idea tends to come out of an iteration, trials, perfection and improvement of other ideas. The chances of getting a good business idea also tend to increase the more options, one could conceive and articulate. Hence, don’t stop trying. The next idea you have may just be the winning one.
There is a true need for a service in the market, and that need is not being fulfilled by anyone. Sometimes, it is not a clear as the above. Existing supplier/ players could currently fulfill a service-need in the market. A good business idea in this context could be a new way to fulfill that need either in better way, more efficiently or at a lower cost to the customer. A more efficient way could imply the customer will get more value through the new business idea for the same amount of investment she would have made under the current situation.
A good business idea as described above is not a wishful thinking. It is grounded in reality. An organization or individual who can fulfill a market need in a unique way must have unique capability. In essence, the organization must have something that is not common, something that others within the boundary of that market do not have. This uniqueness must be such that it can be translated to deliver a unique value to the customer by enabling the customer to fulfill an unfulfilled need or fulfill an existing need better, more efficiently or at a lower cost.
A good business idea must be executable, at least by the conceiver of the idea. Sometimes, there are significant hurdles to cross to execute an idea. This may include finance, government regulation, technology etc. In many instances, the true value of the idea can only be realized when a significant hurdle is overcome. Such hurdles tend to protect the existing incumbent players, protect their inefficiencies and poor customer-value delivery. Overcoming such hurdles may need a lot of courage, doggedness and commitment. Such attributes are the stuff great entrepreneurs are made of.
It is important to recognize that sometimes a good idea may not be executable by the original conceiver because he lacks the capability to do so. This might be due to issues like capital, knowledge or technology. Good business ideas should not be killed because one cannot execute it. The opportunities to partner with others who could bring complementary capabilities to execute the idea in a fair commercial arrangement should be explored.
A good business idea also tends to be such that only the conceiver, when it is brought to live, can do it for a long time. Essentially, if I can fulfill an unfulfilled need in the market, and everyone can quickly copy it, then the idea will loose its uniqueness and ultimately its potential to deliver unique value to the customer. A good business idea must therefore have the potential to be protected, or I must be able to build barriers to entry around the business. This protection may include capital (I can raise money than anyone), technology (I have a unique technology that cannot be copied), legal (intellectual property, copyrights, contracts, regulations), knowledge (I know what others do not know, or what it will take them a long time to know), relationships (I have critical relationships that others cannot build). It is important to recognize the limits of legal protection in places like Nigeria where the institutions that can help enforce property rights are weak and under-developed.
A good business idea must also be expressible in a simple statement to a defined customer. It is amazing how many businesses fail this test. This sometimes called unique value proposition. It is essentially, a statement like “ I am X. You want something like this. I can do it for you in better (more for your spend) or do it for you cheaper (so that you spend far less). And this is why… I am the only one who can do it for you like this at least around here”. Communication is key bedrock of marketing. If it cannot be easily communicated or understood by the customer, it is probably not a good business idea.
The strength of a good business idea must also be measurable. In its simplest form, it must be measurable in the context of how many people could potentially buy the product, the likely cost of producing the service or idea, the price ranges that people will be willing to pay, the revenue stream and profits. Essentially, a good business idea must be expressible in financial terms or in a financial statement. This exercise must however be done without a delusion. It must be grounded in reality of your capability, competition, and customer purchase power and value appreciation.
As simple as the above sounds, they are not easy tests for business ideas to pass. Hence, a good business idea is not common. If it were so, success will be common. This is however not to say that one should be discouraged. Good business idea tends to come out of an iteration, trials, perfection and improvement of other ideas. The chances of getting a good business idea also tend to increase the more options, one could conceive and articulate. Hence, don’t stop trying. The next idea you have may just be the winning one.
How to Challenge the Market Leader
In many instances, we would be launching a new product in markets with existing players or incumbents. Some of these players and their products are already so well known that the task of launching new products into those markets could look daunting. Marketing has many things in common with military strategy. In fact, marketing borrowed a lot of its art from the military. Hence, you find marketers and the military use common words such as campaign, strategy, attacking a position, defending a market. We will discuss how to attack a market leader and win. We will discuss certain rules of successful military or marketing attack.
Know your strength and weakness relative to the market leader or incumbent:
Assess very honestly what you have in your product or your organization or your service that is superior to a market leader. Also, assess your fighting power in a war. Do you have as much resources as the existing players? Existing players will probably have more sales force, more retail outlets and perhaps bigger marketing budget. You must however have one thing that the market leader does not have, that the customers want. If you have this, you are on the way to building a strong attacking strategy.
Do not fight head-on with a market leader unless you have at least three times its resources.
This is one of the most important marketing and military lessons in history. That the defender always has an advantage unless you have at least three times his resources. Remember that the existing players are well known in the market and have built relationships with distributors and customers. The market and customers will always give them benefit of doubt over you. It is the simple rule of the “devil you know is better than the angel you don’t know”. If you want to attack the market leader head-on by claiming that you also do what he does better, you will need to be far better ( three times better) to move the existing players customers. That leads us to the critical rule 3.
Successful market attack must exploit the weakness of the market leader.
There is no perfect product. Assume that there are three major benefits that customers in a market want. Usually, the market leader or existing player will be satisfying two of the needs well and will tend to satisfy the third need averagely. This is the way the world is. It is impossible to be tall and short at the same time. If you look closely at the strength of a market leader, you will find a weakness in that strength.
Build your own strength on the weakness of this market leader.
Do not attack him on the areas where his products are already good by claiming you can do what he is good at, better. While this looks like common sense, it is not the way to go. Instead, find the weakness in the strength of the leader; find the things that he couldn’t do well because of what he is doing well. If your market leader product is satisfying the need of tall customers well, design your own product to fit the short customers. As long as there are enough short customers in the market for you to have good business, you are marching on.
Concentrate your resources on attacking the leader’s weakness.
If you have found a solution to the weakness of the market leader, concentrate your resources on attacking the market leader at this position. If because, the market leader is satisfying the need of tall customers, he cannot satisfy the need of short customer well, let all your promotion, leaflets, salesmen and posters just keep shouting “The product that fits the short customer and his need perfectly” In military warfare, resource concentration on the weak point of the enemy is critical to securing beach-head or fresh ground when you land your troops from the sea. It is the same in marketing. If the enemy resources is concentrated in the North (i.e. its sales outlets, sales force etc, attack from the South, and concentrate all your resources there).
Sometimes you may have to attack a niche or a limited area of the market especially if you are small player and you don’t have resources.
Niches are areas that the big incumbent players consider (economically) too small for their big size. A small player can find a comfortable home in such areas and do good business provided he can satisfy the need of the niche and the market leader cannot. This is sometimes called flank attack in military strategy. Find a flank that the enemy poorly defends and attack there.
Expand from the ground you have secured using the same rules as above:
A war consists of many battles. It is not a one-time battle. So, be realistic. Get a beach-head first. Find a weak and poorly contested territory, attack there and establish your product. Then expand from here but following the same rules as above. No frontal attack. Keep looking for new weaknesses in the market leader’s strength. Look for other poorly defended flanks. Attack them. Concentrate your resources there. Win. Secure your ground and move to the next battle.
Know your strength and weakness relative to the market leader or incumbent:
Assess very honestly what you have in your product or your organization or your service that is superior to a market leader. Also, assess your fighting power in a war. Do you have as much resources as the existing players? Existing players will probably have more sales force, more retail outlets and perhaps bigger marketing budget. You must however have one thing that the market leader does not have, that the customers want. If you have this, you are on the way to building a strong attacking strategy.
Do not fight head-on with a market leader unless you have at least three times its resources.
This is one of the most important marketing and military lessons in history. That the defender always has an advantage unless you have at least three times his resources. Remember that the existing players are well known in the market and have built relationships with distributors and customers. The market and customers will always give them benefit of doubt over you. It is the simple rule of the “devil you know is better than the angel you don’t know”. If you want to attack the market leader head-on by claiming that you also do what he does better, you will need to be far better ( three times better) to move the existing players customers. That leads us to the critical rule 3.
Successful market attack must exploit the weakness of the market leader.
There is no perfect product. Assume that there are three major benefits that customers in a market want. Usually, the market leader or existing player will be satisfying two of the needs well and will tend to satisfy the third need averagely. This is the way the world is. It is impossible to be tall and short at the same time. If you look closely at the strength of a market leader, you will find a weakness in that strength.
Build your own strength on the weakness of this market leader.
Do not attack him on the areas where his products are already good by claiming you can do what he is good at, better. While this looks like common sense, it is not the way to go. Instead, find the weakness in the strength of the leader; find the things that he couldn’t do well because of what he is doing well. If your market leader product is satisfying the need of tall customers well, design your own product to fit the short customers. As long as there are enough short customers in the market for you to have good business, you are marching on.
Concentrate your resources on attacking the leader’s weakness.
If you have found a solution to the weakness of the market leader, concentrate your resources on attacking the market leader at this position. If because, the market leader is satisfying the need of tall customers, he cannot satisfy the need of short customer well, let all your promotion, leaflets, salesmen and posters just keep shouting “The product that fits the short customer and his need perfectly” In military warfare, resource concentration on the weak point of the enemy is critical to securing beach-head or fresh ground when you land your troops from the sea. It is the same in marketing. If the enemy resources is concentrated in the North (i.e. its sales outlets, sales force etc, attack from the South, and concentrate all your resources there).
Sometimes you may have to attack a niche or a limited area of the market especially if you are small player and you don’t have resources.
Niches are areas that the big incumbent players consider (economically) too small for their big size. A small player can find a comfortable home in such areas and do good business provided he can satisfy the need of the niche and the market leader cannot. This is sometimes called flank attack in military strategy. Find a flank that the enemy poorly defends and attack there.
Expand from the ground you have secured using the same rules as above:
A war consists of many battles. It is not a one-time battle. So, be realistic. Get a beach-head first. Find a weak and poorly contested territory, attack there and establish your product. Then expand from here but following the same rules as above. No frontal attack. Keep looking for new weaknesses in the market leader’s strength. Look for other poorly defended flanks. Attack them. Concentrate your resources there. Win. Secure your ground and move to the next battle.
Friday, January 29, 2010
Saturday, January 9, 2010
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