As we proceed with the launch of Ontario Construction News, I’m reminded again of the perils of being the second player in an established market. Even though there is much new about what we are doing and some real competitive advantages to our product, we aren’t first to market. And that means we have a big challenge in switching anyone from the market incumbent, especially since the purchasers have been “doing it that way” for years (even decades) and there is not a natural urge or need to switch to something different.
Of course, I framed realistic expectations when starting the project and even my most wildly optimistic market share expectations hover around 20 per cent (with significant competitive pricing advantages to our business model). I also deliberately set very low initial market share expectations, which appear to be within the margin of error for accuracy at the outset.
It’s tough getting people to change — and hard to sell a “me to” product, even if we are ready to knock 50 per cent off the costs for anyone wishing to switch.
How do you get around (or enjoy) these facts of life in marketing?
- If you are the incumbent, especially in a well-established and stable niche, enjoy your status. Even though you may be imperfect, you indeed have a great moat around our business. Of course, it can be breached by determined competitors, new technologies, and your own misadventures, but unless you have your head in the sand, you should be able to adapt. Your biggest threat — technological changes out of the blue revising cost structures sufficiently to move markets; but even then, you will have time to reduce your costs and adapt your technologies (and best of all, you’ll be able to hold the line on price reductions to match the competition, because you’ll still own the majority of the market share).
- If you are a start-up, beware of “new and improved” ideas that cost more, especially upfront. You’ll have a true uphill battle showing anyone why they should change. Remember costs are more than the financial cost of your product/service. There are costs in switching, learning new processes, sometimes training, and the fear costs of any transition.
- Related to (2), be careful in starting a “me too” idea to be confident that you have the staying power to gradually break through and develop your client base. If you don’t have deep pockets (and are ready to throw unrecoverable money away in the battle) design your business to the lowest possible operating/capital costs so you can hang in while you build your client base.
- Finally, if you can at all possible, avoid being a “me too” — Unique market-creating businesses that really capture the imagination (but aren’t too far out of reality) always have an advantage over a clone of an existing product.
So, why I am breaking Rule 4? The reason relates to the statutory requirements that essentially force our product to be very much like the competition — but we are still doing enough new things and most importantly our costs and market share expectations are low enough that it makes sense to proceed. Still, even as we set out in our competitive fight, I certainly envy the incumbent for its absolute and truly powerful first-to-market advantage.