It's easy to get caught-up on the wrong strategy
Having worked with dozens of businesses over the years ranging from mom-and-pop shops up to multinational corporations, I've learned from experience the many do's and don’ts of marketing a successful business.
Whether you're running a billion-dollar company or the local corner store, there's a fundamental mistake to which many business owners often fall victim. If you can avoid this key misstep you'll save enormous amounts of time, money and headaches.
Are you alone?
If you haven't yet taken my Ideas Quiz I encourage you to do so. If you have then you’ll know what I'm talking about.
One of the questions I ask is whether or not a similar product or idea is already available. If you answered "No I'm the first”, congratulations. However, for most business owners there is some type of competition in the marketplace, and the following realities apply.
Perceptions is king
In the world of marketing, many entrepreneurs fall into the false assumption that marketing is a battle of products, when in fact it's a battle of perceptions.
Being the first product in a new category gets you into the consumers mind before anyone else, establishing your brand as the unprecedented leader in that category. Even if your product is not perfect, you were there first and people will remember that.
When a new company attempts to enter a pre-existing category, however, even if they have a better product, they will never be perceived as the leader simply because they weren't there first. They will always be stuck fighting an uphill battle to gain market share in the minds of consumers.
Don't fight human nature
People are emotional beings with logic often taking a backseat.
How did Trump win the Presidency?
He appealed to people by stirring up emotions and creating irresistible spectacles rather than logical arguments.
It's human nature – people quickly form opinions and cling to them with all their might. It didn't matter how many logical arguments Hillary raised because once a particular belief is established in the mind it is incredibly difficult to change.
In the world of business, this is no different. Consumers quickly become accustomed to using a particular product or service. It becomes very routine and habitual. They swear by certain products and a deeply entrenched brand loyalty is established, even if better alternatives exist.
Think about it: as an iPhone user, how likely are you to change brands even if the alternative is better? Not very likely. Unless the new brand makes a phone that does something so incredibly amazing, (like print money while you sleep)!
As a business with a new product why fight such a difficult battle?
Would you leave your husband or girlfriend for someone who is only slightly better? Probably not.
So if you can't be first to the party, how can you become a dominant player in a pre-existing category?
How "better" are you?
Recap: unless you're the first product in a new category, building a slightly better product will not result in successfully capturing market share. If you're going to compete you can't simply be 10% better, or 25%; you must be 10 times better!
To establish yourself as the new leader in a pre-existing category you need to completely blast your way into the consumer's mind with a product that is so much better they can't help but switch.
What does 10x look like?
Take Google for example. Back in the days of early consumer Internet there were a number of search engine players already in the market, but Google built a product so superior it blew all existing competitors out of the water.
Thanks to its proprietary technology algorithm no other competitor was able to copy their product, essentially giving them a monopoly over internet search.
Uber is another great example. Rather than starting another taxi company with nicer cars or lower rates, they completely turned the industry on its head with a new technology that proved to be 10x better than anything else on the market.
Other competitors like Lyft followed suit but Uber has remained the brand leader in the ride-share category with 75% of U.S. market share.
Lastly, remember the iPod? It wasn't the first MP3 player on the market, but it was so much better and offered such a superior user experience that it instantly became the category leader.
Apple's marketing campaign was genius, yet incredibly simple. Rather than bragging about more gigabytes and better hardware specs (like everyone else) their tagline was simply: "1,000 songs in your pocket." This instantly conveyed the product's function and benefit to consumers.
Moreover, those white headphones quickly became a fashion symbol – something so simply different that set themselves apart from every other competitor who had black headphones.
Reality Check: Mindshare not Marketshare
If you're going to show up late to the party and compete with similar products in an pre-established category you must ensure your product is at least 10 times better than anything else on the market.
"But it's a multi-billion-dollar industry, even if we only capture 1% we will be successful!"
This is another common misconception among budding entrepreneurs as capturing that 1% market share is almost always incredibly difficult and costly. Your business will simply bleed cash until it eventually dies.
Preferably, you want to develop some type of proprietary technology or “secret sauce" that makes your product far superior. If this isn't possible, you need to re-frame your product so that you can be first in a new category, establishing yourself as the category leader.
Become a leader by thinking outside the box
Spotify is a great example of how to become a category leader. Rather than building a less expensive or more thorough catalog of downloadable digital music to compete with Apple’s iTunes, they developed the world's first cloud-based music streaming service – a new category in which they could be first.
Since its launch nearly 10 years ago Spotify remains the dominant player in the world of online music streaming with over 40% market share. The other 60% is split among half a dozen competitors, with the nearest being Apple music at only 20%.
Becoming a category leader didn't require Spotify to develop a new proprietary technology, or in fact, create anything new at all. It simply required them to get creative and think differently about how a pre-existing product was being distributed.
By tweaking the current distribution model they were able to establish a new category in which they could be first.
Tesla is another great example of a small adjustment that opened an entirely new category.
Rather than using the traditional dealership distribution model to sell cars, Tesla owns and operates their own sales centers. This allows them to maintain higher profit margins by not having to sell wholesale to a dealership network.
Higher margins means more cash in their pocket for research and development. As such, Tesla builds a car that is 10x better than any of its competitors and is now the world leader in electric vehicles with 30% of the market share; nearly double that of the second-place automaker, Ford.
It doesn't take much to develop a new category, just a different way of thinking about the way things already exist. Slight adjustments can result in huge gains.
Key takeaway: Spending money on marketing and trying to change people's perceptions is a surefire way to bleed a business dry. Unless you can build something 10x better than anything currently available, stop focusing on how your product is better, and rather, focus on building a new category in which you can dominate.
Remember, people love things that are new and exciting, so why not take advantage of this? Something that is only slightly better won't capture headlines.
Look at the way the system is currently set up. Just because it exists a certain way doesn't mean it can't be changed. Get creative and think of ways you can adjust your product to create an entirely new, untapped market in which you can be first.
So many marketers think that the more they spend on advertising the more market share they'll gain. This simply isn't the case. The only ones who'll get rich are Facebook, Google, and the ad agencies.