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Are You the Rock or The Hard Place?

Posted October 19, 2012
Posted in Branding, Store Experience, Strategy, The Future

By Doug Stephens

Doc Searls, a contributor to The Cluetrain Manifesto and author of The Intention Economy once said that choosing between wireless carriers is like choosing whom to place yourself under house arrest with.  He’s right. All options are supremely terrible.  All we, as consumers can do in these situations is choose the company we feel will be the least horrid of the bunch and hope for the best.

Like a lot of people, I’ve been continually and utterly frustrated by my wireless company over the years.  The problem is that I hear others complain about their providers just as vehemently – so I end up wondering why bother making the switch.  Coupled with the morally reprehensible fees and other punitive charges these companies invoke for leaving, it truly makes you feel imprisoned.

And there are many, many examples like this in the market.  Cable providers, insurance companies, banks, car rental and real estate companies, and airlines are only some of the categories where differentiation between market alternatives is so dismal or non-existent that consumers reach a point of zombie-fied inertia.  If competitors are  just as awful as your current provider, why switch?  There’s no payoff.  No point.  No difference.

This kind of atrophy in a market is dangerous for two reasons.  First, brands actually lull themselves into believing that this consumer inertia is loyalty – that consumers are sticking with them because they actually want to, which of course isn’t true.  Secondly, this tyranny of mediocrity and sameness leaves markets primed for catastrophic disruption from new entrants, which by the way, wasn’t always the case. In fact, the barriers to entry in many of these markets were once virtually insurmountable.  Here’s why. For at least a century, large companies have managed to thrive by creating enormous scale and they bought that scale with massive amounts of paid advertising.  For those hoping to break into an industry, creating similar scale was nearly impossible, especially if you couldn’t outspend the market players on advertising.  Not so anymore.

“For the first time in history, it’s possible for small companies to earn customers on the same order of scale as large companies can buy customers.”

Now, disruption and new competitors can come from anywhere.  Much of this a consequence of open access to scalable, and affordable technologies and networks.   Today, the task of connecting large groups of consumers doesn’t require the same time, effort or deep pockets. In fact, when a product or service is tuly remarkable, consumers will self-organize around it – no advertisng required.  You see, for the first time in history, it’s possible for small companies to earn customers on the same order of scale as large companies are able to buy customers.  It’s a level playing field.  All you need to bring is a truly unique and valued product or service.

For instance, mobile peer to peer payment network, Dwolla started a couple of years ago with a few staff and now moves more than a half a billion in payments and has credit card companies looking over their shoulders. They’re remarkable because rather than charging a percentage of the transaction value, they charge a flat twenty-five cents regardless of the amount changing hands.

Airbnb is a private home and apartment rental site that is shaking up the hotel industry.  It simply gives people with houses to rent short term and people looking for a place to stay a channel through which to connect.

Getaround is a site that brings car owners and prospective daily renters together  - a model that is disrupting the oligopoly that is the rental car market.

Today, disruption is waiting around every corner, ready to annihilate fat, lazy industries and categories.  It preys on those where competitors seem have a gentleman’s agreement not to outdo or outperform one another but to treat customers with equal apathy.

Going into the new era in consumerism, it’s important to ask yourself two questions and even more important to be honest with yourself when you answer them.

First, how well does your entire industry truly address the needs and preferences of consumers?  Are consumers generally happy with the way the industry as a whole treats them?

The second question is, how differentiated are you within that industry?  Is there anything tangibly unique or remarkable about what you bring to the table over what everyone else offers?

If the answer to both questions is “no”, as my father-in-law says, “Don’t buy any green bananas.  You won’t have time to eat them.”

Look for my book, The Retail Revival: Thriving in a New Age of Consumerism in stores February 15, 2013

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