Four ways to beat the best when you’re a market latecomer
There’s no denying the first-mover advantage. Everyone wants to be top of mind, to be the brand that’s synonymous with a certain product or industry.
But sometimes, you just don’t move quickly enough and someone’s already there, setting up residence in the same niche you hoped to fill. They’ve even been there long enough to build up a very solid and imposing looking mansion. So what happens when you’ve lost that first mover advantage and are forced to play catch-up?
For latecomers looking for a roadmap to SA success, you may want to start looking at Capitec. Not even two decades old, the bank has proven itself a worthy challenger to the big four. Banking research group Lafferty recently named it as the best bank in the world, and it attracts significant customer growth every month. Currently, Capitec Bank has 17.5% of the market share and is projected to become the third-largest bank in the country by the end of 2017.
It’s David vs Goliath at its most poetic, but just what is in Capitec’s sling that has seen it achieve so much success in such difficult banking conditions? It comes down to a potent mix of creativity, simplicity and price. Since its early days, the bank has focused on rolling out simple, transparent products that the average South African could understand and afford. It’s never skimped on the basics of competitiveness — great service and delivering on promises.
Yes, latecomers to any market may have to overcome a resource and recognition gap. However, there are also a few inbuilt competitive advantages that they can push. Here’s how they can turn a late entrance into a fashionable one:
Keep your finger on the trigger
Market challengers hold a distinct advantage compared to more established brands — they are agile enough that they can latch onto the triggers of innovation more quickly. Without the weight of legacy weighing them down, they have more freedom to experiment — with their products, their models, even with the exact moment they choose to enter the market.
Ignore these innovation triggers at your peril. Just take an old, not-quite-forgotten friend — the Nokia feature phone. In 2007, Nokia ruled the cellphone market with an almost 50% market share. That is until Apple came along. Though smartphones were still some way off, Apple packaged existing features together in a fresh new product, and with some savvy marketing, they had already helped reduce Nokia’s market share to 35% by the time feature phones began to be replaced by smartphones.
It’s not just about the innovation triggers — if you are missing a key competitive market product, could you develop a “me too” product like the disruptors and what would it take to deliver it? Can you consider a scenario in which you could deliver this “me too” product cheaper or with a better quality to make you relevant in a space that you aren’t currently?
Your customers are your biggest innovation allies
One of the most frequent questions I get is: “How do I spot innovation triggers? How can I pinpoint tipping points?” My response tends to be along the lines of: “I’m not the one to ask. Your customers are.”
That’s exactly what Capitec does, which means it’s able to respond to changing customer needs. “We’re analysing every time a client comes into the branch,” says the bank’s CEO, Gerrie Fourie. “We measure him from the moment he steps in until he sits down in front of a consultant and then if any screen switches, we measure that.”
This is why investing in customer experience data collection and processing strategies is crucial for any market challenger. Read the data right, and you can spot the chinks in a seemingly locked up market.
Relevance trumps perfection
Okay, so now you’ve thoroughly researched your audience, milked every drop of insight from the data, and know all of your customers’ pain-points. The next step is trying to meet each and every one of those needs, right?
Not so fast. In today’s rapidly shifting digital economy, no company can afford to wait until it has a 100% perfect product to enter the marketplace. Nor can you develop that hypothetical perfect product without going live.
This is where rapid, iterative testing comes in — constantly rolling out new features and testing these out in structured environments. If they’re not all immediately successful, so what? As long as you’re failing upwards, there’s nothing wrong with not quite getting it right the first time.
Capitec made sure its products were relevant to a largely underserved market, by constantly testing out new features and services — banking at the till and feature phone banking, for example. This rapid experimentation has allowed it to offer services that matter to its customers ahead of its slower competitors.
Kill your darlings
What happens if you test your product against what the market wants and it simply fails to stick? If it’s a question of user-centricity, it might be time to cut your losses and drop it completely. If a rival product is delivering a radically better user experience, your customers aren’t going to stick around to see whether yours can match it.
Let’s look at Nokia again and one of the products that considerably limited their ability to innovate and keep up with Apple and Android. We are talking about the ill-fated OS, Symbian. Established formally in 1998, Symbian was the world’s top selling OS until 2010. Though iOS and Android were on the rise, and even despite critics’ assertions that Symbian was overly complicated (the unfriendly code structure was said to significantly increase the production time of phones running it), Nokia still refused to cut their losses and failed to discontinue Symbian until it was too late.
By the time Nokia was ready to remove Symbian from the market in 2011, its new-age competitors had a strangle-hold on the market, and the decision taken by Nokia to get into bed with Microsoft and their OS was the proverbial final nail in the coffin.
The lesson is obvious: if a product is simply not working with your customers, you shouldn’t be afraid to kill it — legacy or not. The good news for latecomers to any new market is that they don’t feel these pressures to hang on to irrelevant products.
Have you ever had to start from scratch in an established market? How have you evened the odds? And what companies do you believe are the Capitec’s of tomorrow, about to turn a set industry on its head?