Changing the Way the World Thinks about Strategy
Digital Competition

Digital Competition

So many industries face upheaval because of new technology right now that it’s probably easier to list those that aren’t.  Technology is changing our worlds in many ways, but I’d like to examine one that affects everyone:  market access.  This is simply the ability for you to connect with customers, and vice versa.

Historically, industries have used various methods of reaching out to customers, from door-to-door sales to direct mail marketing.

Here are just a few.

  • Door to door selling
  • Brick and mortar shops
  • Distribution to retail in brick and mortar shops
  • Telephone sales
  • Specialized industrial exhibitions
  • Direct mail marketing
  • Brokering

Digital marketing increased competitive pressure for many companies.

In the past 20 years, many of these approaches got easier because digital technology helped us do some of the work.  However, once that happened, many of us saw market access get harder.  There are several reasons for this.

1. Easier market access lowered barriers to entry for digital competition.

It no longer takes a fully staffed office to get into many businesses.  Similarly, if you are an overseas company, you can get into a new market with a single representative handling it.  Some markets have seen an explosion of mom and pop and single person operations.  This creates confusion for the customers, since it’s harder to pick from 100 options than from 4.  It also tends to commoditize the market, as low-overhead entries don’t have the expenses of larger, established players.

2. Easier market access allowed commodity players to gain even greater economies of scale.

Data is perhaps the greatest economy of scale you can have.  Having useful insights is naturally worth more as your sales increase.  Additionally, formerly expensive “big data” analysis becomes accessible at a smaller scale.  It is easily in the reach of a rapidly growing, low-overhead organization.  Commodity players are usually the largest companies in their markets. Therefore, they know more about all customers, and are seen more by customers.

3. Alternative market access, such as online stores, became competitive.

Not only do we see more businesses with fully functional retail operations and shopping carts, but companies like Amazon, EBay and Etsy offer streamlined entry for people to shift to online sales.  In some industries – especially traditional retail markets with lower turnover and foot traffic – the online store or a hybrid has nearly replaced the brick and mortar shop.

4. Alternative marketing, such as search engine optimization, search engine paid ads, banners and email marketing became profitable for digital competition.

Having learned about, and focused on, non-digital marketing was a profitable tool for many industries.  The advent of digital marketing made competitors better able to access markets cheaply, and better able to target individual customers’ preferences.

5. Data analysis allowed even more specific targeting of segments of the market.

By making the data acquisition and number-crunching that is the heart of good marketing more accessible, new approaches to data analysis combined with online retail allows businesses to have even greater focus on specific customer groups.  For example, cat fanciers have several online options now, even though a brick-and-mortar cat-only store would only make sense in the largest cities.

6. Data availability removed the asymmetry of information that made some approaches profitable.

In some industries, certain players made money because they were the only ones who knew who all the customers were.  Today, there are very few places where you can make money this way, as a quick internet search will turn up all kinds of information.  In addition, your customers may also be able to figure out who your suppliers or competitors are, which can cause another set of problems.

7. Quantification of some customer preferences (especially price) made relationships seem less valuable.

The poster child for this phenomenon is the travel industry.  While some people are truly frequent travelers, others may travel once a year or less.  Those who travel less frequently (a sizable chunk of the market) often care more about price than their relationship with a specific airline, hotel or restaurant.  A quick search on a travel website will give you the lowest prices available in many markets.  This behavior is certainly behind the rise of discount airlines (such as Southwest Airlines), and makes competition more difficult for traditional airlines.

In our next article on digital competition, we’ll examine the key factors you can use to handle these issues – if you are a traditional company.

If you’re already fully digital, we’ll examine the places where you might see competitive pressure from traditional players.

Are you struggling with the changes in market access?  If you’re like most people, you’d benefit from having an experienced professional lead you through the strategic planning process, so you can focus on the content of your strategies.  If you’d like to explore how you could do this, please contact me at rbradford@cssp.com. Center for Simplified Strategic Planning professionals have successfully conducted thousands of strategic planning meetings, and have a great understanding of how to best use your planning time.  Consider holding a one-day workshop on Simplified Strategic Planning in the next few months to improve your results.

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Robert Bradford is President & CEO of the Center for Simplified Strategic Planning, Inc.  He can be reached at rbradford@cssp.com.

Dana Baldwin is Senior Strategist with the Center for Simplified Strategic Planning, Inc.  He can be reached by email at baldwin@cssp.com.

© Copyright 2019 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission

Co-Author Robert Bradford

Co-Author Robert Bradford

Co-Author Dana Baldwin

Co-Author Dana Baldwin

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