Friday, March 16, 2007

The Benefits of Direct Competition

A new competitor for Tenuki emerged last night. From totally off the radar. With a service that is very close to ours. And they're ahead of us. Aargh.

You might say "wow, that sucks for you." Well, yes and no.

Yes, it does suck, mainly because they have a lead on us, and if they executed perfectly, they could tie up a significant portion of the market. But no one executes perfectly.

No, it's kinda great. It does the following things:

  • it validates our idea to investors.
  • it forces us to focus harder
  • it makes marketing cheaper
That last point needs a bit of explanation. The first step of marketing is to educate the consumer that they have a need. When you're launching a novel service, it's usually the case that the consumer doesn't realize that they need that service. For example, did millions of Americans realize they "needed" to send text messages? Of course not. No one was rioting in the streets for the ability to text. However, imagine if you took away that ability now. I'm pretty sure the White House would be torched.

Right now, people don't realize they need what Tenuki and our competitors are offering. Which means we need to spend money to educate them about their need. Sounds cynical, right - educating the consumer that they have a need. Probably why marketing has a bad name.

The early entrants to a market have to spend a larger amount of money on consumer education. In fact, this is usually the most expensive phase of marketing plan. These kind souls pave the way for later entrants who can spend all their money advertising the qualities that make them superior to their competitors, knowing that the consumer is already aware of the type of service that they provide.

So to our competitors: thanks for taking one for the team.

And on the PR front, journalists much rather write about two competitors slugging it out in an interesting new space, then about a company dominating its space. By the way, if you ever want some ink, just create a bitter rivalry - it worked great for Tupac and Biggie...oh, well, um, it worked great for P. Diddy and Suge Knight (the guys who owned the record labels).

I could talk about marketing strategy all day, but unfortunately the homeless guy sitting behind me at Starbucks has decided that somebody has screwed him over and that someone needs to pay. Time for Bret to go.