The Competition Paradox
Two shoe salesmen from Victorian England travel to the colonies to assess the business opportunity for shoes. The first dispatches his analysis back to headquarters: “This is a terrible market – no one wears shoes!” While the second counters: “This is an excellent market – no one wears shoes!”
This simple parable offers two valid yet opposing perspectives on competition. On one hand, the market’s needs appear to be met, with people seemingly content to go about their day shoeless. On the other, the market is ripe for both the introduction of and education about the wondrous innovation of foot protection and support. Is the glass half empty or half full? Depending on your perspective, the unshod throngs might represent a lack of demand, or a lack of competition. From my experience as an entrepreneur, a successful disruptive business must engage with both of these perspectives to encourage product adoption.
My business is ketchup. Namely, Sir Kensington’s gourmet ketchup, an all-natural, premium alternative to the ubiquitous condiment most Americans grew up with. The interesting thing about ketchup is that the nation’s leading brand (ahem, no need to name names here) has about a 75% market share – an unusually high percentage in the consumer goods space. This makes their brand name, flavor profile and bottle shape practically synonymous with the category. They control one of the last remaining American monopolies, and create a product that most of their competitors attempt to emulate in taste, texture, and package, leaving price as the only other competitive tool left to leverage.
Ketchup that was strikingly “different” or “premium” was not widely available when Sir Kensington’s entered the market in 2010. A number of small-time companies had tried to introduce new varieties of ketchup, as documented by Malcom Gladwell’s 2004 article in The New Yorker, “The Ketchup Conundrum,” but none of them caught on. So why would we dream of getting into the business of selling gourmet ketchup when there was no apparent market for gourmet ketchup?
Perspective I: “It’s Brilliant Because Nobody Wears Shoes Yet”
The opportunity we saw in gourmet ketchup was intrinsic to the US market’s homogenous structure. Because there was no real variety of offering, our strategy to stand out from the pack was to be dramatically and deliberately different. Our competition packages in plastic, so we chose glass; their product is squirted, ours is “scooped”; they practically define Americana, we opted for a British panache. The goal was to turn ketchup as we know it on its head, and create a product that exemplified everything that the market leader was not. Thus, we transformed the everyday high-sugar, high-salt condiment into an upscale, beautifully-designed, healthy and all-natural alternative, in the hopes of addressing unmet needs of the customer seeking a higher-quality, healthier ketchup option. After all, why should the Four Seasons serve the same ketchup as the local Drive-Thru? Why should savvy modern moms feed their children high-fructose corn syrup laden goo?
Our strategy to enter the market began with selling in upscale specialty stores that previously had no ketchup on offer, such as Williams-Sonoma and Sur La Table. Gaining this niche market segued our product into supermarkets, where the lion’s share of consumer ketchup purchases are made. Our refined packaging has also been key in offering value to restaurants, a type of business that attracts customers by offering high quality food and a memorable experience. And our healthier formulation, with half the sugar and half the salt of the market leader has made the condiment appealing to parents.
In short, we made it clear to customers which attributes we were competing on, and which we were not. What we have found effective is to not compete on the things that the market leader is so incredibly strong in: familiar sweet taste and low prices, and instead compete in areas they don’t serve by offering a healthier, beautifully-designed product, and exceptional customer service for chefs. This strategy allowed us to employ very limited resources to win over customers with specific needs that were being overlooked by the competition.
Another example of a homogenous market that has gaps in consumer needs is the air travel industry in America. After a series of mergers, the remaining four major airlines are left to compete doggedly with each other, focusing on fares, routes, and rewards. And customers hate it. Flying has become cheap and convenient, but the customer experience is so poor, American aviation has become the butt of endless jokes. Enter Virgin America. They don’t have the cheapest fares, or the best mileage program, but their focus on customer experience got people excited about flying again. With sleek, sophisticated interiors, a convivial brand voice, and integrated technology, customers feel smart, stylish, and comfortable in what feels like a new class of domestic travel. By knowing the customer’s pain points and competing by solving them directly, Virgin created an offering that the big airlines would have never developed. Had they been studying the offerings of their competitors and delivering on those offerings 10% better, Virgin America would have just been another boring airline.
“Perspective 2: It’ll Never Work Because Nobody There Wears Shoes.”
Alas, if only it was as simple as competing on a few new attributes. We don’t all have Richard Branson’s cool factor, and even with year-upon-year of excellent customer ratings, Virgin America isn’t yet a cash cow. Deeply engrained consumer habits and higher price points slow the rate of adoption. And the hard fact is, people are slow to change.
To gain customers a business must not only fill an unmet market need, but also educate the consumer on what makes their product better than the competition. But what if the consumer doesn’t even know they have a need? What if your product is so innovative that the “competition” is a lack of consumer demand and awareness?
What we’ve found key to engendering change in a market is to reach the early adopters. These are the key customers who are most excited to try new things, and – crucially – have the attention of a larger customer group which looks to them for recommendations. The shoe salesmen in our parable might adopt this strategy by first selling shoes to those who would benefit the most from them, say a herder who walks miles each day, and who might tout their utility to the average consumer who was previously satisfied walking barefoot.
For Sir Kensington’s ketchup, focusing first on early adopters has allowed us to create a tribe of loyal followers among epicureans. Winning over the toughest critics first – food-savvy New Yorkers, restaurant chefs, and discerning journalists – has earned our product a proverbial seal of approval that everyday supermarket consumers trust.
The list of businesses which have implemented this early adopter strategy to command market presence is endless. For example, Monocle magazine offers highbrow content to the wealthy taste-maker, thereby attracting best-in-class advertisers. By focusing on content that appeals to the early adopter set, Monocle is able to command high ad rates from companies looking to target this elusive and influential group. Vita Coco, a coconut water company, began selling in non-traditional retail spaces such as yoga studios to align themselves with health and benefit from existing communities who were proven early adopters in the wellness space. For emerging consumer brands with limited resources to spend on advertising and a product that may not be readily adoptable by the mainstream market, a winning strategy can be to target the early adopters first. Using them as an entry-point helps the brand ultimately reach the larger, more average consumer base necessary for establishing a sizable consumer brand.
Markets that can be described by both an apparent lack of demand and lack of competition are attractive. A white space exists where there is a set of deeply entrenched players creating nearly identical products, alongside a glaring lack of anything fresh or different. It may go against common wisdom to develop products in a category that doesn’t exist and face educating customers from square one. But at the end of the day, I’d rather sell shoes to the shoeless than dismiss them as happily barefoot.
Malcolm Gladwell: The Ketchup Conundrum
A 2004 piece from the New Yorker exploring the homogeneousness of the ketchup world.
Seth Godin: The Purple Cow
Book on cultivating early adopters.