Mythology - The Meaning Behind the Marketing

Empowered Marketing Pillar #10: Beware the Low-End Competitor

You're a dominant player in your market. You're making fat margins. Everyone uses your products. Why worry about a pesky little new entrant in your market, one that is charging less but delivering less functionality and value than you are? If you lower your price to match them, you'll just be cannibalizing your own margins, right?

This competitive scenario and its implications is well-documented by one of my favorite business authors and speakers, Clay Christensen of Harvard. His Innovator's Dilemma laid out a framework that makes "disruptive innovation" (as compared to incremental innovation) predictable.

Christensen writes that the dominant player in an industry seems to have little incentive to develop disruptive innovations. Why? Because there is too much internal pressure to be self-protective. Often these disruptive innovations lead to cheaper solutions that fit the marketplace better. Many executives inside the company whose products/services would be cannibalized by the new innovation will fight it, often to the point that it dies on the vine.

Meanwhile, an upstart competitor with nothing to lose has no problem at all chasing the low-end. By offering a product/service that better fits the price range and needs of these low-end customers, they build market share. Soon, that disruption has taken hold and starts to seriously threaten the status quo. Christensen provides many good examples of this, such as the PC's growth at mini-computers expense.

Today, a major case study in the making is occurring right before our eyes. Microsoft, long dominant with PC and server applications, is seeing new Internet-based services ("cloud" services) such as Google Docs, Google Sites and Zoho.com offer a barrage of new "good enough" services. In many cases the services are free, supported by ads and/or fee-based add-on services.

Microsoft execs are certainly aware of the "disruptive innovation" model, and their Live Services strategy - lead by industry legend Ray Ozzie - has been an attempt to begin offering lower-end, often free online services. Unfortunately for Microsoft, their efforts have been clunky and not well accepted by the marketplace in most cases. Ozzie's challenge is to get a very large company back into a startup mentality to focus on their own disruptive innovations.

You may only be a dominant player in a smaller market, even a local one. But beware of competition that seems to be harmless today; it could be the disruptor that changes the playing field in your market.

Microsoft Marketing Goes "Bing!"

I often observe my old company's marketing with a mix of critical eye and hopefulness, all colored by my fourteen years at the company. So I'm obviously enjoying the marketing related to the launch of Bing, Microsoft's latest effort to humble Google.

In many ways this is classic Microsoft: an emphasis on feature-rich improvements over the competition, a major publicity push, and "launch event" stunts like a campy "Bing-a-thon" hosted by Hulu.com and (of course) a Space Needle stunt.

(Some of these launch stunts can go horribly wrong. I still cringe and break into cold sweats at the memory from my days as a young Microsoft marketer in the early Nineties when someone thought that sticking MS execs in a broadway-musical style product launch musical was a smart thing to do. Yikes.)

In terms of raising awareness that there is an actual choice in search engines now, it seems to be working.

Google has always taken pride in not really marketing itself other than by coyly generating buzz about what service it may or may not be launching. In some ways that approach has created significant media and consumer craving for the next cool Google innovation.

Microsoft has rarely, if ever, taken the understated approach to marketing. It has a saturation-style approach that in many ways is "old school." The Bing campaign seems to be an interesting mix of old and new media and tactics.

At least - thank goodness - the central marketing group has taught the Microsoft product groups to consider unique, memorable names vs. "Microsoft Search Engine 3.0". You can take that to the Bing. That's a major breakthrough, although some are disagreeing.

For the good of search engine competition and more options in search marketing, let's hope Microsoft gets some traction this time.