Products and services in all markets almost universally, sooner or later, reach a market penetration plateau. Once this limit is reached, there are only a few options when it comes to gaining market share: slow incremental growth at a significant cost; the acquisition of competing brands; and, the creation of new brands/services that compete with your existing brands.
The last approach isn’t easy and it’s as risky as all new product development projects, but it has some distinct advantages. Creating new brands and services can substantially change market share over the medium term. It crowds other players out of your market, limiting competitors’ ability to increase their market penetration. It doesn’t run afoul of antitrust laws the way a merger might. It even has a built-in element of insurance to it that makes it an important hedge against the future, especially in fast-changing markets.
In India one master of the technique is the Taj Hotel chain, which has multiple brands across a wide range of lodging price points. This way the company gets a larger piece of the lodging industry pie and they can cross-sell services by, for instance, enabling customers to hold a wedding in a high-end facility while the guests sleep at an affiliated mid- or lower-range hotel. The company is very careful not to “blur” the brands in any way that would devalue their premium brand, but it counts on a positive “reflected glow” from the premium brands on the lower-end brands.
Can this model be used for B2B service firms? Well, Information Evolution reached a point a couple of years ago when we noticed that a particular marketplace development – crowdsourcing – had the potential to be massively disruptive to our core business. Rather than running from the phenomenon, we embraced the new tool and incorporated it into our product offerings. We soon found that crowdsourcing was something that many of our customers and prospects were exploring as an alternative to our data maintenance services, but they were having trouble realizing the promised cost-savings. By finding a way to help our customers integrate crowdsourcing (via our “managed crowdsourcing” practice–more about that in our white paper on one of our early attempts at data appending) into their core data processes we were able to decrease project turnaround times dramatically and at the same time as we reinforced our customer’s perception that IEI was always reinventing its mix of services to ensure we were always the best, fastest, cheapest way to create, maintain, and append data, even when compared to in-house project management.
Can you apply creative destruction to your information service’s business model, too? Well, everybody knows that users would prefer to find information themselves online rather than pay for a premium data service. The barriers that drive marginal subscribers to your service are speed (free isn’t free anymore if it takes too much time) and confidence (can the user really be sure the data found on that site is accurate?). So, the inclusion of a kind of free search that is better than a general web search (say an aggregation of industry-specific RSS feeds) that gets the user the answer they desire most of the time, but takes 5x as long as your service and has a lower confidence factor might be just the kind of “creative destruction” model that would appear to cannibalize revenues, but actually increases traffic on your site and leads to increased subscriptions over time.
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