Why Being a Market Leader Is Necessary.
Times of economic uncertainty test one thing above all else: the viability of a business. Businesses with strong, core offerings and who are positioned as market leaders thrive and expand.
Author: Frank Wazeter, Nov. 2, 2020
Times of economic uncertainty test one thing above all else: the viability of a business. Businesses with strong, core offerings and who are positioned as market leaders thrive and expand. Businesses who are not market leaders end up suffering the brunt of the brutal truth of the market.
Regrettably, that truth often means going out of business. The recent effects of COVID have already forced 100,000 businesses to close their doors. Yelp has reported that 163,000 businesses have shut down listings completely. CNBC goes further and states that 7.5 million businesses are at risk of closing down completely.
This isn’t the first time this has happened either - the Great Recession claimed more than 200,000 small businesses.
Reality here is twofold: 1) times of economic recession are guaranteed and 2) market leaders, whether local or national based, hold the vast majority of the market share - the sales and customers.
So here’s what happens: during good times, new businesses form or established businesses reach a comfortable stability. Meanwhile, one or two companies in the market are innovating - whether it be through superior products or services, marketing, better customer experiences or a superior structure to manage their business.
Inevitably, those few companies become market leaders - capturing the lion share of sales and customers. These companies don’t require intensive market research to identify - as a business owner, if you’re constantly being compared to one or two other companies, chances are, that’s your market leader and you’re the market follower. They’re the ones you constantly keep your eye on and seemingly keep moving forward and doing new things.
Then, one day, something out of control happens: a pandemic breaks out, the real estate market crashes, a terrorist attack occurs or a bubble (like the dot com bubble) bursts wide open (and these are just examples from the last 20 years).
This negative effect causes a recession, the recession causes customers to start tightening their wallets. Customers tightening their wallets means less sales.
Less sales means that the market followers, the companies not in a leadership position, lose a disproportionately higher amount of customers, while the market leaders retain most of their market share.
That means that the business that goes out of business is the followers. Because the followers are now shutting down, the leaders gain even more market share as the economy comes roaring back and the cycle repeats itself.
In the COVID related recession, the industry hit hardest has been, by a large margin, restaurants. Bad enough that the average restaurant tends to be about a month away from going out of business anyway: the industry is notorious for operating on slim margins and cash flow management isn’t typically the forte of your average restaurant owner.
So of course if you put a 2-3 month complete halt on revenue, the average restaurant is going to simply tank.
Yet, at the same time, home food deliveries were at an all time high. Had most of those restaurants simply changed their websites (or had one to begin with) to enable home delivery and converted waiters and waitresses to delivery drivers - they’d have saved themselves from the worst: going out of business. It may not have been totally profitable, but it’d have opened up a pathway for keeping the doors open and gaining crucial customer long term loyalty.
Plus, a simple button to ‘call to order’ on their website would have eliminated 100% reliance on services like Grubhub or UberEats - which cost the restaurant 15-30% on average in commissions for the total meal. With margins slim already, a 15-30% hit doesn’t exactly work well with most local restaurants.
Then, to make matters worse, when restaurants could open their doors again, I distinctly remember going out with friends looking for a restaurant to eat one Friday night at 8:00 PM. Most were closed except fast food and chinese restaurants. Seems McDonald’s and Seven Star China Cafe were the only business owners serious about growing in a downturn.
We ended up going to Arby’s for the first time in over 15 years. We’d have much preferred to go to any of the other 10 restaurants that looked good in the area, but they were closed at 7 PM. On a Friday.
Meanwhile, take a restaurant chain like Chipotle - whose become the clear market leader in the space precisely because they kept open as much as possible, enabled online ordering on their website and supplemented with services like Grubhub (but did not solely rely on them).
Chipotle didn’t experience literal record breaking growth because they came up with some new amazing menu - they became the clear market leader because they innovated in how to deliver their product to customers who were hungry for just about anything.
Chipotle literally took the lion share of customers because while everyone else was reliant on third party services (Grubhub, UberEats) they had their own internal solution: it was called a notification saying ‘we now deliver’ on their website and a button so someone could call them (and a more sophisticated implementation of putting the order in online).
While their competition was closed for the day, they stayed open.
Now, Chipotle is all time sales records while 100,000 restaurants go out of business: talk about “A Tale of Two Cities.”
Chipotle’s not the only one: savvy local restaurant owners have been and continue to be able to weather the storm following the same principles. In this case, the innovation being simple: make the product (food) available to customers who want it so they can buy it.
No complicated marketing, no complicated product innovation, no revolutionary new things.
Simple tweaks to their business model and good leadership from the owners is all it took.
Those are the foundational hallmarks of businesses who are market leaders.
What’s scarier to think is that a fix to ‘make the business work’ in this case would often cost a business less than $500 to implement.
But it wasn’t just that it was a $500 or less fix to make the business work, it was a way of thinking that market followers simply don’t possess. Most of the time a follower is thinking about everything that is going wrong and how unfair things are rather than thinking through new solutions - even if those solutions are uncomfortable to them.
Conclusion and Key Takeaways
The most bulletproof way to keep growing as a business is to become a market leader. Becoming a market leader starts with thinking in a different direction than other competitors.
Here are a few ways to think more innovatively:
1 Embrace Technology
Technology isn’t going away - and as COVID has proved, those companies who were prepared and comfortable with, or could adapt to, operating on the internet were the ones who were able to serve customers looking to buy - and thus becoming local and national market leaders.
Most often, in a small business context, this means taking your website more seriously as an asset, rather than using it like a business card.
2 Use What Works In Other Industries and Incorporate It Into Yours
Most of the time ‘genius’ innovation in any given industry doesn’t come from new ideas - they come from implementing strategies, tactics and structures from other industries and applying it to their own and adapting it to their needs.
For example, one of our clients in the home service industry (contracting, remodeling, etc) dealt with the same issue that most home contractors deal with: homeowners wanting to know status updates on their project.
We took the core idea from Domino's Pizza Tracker (to let customers know where their pizza is) and incorporated it into the home service industry so that a customer at work could check in on the progress of their project and not worry about what’s going on at home.
3 Listen To Your Customers
A lot of the time, as business owners, we get stuck in our ways about the way things work and it’s “just the way that it is.” Oftentimes you can find innovation by listening to where your customers get frustrated and improving that process.
It could be during the introduction - maybe it’s setting proper expectations or having documentation that lays out what they’re going to get. Maybe that’s adjusting your language to have less jargon during the sales pitch. Maybe it’s offering an additional service as an add on that complements your main product or service.
You can find out a lot more about your process and how to improve, not by looking at the great reviews you or your competitors have, but by looking at the negative comments. These are usually treasure troves of useful information to make your core offering even better.