By: Richard Peters
Much of my business career has focused on getting under performing organizations
and their business units on a faster growth track. In these situations, an essential
piece of homework has been understanding the competitive playing field. Over
the years and based on exposure to a wide variety of industries, businesses and
products I have found there are few basic questions that when asked of a
management team can be very enlightening regarding the identification of competitive
issues, challenges and problems. Chief among these questions is “who owns the
client?”
This is not an uncommon question. We have all asked it in one form or another.
When I ask it, the discussion I am looking to stimulate centers around identifying
which supplier(s) the client values as a partner rather than a supplier. In
other words, from the client’s perspective, which competitor or competitors
position themselves as the client’s preferred call when they need something. The
company that owns this place with the client has a significant competitive advantage.
CASE STUDY – OWNING THE CLIENT
A few years ago, I was responsible for Trader Quebec which was a major
North American subsidiary of Trader Classified Media, a European based
multi-national media organization. Trader’s primary business was publishing classified
ads for used vehicles as well as boats, motorcycles etc. in a variety of print
and online media. Trader was the market leader in Canada with well over 150
magazines and dozens of websites. In Quebec alone, we produced over 50 titles
and operated 6 or 7 sites. As the market leader in Quebec, Trader enjoyed an
85% market share.
Competition in the classified advertising industry was intense. Trader
was competing against all major Canadian newspapers as well as dozens of
independent magazines, newspapers and websites. A key market for this business
was car dealers. In the case of dealerships, the selling process involved sales
reps from Trader and its competitors visiting car dealerships and with the assistance
of the dealership staff identifying vehicles to be advertised. The reps would
then photograph the target vehicles and get the relevant details on these
vehicles from the dealers. The photos and vehicle data would then be posted or
advertised using classified advertising websites, magazines and newspapers. Classified
advertising publications were published weekly and sold through thousands of
retail outlets (e.g. grocery stores, corner stores, car parts dealers etc.)
across Canada. In Quebec alone we distributed our publications through
approximately 3,000 locations.
Trader and its competitors followed the same model for gathering
classified ads from dealers. In any given week, some dealerships, especially those
located in or near major metropolitan centers could be visited by numerous sales
reps representing multiple media organizations. As long as a competitor could
convince a dealer that they had the ability to provide the dealers with access
to potential car buyers that the dealer would otherwise miss, the dealer was
willing to spend money with them. Despite Trader holding a significant market
share advantage (e.g. In Quebec we estimated that we had 85% of the used car
advertising market) competitors were successful in taking ad dollars from us.
Dealers could be required to commit quite a bit of time to managing visits
made by numerous sales reps weekly. While no individual competitor was a
significant threat to Trader in terms of sales volume or market share, the
extent of competitive activity caused problems and challenges in a number of other
ways:
- Dealers’ were showing signs of sales call fatigue.
- Pricing wars, that always develop when the competitive field becomes over populated with new players, were eroding margins.
Increasingly we saw our competitive advantage being threatened. In
addition to eroding margins, this competitive climate was also driving up our
cost of doing business. In proactive and reactive modes we were constantly required
to differentiate our offerings by introducing online and print product
innovations. Despite these challenges, an even greater concern was our
relationship with the dealers. Customer service was a pillar of our marketing
and brand strategies. Erosion of this pillar was being threatened by the
relationships being established by competitors.
The Trader organization decided to convene a North American Task Force
to investigate the situation and to make recommendations regarding what action
could be taken to mitigate the threats. I was asked to head the task force
which comprised representatives from Trader’s North American Head Office and
all seven of Trader’s North American regional operations.
After several months of study and research, the Task Force submitted the
following recommendation for Trader’s first North American wide online integrated
program comprising its 7 regions.
Recommendation:
Trader must put in place a barrier that would ideally eliminate and
definitely minimize the opportunity for competitors to develop and cultivate
client relationships. Accomplishing this would require Trader taking control of
client relationships.
Action Plans:
A. Trader needed to introduce a new service to Canadian dealers that would motivate the dealers to empower Trader to assume responsibility for their classified advertising programs. This plan comprised:
A. Trader needed to introduce a new service to Canadian dealers that would motivate the dealers to empower Trader to assume responsibility for their classified advertising programs. This plan comprised:
- Trader providing inventory management services to the dealers. Under this plan, Trader would maintain, for each dealer, the photos and records for their entire used vehicle inventory.
- Trader would become the dealers’ sole provider of photos and data to whomever the dealer authorized access. If a dealer wished to advertise any of their inventory using a competitors magazine, newspaper or website, Trader would be notified and would provide the photos and related data to the competitor.
Outcome:
The strategy was implemented and was successful. It weakened the competitors’
ability to secure and nurture client relationships and it strengthened Trader’s
ability. In its first year approximately 2,000 car dealers across Canada signed
up for the program. In Quebec alone, we signed almost 800 dealers in the first
6 months. The strategy’s success was also contingent on the cooperation of competitive
media organizations and while there was resistance, the dealers liked the
program and their pressure on the other media organizations to cooperate went a
long way to ensuring the strategy’s success.
Pre-existing Client
Relationship Environment
Trader Media
Competitor A
Competitor B Dealerships
Competitor C
Competitor D
New Client Relationship Environment
Competitor A
Competitor B
Trader Media Dealerships
Competitor C
Competitor D
Anatomy of a Turnaround
Ancillary Business Opportunities
Achieve and Maintain Competitive Advantage
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