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In business, as in the animal world, just
about every product category has an Alpha, a company that leads the
pack. Alpha companies enjoy higher profitability, lower competitive
pressure, and more control over future revenues than follower
companies do. Alphas are so influential that almost everyone in
their category looks to them before making decisions of their
own.
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Wes Ball is
founder of The Ball Group, a strategic innovation management
consulting firm. |
What made Starbucks the Alpha of coffee retailers, when there were
already many others with arguably better products? What made
Harley-Davidson the most desired product in the world (even above
diamonds), when its product quality was far lower and its prices
much higher than most of its competitors’ motorcycles? What is the
secret to making products people will pay almost anything
for?
The secret to being an Alpha and dominating one’s product category
lies in: (1) identifying your company’s real Alpha assets — the
things your company offers that drive buyers — and (2) managing
those Alpha assets and making them the focus of all decisions and
performance measurements. Alpha companies help customers believe
their products will provide them with self-satisfaction and
personal significance. Make it possible for customers to feel
smarter, bolder, braver, more influential, more knowledgeable, more
admired, or more fulfilled, and customers will flock to your
product.
Let’s dispel some commonly held myths people have about Alpha
companies.
Myth #1: To dominate the category, your company has to be
biggest. Size — i.e., market share, number of employees,
number of locations — does not equal domination. Often a smaller
competitor in the category is the true Alpha — the company the rest
of the industry tries to keep up with, the one that drives customer
expectations. A good example is Ben & Jerry’s.
Myth #2: Price is the deciding factor for consumers when
they buy. If price were the ultimate driver of buying
decisions, there would be no Mercedes-Benz, Dom Perignon, and
Rolex. Consumers are willing to pay more for something they believe
gives them more. Research shows price is actually the last thing
customers consider before a purchase.
Myth #3: To achieve dominance, you have to be first to
market with an idea. In truth, few of the Alpha companies
today were either the first in their category or the first with the
type of product they currently sell. Victoria’s Secret and
Starbucks are good examples. They were not the first to sell sexy
underwear or coffee — they were just best at marketing those
products so that customers clamored for them.
Myth #4: The Alpha in a category offers the highest quality
product. That would only be true if customers wanted the
best quality. Evidence shows that customers want something else: a
product that satisfies a functional need but also makes them feel
smarter, more attractive, more admired, more significant, etc. A
good example is Harley-Davidson, whose motorcycles are of poorer
quality than Japanese bikes yet dominate in customer loyalty and
price leverage.
Myth #5: To learn how to be an Alpha company, follow the
leader. Every time you follow the leader, you convince
customers in your category that the leader’s product is the one
they should aspire to. To be an Alpha, strategic differentiation is
critical. The real trick is to find unmet, higher-level needs that
you can “own” as things you uniquely address well.
Myth #6: The fewer competitors in your category, the
better. Quite the contrary. Eliminating or attacking
competition is the worst thing you can do if you want to dominate
your category and grow your customer base. Aggressive competitors
drive more consumers to the products in your category, and demand
for those products — yours and theirs — begins to grow
geometrically. Furthermore, when you have competitors imitating
you, customers seek out your Alpha products with even greater
enthusiasm.
Myth #7: Sometimes, Alpha companies just “come out of
nowhere.” Fortunately, once you understand how Alphas
evolve, you can reliably predict who will grow dramatically before
that growth even starts. By comparing all competitors in your
category in the factors that constitute an Alpha, you can readily
see which companies are in the process of creating growth potential
and which are not.
Myth #8: It takes time to acquire a dramatic share of the
market. Most corporate executives find it hard to believe
that dramatic, revolutionary growth can occur for a company in a
short amount of time. Evidence shows, however, that using Alpha
learning can create significant growth usually within a year or
less — even if the company is a top performer already or,
conversely, has been in a prolonged cycle of stagnation or
decline.
About the Author
Wes Ball is founder of The Ball Group, a strategic innovation
management consulting firm, and author of The Alpha Factor: The
Secret to Dominating Competitors and Creating Self-Sustaining
Success (Westlyn Publishing, www.thealphafactor.com).
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