Can a market follower make more money than the market leader?

With only about 20 per cent share of the Jamaican telecoms market, FLOW does not appear equipped to challenge Digicel for market leadership any time soon. And, any former monopolist would be offended to be classified as a market nicher. Which leaves FLOW with one strategic option: become a good market follower. But corporate pride aside, is this necessarily a bad place to be? And can a market follower make more money than the market leader? There is precedent. Let’s look at Panasonic and Sony, two giants from Japan.

PANASONIC VS SONY

“An innovator such as Sony bears the huge expense of developing the new product, getting it into distribution, and informing and educating the market. The reward for all this work and risk is normally market leadership. However, other firms can come along, copy or improve on the new products – for example, Panasonic rarely innovates. Rather, it copies Sony’s new products, then sells them at lower prices. Panasonic turns a higher profit than Sony because it did not bear the innovation and education expense.”

– Wilson, Richard M.S.. Strategic Marketing Planning (2009)

Let’s look at last year’s results. In 2016 Panasonic, the market follower, with a complement of 249, 546 had twice the number of staff as Sony, the innovator. Both had revenues of Y7.6 trillion, but Panasonic recorded net profit of Y193 billion compared to Sony’s Y73 billion.

A BUSINESS LESSON

I was flicking through the religious channels one afternoon when I heard the unmistakable voice of Jamaica’s own father Ho Lung on EWTN, the Catholic Television Network. Now that’s a channel I never watch, but it is Father Ho Lung’s voice that I’m hearing! Wonder what’s his topic?

Father Ho Lung concluded his sermon by saying that if you are following Christ you have two options: You can follow from a distance and be hardly like Him, or you can follow closely and be just like Him. So it is in business.

Favourite marketing strategists Wilson and Gilligan speak of three quite distinct postures for market followers, depending on just how closely they emulate the market leader:

1. Following closely, with as similar a marketing mix and market segmentation combination as possible

2. Following at a distance, so that, although there are obvious similarities, there are also areas of differentiation between the two

3. Following selectively, both in product and market terms, so that the likelihood of direct competition is minimised.

HOW MAZDA FOLLOWS TOYOTA

Two of my closest friends know the motor car business better than most, and both of them gave their wives 3-series Mazdas. When I asked them why, the response was the same. They are excellent value, stylish, never break down, and cost less than the Toyota Corolla.

That’s what market followers do. They offer excellent value with pricing noticeably below the market leader.

Eleven years ago we got a crisp Mazda3 purely on the basis of styling and colour. We named it ‘Summer’ for the bright yellow plumage, and have never regretted the purchase. Utterly reliable. And did I mention that it is fun to drive?

Many claim that the Mazda3 is a clear case of following perennial class leader Toyota Corolla, but at a distance, with clear differentiation in some areas such as styling. But does Mazda always follow Toyota, the company that sold the most cars globally last year in every market segment?

This marketer thinks that Mazda, in addition to following at a distance, sometimes competes head to head. In one of the most challenging motor car market segments — the family sedan — by many accounts the Mazda6 is rated second only to the Honda Accord, and ahead of the Toyota Camry. Smart positioning from the 15th largest car manufacturer compared to the market leader!

So, can FLOW reposition itself as a smart market follower and do better than Digicel? Maybe. But first they need to ask themselves, “What type of market follower do we want to be, and what is the power statement that we want our brand to make?”

Next week we will look at strategies for the market challenger.

Herman D Alvaranga is a Fellow of the Chartered Institute of Marketing (FCIM). E-mail hdalvaranga@cssm.edu.jm