As annoying as haters are, they’re a leading indicator of success, as I’ve written before. So for the market leader, a gaggle of noisy haters should actually be more comforting than disturbing.
But what about for prospective buyers? Is there a reason to tune into a hater’s advertising and buy from the runner-up, rather than the market leader? Is it ever prudent to buy the market leader’s exhaust?
The Power Of Leadership
What do Apple, Microsoft, Google and Salesforce have in common? Each, at different times and in different markets, has shaped an industry in its image.
Intriguingly, however, none of these companies was first to their respective markets. Each was a follower first.
Followers are tempted to try to get ahead of the market leader by denigrating them through negative advertising. But this is the sign of a loser, not a winner, and markets don’t buy from losers. Ultimately, great brands inspire their customers. It’s hard to inspire if most of one’s marketing is directed at shouting down the market leader. Such ‘hating’ is a sign of weakness, not strength.
Hating also leaves the losers with little pricing power. As some academic studies suggest, there’s only one clear reason for buying from a losing brand: Price. As the researchers found, “Marketers of leading brands should not concern themselves about price but merely stress the benefits, whereas marketers of follower brands should make much of the price differential.”
The Microsoft Example
Microsoft ruled the desktop, but it was not first to market with Office (WordPerfect beat it in both time-to-market and product maturity) or with Windows. Instead, Microsoft sold a big vision to consumers and businesses: A computer on every desktop and in every home. This meant Microsoft had to significantly lower the bar to computing, making the experience simpler and more powerful. Microsoft then did the same thing for the enterprise by making exceptional development tools, thereby lowering the bar to IT productivity.
But that was the old Microsoft. Fast forward to 2007 when Microsoft CEO Steve Ballmer ridiculed the Apple and the iPhone:
This was the same Ballmer who said there was “no chance that the iPhone is going to get any significant market share.” The same company went on to attack open source, calling it a “cancer.”
During this negative campaigning against competitors, Microsoft was rapidly losing the battles that mattered the most. The company had become a spiteful follower of the market leader, rather than being the market leader.
It’s not over for Microsoft, of course. Its story on cloud (Windows Azure) is much more positive and thoughtful than its broadsides against open source and Apple, so there is a chance to lead the market once again. But that’s because people want to buy from the leader, not the loudmouthed, hateful follower.
Network Effects Of Leadership
There is far more value in following leaders than in subsisting on the leftovers of their competitors. For one thing, there are significant network effects that derive from joining the dominant ecosystem. Even though plenty of users seem to prefer Macs, for decades virtually all of the best third-party software was written for Windows. The same holds true today for Salesforce: It has a massive, growing ecosystem built up around it, something that its competitors simply can’t match.
This same effect spills over into talent. One of the hardest things in business is to hire exceptional people. This is made dramatically harder if the talent pool is smaller. Is it worth buying into an obscure but noisy losing company if their talent pool is also anemic? No way.
It’s A Vision Thing
Followers are forced to be parasites on the market leader’s direction. That’s what happens when one company has a dominant vision.
In open source, the leaders are those that contribute most to a project, and can therefore influence projects to go in directions favorable to them or their communities. This is something we’re seeing in the Hadoop community right now: The market leaders are those that are also the code leaders. Those who buy from losers never get to benefit from the market leader’s innovation.
It’s far better to buy into Apple’s “insanely great” products and vision than a cheaper facsimile—same goes for buying into Salesforce’s vision of a world without (installed, cumbersome) software, or Google’s mind-bendingly cool data-driven universe. These are leaders. They’re worth buying from. Their haters? Not so much.
Image courtesy of Shutterstock.