If you are the market leader, everyone else wants your market share so everyone is your enemy. Your job is to ruthlessly defend your territory. If your enemies are smart, they won’t attack head-on. Instead, they will choose areas of weakness where you haven’t defended yourself and exploit them to their own advantage. Little by little, they will swipe your customers, take your share, disrupt your markets, and watch in amusement as your resources are scattered fighting little distractions here and there. That’s what attackers do.
Now since this post is about market leadership, it’s only fitting that we should start with the basics. Before we talk about what a leader has to do, let’s cover off why market leadership is such a big deal to begin with. After all, if you don’t understand the value of the market leadership position, you won’t appreciate why it’s so important to fight to keep it.
WHY MARKET LEADERSHIP IS IMPORTANT.
The reason market leadership is important is not the revenue (although that is obviously very important). It isn’t the status of being the leader either (although it does help build an ego). The reason that leadership is important is because most customers prefer to buy from leaders. Of course, you’ll always get the fringe-dwellers that as some form of protest support the underdog but, on the whole, most customers prefer to deal with leaders.
So customers create market leaders. They perceive leaders to be better (otherwise why would they be leaders?) and they perceive leaders to be a safer purchase. People are like sheep. If the majority votes you the best, the majority must be right. So they buy from where everyone else buys, thus strengthening the leader’s position.
It is hard for a challenger brand to dislodge a market leader if the leader is actively defending territory. Time and resources have to be deployed to attack over a sustained period of time. Not all challengers are in the position to attack for long periods of time since it takes a significant amount of resources to be able to relentlessly pursue a leader. (It’s fun though.)
But leaders are not invincible. Some get arrogant and complacent, a bit too big for their boots. They get distracted by internal issues like changes to senior management, or fall victim to regulatory interference, and this offers challengers a timely opportunity to strike. Market leaders do slip to challenger position (and it’s a bit of a bumpy ride downwards). If that happens to you, you’ll have to switch strategies to become an attacker yourself.
ADVANTAGES ON THE SIDE OF THE MARKET LEADER.
Amongst the armory enjoyed by the leader are:
Greater resources to apply in defending a market territory.
Often leaders can outgun competitors on all fronts – outspending them in advertising, having bigger and more comprehensive distribution channels, enjoying higher brand profile, and more.
Time to defend.
Since no-one listens to advertising anymore, a challenger’s message can get lost. This gives the leader time to respond. A leader usually hears competitive messages before most of the market does and simply outspends the challenger.
Distribution Channels favor the Market Leader.
Shelf space is a valuable commodity, and the best positions favour the product that sells in the greatest volume. In other words, it favors the market leader. The same is true for distributors and third-party agents that need volume sales to earn commission.
Brand profile favors the Market Leader.
More people buy “known” brands than “unknown” ones since positive branding instills a perception of trust. Brand profile is important since it is the mechanism used by marketers to facilitate the selling process, and the mechanism used by consumers to reduce their purchase risk.
Creation of barriers to market entry favor the Market Leader.
There are numerous ways in which a Market Leader can make it hard for competitors, ranging from the use of legal instruments such as patent protection (common in the pharmaceutical and information technology industries) through creation of market barriers such as exclusive distribution contracts, exclusive supply contracts, restricted access to essential channels, market or government monopoly status or removal of experienced staff from the market.
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