Despite everybody knows that Marketing is essentially the way of understanding the Consumer and workout all the process within the Company to create the appropriate offer to be supplied to this Customer, very often traditional Organizations take the risk of not acting as such. On top of this misconduct, Companies tend to forget that competitors are alive and ready to gain some share of consumers’ pocket. With these 2 typical business risky behaviours, Companies put themselves in danger and exposed to the risks of the free market nasty effects.
Let’s analyse 3 well known situations of (big) Companies that, for the sake of maximizing profits without paying attention to the Consumers’ needs, neglected the effects of the competitors attacks and forgot that the Consumers have always the last word.
1. Hotmail vs. Gmail
When Hotmail was launched in 1996 by Sabeer Bhatia and Jack Smith, it looked (and it was) a great idea and superb value offer: a free webmail service, accessible from anywhere in the world where each user had the “right” of having 2MB of storage for his/her personal use (a “normal” photo taken with a mobile phone these days can weight between 1MB and 3MB). At the time this was a very innovative product as most part of the email services were supplied by the internet suppliers when the subscribers signed up and the emails were statically staying at the users Inboxes. It was so great that the giant Microsoft bought it by (allegedly) $400m in December 1997. So far so good. The innovation at the service of the consumers was paying off and, 2 years later, Hotmail had already 30m active users.
When Google launched Gmail in 2004, the free (advertised supported) email service, the Beta version was available by invitation only. However Google had already in mind (I assume) to revolutionize the landscape of the webmail by offering a huge storage where the user could forget the old days of deleting emails in the Inbox after the annoying message “Your Inbox is reaching the limit. Please delete some emails.” popped up.
Today Gmail has 15GB for free for its users and, despite the price to pay is to be hit with advertising and discrete banners, more than 400m users chose to have an account on Gmail. Does any of you still have an old Hotmail Account (Outlook.com it’s something different)?
2. British Airways vs EasyJet
Although we know that BA is hold by IAG, a Private Economic Group listed on the London Stock Exchange and FTSE 100 constituent since 2011, we also know that BA has been treated and perceived throughout the years as the “National Company” of UK. With this “status” we could expect that BA would be the unquestionable market leader in the English Airlines Market. Moreover BA has a story (as such) of more than 40 years what gave them time enough to understand the Customers and create the proper value proposition to them.
Nevertheless this is not the case. BA is not the market leader in terms of number of passengers in UK and reported negative £139m before Taxes in 2012. Wow….
Who’s the leader and the profit maker then? EasyJet.
The Company founded in 1995 by Sir Stelios Haji-Ioannou, a Cypriot businessman who leased the first 2 planes of the fleet, transported in 2013 close to 60m passengers, whereas BA hardly reached the 38m according to the official Reports of both Companies. Profit wise, EasyJet reported £317m Profit in 2012, whereas BA (as I mentioned above) reported a negative result for the year 2012. Last but not the least, while the earnings per share of IAG (the Holding Group of BA) in 2012 was -11.1 cents of EUR (approx. -9.25p), EasyJet reported a positive 62.5p for the same fiscal year.
3. Carrefour vs Mercadona
Carrefour is arguably the largest Retailer in Europe and the second one in the world, following Walmart. Although the French retailer has got all sort of stores as far as size and location is concerned, this Group is definitely known by their most successful retail format: The Hypermarket.
Carrefour arrived in Spain in 1973 with their first Hypermarket being opened near Barcelona. Since then and after a few movements of Mergings, Acquisitions and Disposals, the Group grew in number of Stores and Sales until become the market leader by the end of the XX Century.
However a big surprise was hitting the Executives of Carrefour at that time. A local Supermarket player born in Valencia on the late 70s was becoming stronger and stronger and “stealing” consumers and consequently revenues from Carrefour. To the point that in 2013 Mercadona was already the largest food retailer in Spain in revenues and number of stores. On those days the Spanish Supermarket chain had more than 21% of Market Share in Value and 15% in shop floor area. The European giant had been relegated for the second position with 8.1% Market Share in value. Even if we sum the Market Share of DIA, the Hard Discount chain that Carrefour sold in 2011, the total Market Share of Carreour + DIA together would hit 16%, 5pp less than Mercadona alone.
In all these 3 examples above we can see some sad stories of great Companies or Products that didn’t pay enough attention to the market changes and to the new needs and demands of the Consumers. It was clear than in all the 3 cases the initial value proposition was great and that’s why all of them were market or segment leaders by the time. But also in all of them we see an evident lethargy in quickly adapting their offer to the “New Consumer”. Despite I do appreciate that it’s not easy at all to change a full Business Model with a huge investment made, what is true is that if the Products or Companies do not adapt and are able to meet the customers’ needs the risk is too high in the long run.
As Mr Sam Walton said: “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
The Flying Cow 