How the world of 'mocial' will up-end your competition and make a race to the bottom, already toxic, even more foolhardy.
You don’t need me to tell you this: Because the barriers to entry for almost any business are so low, and the costs so modest, competitors can be in your business, and in your face, in an instant. That’s irritating to you, but it’s also bad for customers, who have very little accurate information to help them make the right choices among different products or services.
Many customers understandably choose one of two ‘default’ methods for judging a purchase: price or size.
Price is a nightmare for the entrepreneur. Cheap prices are far too prevalent on the web: We have inadequate and poorly distributed marketplace information, false claims and promises, and bait and switch offers. Unfortunately these work pretty well right now.
Size isn’t great either: Measuring “bigger” is easy, after all. Measuring “better” is much harder because it requires judgment and values.
We need some form of validation that will help consumers know what’s what online. Stella Service is one of the early leaders in this space, trying to become the "Good Housekeeping" seal of approval for e-commerce and other sites. It’s a fertile opportunity and you can bet Stella will have plenty of competition in no time at all.
That’s just the start. It would be far better for us to have timely and accurate comparative information concerning everything we are thinking about buying, selling, using, visiting or consuming. When we start to get that – and it’s not far away – we’ll be entering the Mocial world.
Mocial is just a mash-up of mobile and social, but what it stands for is a much more complex and important set of ideas and requirements. Mocial means that companies will provide information that matches: (1) what we need; (2) when we need it; (3) wherever we are; (4) without asking. Places and spaces will become intelligent and active. They will tell us relevant and individualized “stories” based on who we are, where we are and what we are doing. They’ll meld that information with other data the seller already has about us. These types of systems will eventually make a lot of basic purchase decisions for us. Google Now is an early second-generation entrant into these kinds of services
Even with the current paucity of good information, there’s no point trying to win a race to the bottom. Once prices start to spiral down, things only get uglier and less appetizing. There’s really no way back. Trying to compete on price or sheer quantity - especially for a start-up - is a very tough and risky choice, and almost always a bad idea. This is why you don’t wrestle with pigs – you’ll both get dirty, but only the pig will enjoy it.
Another reason you can’t win a race to the bottom is that for many consumers, even "free" isn't cheap enough. In many cases the costs of use and adoption have a lot more to do with the calculated allocation of scarce personal time and precious resources rather than with just dollars and cents. There are always other and better dimensions to compete on if you’re really doing your job.
Please don’t buy into this noise about there being room for everyone in the market and that more players just expand the overall market size. Your job is to kill the competition – if they’re about to drown; throw them a nice large anvil to speed the process along.
The best plan is to ignore the guys in the cheap seats and concentrate on making sure that you’re delivering a product or service that’s worth the prices you’re asking your customers to pay. In the end, that’s all that really matters, and that’s what will win in the long run.
HOWARD A. TULLMAN is the CEO of 1871 – Where Digital Startups Get Their Start and the General Managing Partner of G2T3V, LLC and of Chicago High Tech Investment Partners. He is a member of the Chicago NEXT & Cultural Affairs Councils and the Illinois Innovation & Arts Councils; an adjunct professor at Kellogg; and an advisor to many start-ups. He is the former Chairman and CEO of Tribeca Flashpoint Media Arts Academy. Over the last 45 years, he has successfully founded more than a dozen high-tech companies. @tullman @tullman