Sunday, October 21, 2018

Customers as Competitors

I always have found the important nugget in Selling the Invisible, billed as a “field guide to modern marketing, its relatively brief--and vital--notion that services cannot be marketed the same way as physical products, as there is no way for the potential buyer to evaluate quality in advance, before consuming the product.

In many cases, the consumer has no objective way to evaluate quality even after performance. Unlike physical products, intangible products (software, communications services, all sorts of home repair, medical, legal, accounting, financial, advertising) cannot be touched, seen, tasted or  smelled.

On the other hand, among the other points that have stuck with me over the years is that a service provider’s competition is actually not the other firms selling similar or the same services. It is the customer deciding to do nothing, or “do it yourself.”

A survey by the TMForum suggests that might actually be the case. Asked whether service providers “can make it without them,” about half said “no.” But only about half.

A slightly smaller set of respondents agreed that service providers “will continue to be hugely reliant on vendors.” And some 12 percent said they believed “many large operator groups will successfully transition to (becoming) tech companies.”

True though that might be, I know of no instance where firms, evaluating market share, actually assume the potential customer is a competitor, and track sales, market share or installed base in the same way that other suppliers are tracked.

The point is that the observation still appears apt: potential customers can do nothing, or sometimes “do it themselves.” So the competition really is “inertia” (do nothing) and “do it yourself” (DIY).

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