Competition meets Co-location with John Hale

Competition

The theory of competition suggests that market players who generate earnings in identical ways cannot coexist. πŸ‘©β€πŸŽ€πŸ‘©β€πŸŽ€To this end, every player must be different in some way, to create a unique source of advantage. πŸ˜€ When direct competitors continue to thrive for extended periods, each must somehow be different from the other, so that they can coexist. Each will have a slightly different value proposition and customer focus. πŸ€”With coexisting players who are seemingly identical, with equivalent value propositions, the only difference between them may be in the minds of their respective customers. This is why marketing and advertising can be so valuable in a traditional marketplace. 🎯 This is also why digital platforms with millions of registered consumers, like Amazon and E-Bay, can be so valuable in the online marketplace.

Furthermore, as consumers, we often need the existence of similar players πŸ‘©β€πŸŽ€πŸ‘©β€πŸŽ€to help us buy. The existence of similar players with similar offerings raises our awareness and perceptions of a new product or service. A collection of similar market players can provide β€˜social proofβ€™πŸ˜‡ that a product or service is, in fact, legal, subject to periodic price competition and of inherent value, due to the number players in the game.

meets Co-location

Imagine a scenario. Picture a long stretch of beach on a hot summer’s day, populated with hundreds and hundreds of people. πŸ„β€β™‚οΈπŸŠπŸΌβ€β™‚οΈπŸš£πŸΎβ€β™‚οΈπŸ–There is ample parking right along the beach and a visiting ice cream van is able to park anywhere along the beach.

If you are the first ice cream van 🍦to arrive at the beach, where should you park?

Did you say in the middle of the beach? The middle of the beach is likely to be the best location to park your van.

Now imagine you are the second ice cream van 🍦🍦 to arrive at the beach, sometime later. Where should you park?

When I pose this question to audiences I speak to, around 60% of people say that they would park the second van at one end of the beach. Around 20% of the people say that they would park the second van alongside the first van. A further 20% of people are undecided. The people who said that they would park alongside the first van have the best strategy. By parking alongside the first van, the following effects can be observed. Those buying ice cream from the first van provide social proof to those on the beach, who have not yet decided to buy. Parking next to the first van allows the second player to leverage this social proof. The existence of two vans parked beside each other provides mutual validation and value to the other van, and the size of the market for ice cream expands rapidly. On a busy hot beach with hundreds and hundreds of peopleπŸ„β€β™‚οΈπŸŠπŸΌβ€β™‚οΈπŸš£πŸΎβ€β™‚οΈπŸ–, the existence of a competitor helps business for both of them.

Now imagine you are a third ice cream van 🍦🍦🍦to arrive at the beach sometime later. Where should you park?

When I pose this further question to audiences, around 50% of people say that they would park the third van next to the other vans. Around 30% of people say that they would park the third van at one end of the beach. A further 20% of people are still undecided. The people who said that they would park alongside the first and second vans have the best strategy. By parking alongside the other vans, for people on the beach, the propensity to buy increases further. On a busy hot beach with hundreds and hundreds of peopleπŸ„β€β™‚οΈπŸŠπŸΌβ€β™‚οΈπŸš£πŸΎβ€β™‚οΈπŸ–, the existence of three competitors in close proximity helps business for all three of them.

Now imagine you are a fourth ice cream van  🍦🍦🍦🍦to arrive at the beach sometime later. Where should you park?

When I pose this further question to audiences, around 80% of people say that they would park the fourth van next to the other vans. Around 10% of people say that they would park the fourth van at one end of the beach. A further 10% of people are still undecided. The people who said that they would park alongside the existing vans have the best strategy. By parking alongside the other vans, the propensity for people on the beach to buy increases still further. On a busy hot beach with hundreds and hundreds of peopleπŸ„β€β™‚οΈπŸŠπŸΌβ€β™‚οΈπŸš£πŸΎβ€β™‚οΈπŸ–, the existence of four competitors helps business for all of them.

When I ask audiences about a fifth van 🍦🍦🍦🍦🍦, almost all of them say, next to the others.

When we look around any busy marketplace, the co-location of competitors with similar offerings abounds. Furthermore, the closer these players are able to locate themselves to one another, the greater the social proof and relative consumer demand are likely to be. Co-location grows the size of the pie. The slice size each player enjoys will be determined by the customer value they offer and capture. This is often why we see co-location of competitive mobile phone providersπŸ“ž, jewelry stores πŸ’, boutique fashion storesπŸ‘™, home furniture centers πŸ›‹, discount outlets, late-night restaurants🍱, theatres🎭, fast food chains🍟, and even airlines✈️.

Which players offer a similar product or service to your business?πŸ‘©β€πŸŽ€πŸ‘©β€πŸŽ€ Who are your direct competitors? πŸ‘©β€πŸŽ€Β Keep them close. πŸ‘©β€πŸŽ€πŸ‘©β€πŸŽ€πŸ‘©β€πŸŽ€πŸ‘©β€πŸŽ€To keep an eye on their moves and grow the size of the pie for all of you! 🍰

2018-10-09T17:50:45+00:00By |Strategy|