In a dynamic market, you can compete on price, but this is akin to an arms race and damages everybody. You can also compete by innovating and making your product more feature rich, but this is expensive and takes time. A third approach is to have a brand strategy in place from the outset that puts you in a stronger position when competition arrives. But product developers sometimes overlook branding as part of the overall value proposition.

In his book, Prof. Sharp argues that the quickest way to build a market is to make your brand physically and mentally available to consumers as well as targeting the large pool of dissatisfied customers that change brands each year. He scoffs at differentiation, citing cases like Coke and Pepsi who have attempted to differentiate within the cold drinks category, but whose respective market shares hardly change year after year.

Coke and Pepsi are constantly fighting off cheaper brands and do so quite successfully because customers are prepared to pay a premium for a brand they feel connected to. That connection has been built up through generations of consistent positioning. Everybody recognises the Coke symbol, right? It’s irrelevant whether or not the product itself is substantially better than the cheaper ones. What matters is that customers mentally associate positive attributes with a brand such as trust, some kind of meaningful narrative plus “sticky” graphical images. Customers ascribe value to intangible features and this should not be overlooked.

This post is an extension of a discussion on a value based strategy to competing in new markets started by Libby Russell on the New Zealand Software Alliance LinkedIn page.

For argument’s sake, let’s say that there are a total of 100 customers in your target category and that 20% change their loyalty each year. So, ignoring any organic growth, there is a total pool of 20 customers up for grabs in any given year. A start-up entering the field does well and secures 5 of these floating customers in the first year. But they will lose one of these customers at the end of the first year on average. In the second year there are still 20 customers looking to change provider. If the start-up succeeds with customer acquisition at the same rate it will still more than double it’s user base.

Being a small brand in a market with high defection rates is risky. Growing customer numbers as quickly as possible is insurance against future defections. A larger brand can weather the storm. For many product categories in fact, 20% loyalty churn would be extraordinarily high. So a new entrant has its work cut out for it on both fronts because in some industries the number of shifters is fewer.

I’ve over-simplified the figures, but you see my point. Acquiring customers from the pool of dissatisfied users is the primary goal of a start-up. In the case of web-based services, create a better user experience and you immediately tap into that pool. Customer retention will also take care of itself. Because the domain registrar industry is in dire need of innovation and there is a large number of disaffected users, this is the approach we have taken at iWantMyName.

Pivoting involves a fundamental change to one or more of the three fundamental questions that frame the business model and could be a response to either a flawed model or a new opportunity.

We Are Selling What? + Via Which Channel? + To Whom?

Bruce Aylward from Psoda described how his company underwent a complete change in strategic direction in terms of how their product was marketed and distributed. Psoda is a SaaS suite that assists professionals to manage programs, projects, requirements, testing and product development. Psoda’s pivot point came when they realised that customers only wanted some of the services being offered – so they created a pick ‘n mix option. It was a subtle change that boosted the company’s revenue take.

The domain registrar industry has a well established model and hundreds of incumbents. Finding ways to innovate within such a model is tough, but it is the only way forward for a new company. At iWantMyName our pivot point came when we realised we were creating a scalable platform-as-a-service offering that we could rapidly roll out to channel partners. It was a great learning experience for us that added a lot of value to our business.

But we aren’t just stopping there. We’ve also opened a wholly owned and operated German language site and we called it simply Mein Name. The German site is a special achievement because ideegeo in part has its origins in an idea that began in Germany. Mein Name is a little bit like a return home for us.

The new sites demonstrate how ideegeo can powerfully leverage the underlying technology behind iWantMyName and how we can make other partnerships work in new markets. Expect to see further rollouts and cool new services in the future as we change the face of domain name management.

1. Cultivate a community of trust. Demonstrating industry knowledge,  showing moral and ethical leadership and delivering on product promises are fundamental keys to success.

2. Offer an exceptional user/customer/reader experience. Consumers have a lot of choice already. Why would you aim for mediocrity when you can have excellence?

3. Network. Connect in both the real world and online. Think – what can I learn from this person and how can I help them in return? What can our company do to help build communities?

4. Enjoy the journey. If you are looking toward the sky, you are more likely to find a rainbow. So find a project that you will enjoy doing.

If you follow these four rules and build a good team around such philosophies, you will have substantially improved your chances of success in going global. These are not the only rules of course, but it is a good starting point. Are there any other rules you would like to add?

You can now follow GeniusNet on Twitter @GeniusNet

I find it quite bizarre that so many site owners are obsessed with driving traffic to their sites in order to squeeze out a few more cents of revenue, on the basis that a tiny percentage of users will click on some ugly random ad words placed strategically around the site. Oddly, nobody seems to question this model. At this point I should probably point out that I don’t own the ads you may have seen at the top of this page sometimes. In fact if I had my way I would gladly pay to keep them off site because of the devaluing effect they have on my own brand.

So notwithstanding the irony that paying to remove ads has now become a valid revenue model in itself, I reckon there are a lot more creative ways to make a social media site pay. The most obvious option is the multi-tiered subscription based approach whereby users can receive a basic level of service for free and choose to pay for additional services. Dating sites are probably the most popular example of this approach and my friends over at Smallworlds are taking this track too. The second approach is to sell something for which there is a demonstrable need and do it in a stylish way that carves out a niche. That’s what we are doing with iWantMyName. But how can sites like Twitter earn cash when they don’t appear to have anything tangible to sell apart from access to their network?

Twitter has so much cash to burn that there is no urgency to find a revenue model – yet. Building trust and growing the user community is far more important than spamming users with site ads at present. There have been quite a few ideas floating around about how Twitter will monetise but many of them are red herrings. I believe Twitter does have a plan and the key lies in the fact that the interface is so clean and simple at present. By offering only limited functionality now it creates a fertile ground to add revenue generating value drivers downstream.

I think contextual search will play a big role in the approach that Twitter ultimately adopts and other site developers should watch and learn as this evolution occurs. Twitter is ripe to move into an enterprise setting too, but it cannot do this until there is much better search functionality. Microblogging may not replace email entirely in the future, but it certainly will put a big dent in it. How long will it be before you can add images and document attachments directly to your Tweets?

What I love most of all about micro-blogging services is that I have complete control over who I subscribe to. That is a feature people will pay for and that is the one problem that regular email software can never properly address. On that basis alone I think micro-blogging services will eventually win as opposed to stepwise adaptation by the encumbent technologies.

I’ve been resisting this for some time, but finally succumbed and opened an account at Twitter. And since Twitter now appear to have identified how they will make money, it’s clear that the increasingly popular micro-blogging service is here to stay.

Described alternately as “narcissistic and self indulgent” or (predictably) “the next killer app”, Twitter is like most things in life, there are pros and cons. If used judiciously it can be beneficial. It delivers me links to useful news and articles and it opens up another channel for me to share ideas. According to this explanatory webcast by O’Reilly Media, it’s also a “mood meter” for whatever is going in your sphere of interest. On the other hand, I don’t have any control over what I receive, once I subscribe to another user. So there are the vexing questions of truth and relevance. Do I really need all that additional information about somebody elses lifestream and how much of it is real anyway?!

But the really interesting part about Twitter is that it has the power to aggregate a huge global community. At present Twitterdom is largely confined to geeks, technophiles and early adopters. But that’s exactly what you’d expect at this point in its evolution. I think that will change. What will make the difference is when other communities realise that Twitter can work for them too. For example, there are lots of third world countries where Internet access is poor but mobile phone access is ubiquitous. So what better way to keep in touch with friends and family, when back-packing, than by micro-blogging via your mobile. Maybe even criminal dictators like Mugabe will be unseated by Twitter campaigns in the future?

But what really sold me on joining up was two things. Firstly a friend introduced me to TwitterEarth where you can spot tweets from all over the globe. OK so it’s a wee bit gimmicky, but it demonstrates how interesting new opportunities will spring up from the paradigm shift towards micro-blogging. Secondly I read a great article about how to use Twitter as a marketing tool. Suddenly I could see some value in it for me. It also occurred to me that Twitter is a great case study for the kind of mental transition our business will need to think about engendering as we push our own technology projects out into the global marketplace, such as our recently released site iWantMyName.

Looking forward to some “tasty Tweets” from you all over the Festive Season. And by the way, I promise not to squawk more than once or twice a day.

http://twitter.com/GeniusNet