The Advantages of Financial Services Market Leadership
Being a marketplace leader is so important that we encourage every client to work to achieve this positioning—even if it requires them to create a new marketplace niche that they can dominate. Leadership offers significant advantages and many attractive rewards.
Examining Market Leaders
The consumer products area offers several examples of brand leadership. Ivory Soap, to cite one well-known brand, was introduced in 1879 and rapidly gained market share to become the market leader in its category. By 1924, Ivory was a mature product at its zenith and its future brand dominance appeared to be 99 and 44/100% guaranteed. However, Ivory failed to follow the strategies that appropriately accompany a leadership position and one product after another overtook it in its category. Today, with competitors offering varieties of shower gels, liquid soaps, antibacterial washes, aromatherapy bars and moisturizing products, Ivory has been reduced to a minor player in its category.
Believing that Ivory was an anomaly and that established leadership position was easier kept than lost, Suasion Resources researched other market leaders of 1924 to determine if they had suffered the same fate. The chart below shows how 20 leading products of 1924 have fared over the past eighty-five years. It provides irrefutable evidence that most companies who have worked hard to secure their leadership position also understand that it is just as important to take rigorous methods to protect it.
Position – 2009
Leader – 1924
Position – 2009
|A1 Sauce||#1||Heinz Ketchup||#1|
|Campbell Soup||#1||Hershey Chocolate||#1|
|Clorox Bleach||#1||Jello Gelatin||#1|
|Colgate Toothpaste||#1||Kodak Cameras||#1|
|Del Monte Canned Fruit||#1||Levi Jeans||#1|
|Eveready Batteries||#1||Life Saver Candies||#1|
|Gillette Razorblades||#1||Sherwin-Williams Paint||#1|
|Gold Metal Flour||#1||Singer Sewing Machines||#1|
|Hammermill Paper||#1||Wrigley Gum||#1|
The Advantages of Market Leadership
A company gains more than bragging rights by becoming and remaining a brand/product leader. It gains the “leader’s advantage” a term that refers to the many benefits that accrue to a leadership position. Leadership is not an end result, but rather the beginning of a company’s opportunity to exploit and leverage these advantages to remain well ahead of competition.
Advantage #1. A heightened level of marketplace trust. The credibility imparted by market leadership facilitates a company’s ability to acquire new businesses and build market share. Loyal customers who place their trust in the company generate repeat business and unsolicited referrals that invariably provide the market leader with positive marketplace visibility and superior customer awareness within their segment. As a result, customer communications and promotional campaigns are better received and, consequently, more effective.
Advantage #2. Economies of scale that result in increased profitability. As sales increase, a company can reduce operating expenses by leveraging its infrastructure and enjoying the resulting economies of scale. As a result, margins improve and returns on investment expand. Market leaders are also in a better bargaining position with their resource suppliers, another factor that helps them improve margins and enhance ROI.
Advantage #3. Greater opportunities for expansion and improvement. Most market leaders invest significant amounts of their surplus in R&D in order to provide new and higher quality products and services. Leaders are also able to enhance their capabilities to maximize productivity by attracting the best management. All this adds up, over time, to greater competitive differentiation and an enduring leadership position.
Adopting A Leadership Strategy
Most financial service marketers recognize that a leadership position can help a company withstand competitive assaults and maximize its marketplace opportunities. At the same time, however, they question if the quest for leadership is appropriate for most financial services organizations. We strongly believe that the answer is yes, but only for companies that are willing to commit to developing and adhering to an aggressive leadership strategy.
This is a key point that cannot be over-emphasized: securing a market leadership position is a critical strategic planning issue. A company cannot achieve leadership simply by launching clever advertising campaigns or corporate promotions. Nor can it achieve leadership by becoming the largest spender in its segment.
The Bottom Line
In our commoditized financial services business, product or service successes can be easily replicated. As result, a company’s future can depend on management’s willingness to invest resources to conceive and implement an effective strategy to achieve market leadership. That decision will place a company in one of two camps: those that forego present earnings for future results, or those who will later wish that they did.