The Cycle of Choice

Most markets are busted open by one successful leader. Burton in snowboards, Henry Ford in cars, the iPod in mp3 players.

It sure seems, for a while, that the leader can do no wrong. Market share is high, the market grows, and then, oof, the leader fades.

It looks a bit like this:

The leader attracts newcomers to the market. Both new users and new competitors. The competitors offer new choices, alternative pricing and distribution models and just plain old choice. Unless there is a significant external barrier to change (like the iTunes store or the Windows distribution monopoly), then the leader appears to fade. At one point, there were more than 2,000 car companies in the US.

There are several lessons available for marketers here. First, if you bust open a market, don’t expect to own it forever. Second, if you can, invest heavily in some sort of external effect that creates a natural monopoly and gives people a really good reason to stick (beyond the fact that you’re the leader). And third, if you’re not the leader, realize that: a. you’re not going to replace them and b. being just like them isn’t the way to grow. As a market grows, the ‘scraps’ left over from the leader can add up to a huge piece of market share. And then, over time, a new leader may emerge.