Think about how frustrated you were the last time you waited for your cable guy to show up, or how annoyed you got when you settled into the back of a cab, only to have the driver tell you he wouldn’t take a credit a card. What about the time you had to pay a hefty fee for the right to text and use data on your smartphone outside of the country?
These scenarios are probably all too familiar to many of you.
The good news for consumers is that these frustrations have been addressed by various startups (or existing businesses with better ideas) in recent years. These companies recognized that incumbent industries were responding to their own operational requirements, instead of their customers’ needs. When these newer businesses came along, they were able to take advantage of customer disaffection and grab gobs of market share, while shaking their competitors to their very foundations.
Getting Eaten By Innovators
Innovation has a funny way of wreaking havoc on markets where once-dominant industries are suddenly forced to compete for business.
Very often, however, these companies have taken customers for granted, having controlled the market for so long. When a disruptive agent enters the scene, customers happily flock to the alternative, leaving the incumbents struggling to play catch-up on multiple levels.
Every sector is bound to be affected at some point as a technological tidal wave driven by the internet, mobile and cheap cloud resources drives sweeping changes across industries.
If you haven’t been focused on your customers, you are particularly vulnerable when these changes come because they have no motivation to be loyal to you.
The Beauty Of Competition
Cable companies are a prime example of a municipal monopoly, which hasn’t had much reason to be concerned about their customers up until now. Back in the 80s and 90s, when cable markets were being established, they competed for municipalities, rather than individual consumers. Once a company was awarded a town or area, it was theirs forever, a veritable fiefdom.
If you haven’t been focused on your customers, you are particularly vulnerable when these changes come because they have no motivation to be loyal to you.
With little or no competitive pressure, getting customers was like shooting fish in a barrel. Once it had them, there was little incentive to respond to problems or lower prices. What were you going to do, go to the other cable company?
That has led to consumer frustration and as these companies get bigger and bigger, they have become more focused on protecting their turf than maintaining happy customers.
Look at the cloud infrastructure providers for a good example of what happens when there is healthy competition in an open market. There are a wide range of large and small vendors competing for business including the likes of Amazon, Microsoft, Google, IBM and a host of others. Just recently Alibaba announced it was investing a billion dollars to become a player in this market. All of this means these companies are competing hard on price, the breadth of their offerings and how they treat their customers.
It has forced down prices and led to ever-increasing innovation in an ongoing effort to win and keep business. Plus, when you add the notion of subscriptions, where customers can switch among providers fairly easily, it really forces companies to focus on clients.
In industries like cable with less competition, the motivation is lacking and that usually results in poorer customer service.
Crying For Help
As disruption enters a marketplace, the first reaction is to cry for help from the government to maintain market dominance. The taxi industry has also enjoyed a municipal monopoly and when a popular competitor like Uber (and other ride sharing services like Lyft) entered the fray, the industry went into full protection mode, which has resulted in a variety of government reactions.
As an example, taxi drivers went on strike in Paris in July and the government reacted by issuing arrest warrants for Uber executives for operating an illegal taxi service.
When taxi drivers held a similar one-day strike in Cambridge, Massachusetts earlier this month they didn’t get the same type of sympathetic response from their government. Instead, a Cambridge City Councilor lectured the drivers, according to a Boston Globe article, “You guys realize the constituency that supports Uber is the majority and you’re the minority, right?” said a frustrated City Councilor Nadeem Mazen…”
While taxi drivers protest their lost dominance, the industry lobbies legislators looking for relief. This approach can annoy customers because instead of looking for creative ways to keep your business, they are looking for a legal edge, something customers quickly see through.
Sometimes the dominant industry wins by going the legal route as it did when the Supreme Court ruled against Aero, a company that was trying to change how television was delivered.
When Disruption Hurts
But other irritants aren’t so easily dismissed. More recently, the cable industry has had to deal with competition from streaming services like Netflix, which we can watch on our computers or tablets or connect to our televisions with gadgets like Chromecast, Apple TV, Amazon Fire TV and Roku. When you combine clever original content from the streaming services with a low monthly fee, people are beginning to see they can be entertained for far less than what they pay the cable companies — and they’re cutting the cord.
In fact, Variety reported this week that cord cutting is beginning to have an impact on traditional pay-TV companies with 566,000 customers leaving during the second quarter alone.
The dominant cell phone providers, particularly Verizon (which owns TechCrunch) and AT&T are facing their own competitive pressure on several fronts. T-Mobile has created a variety of customer-friendly plans, proving that an entrenched player with the proper motivation can offer creative business ideas that put their competitors on the defensive. (Verizon’s answer was ending subsidies and eliminating contracts as announced last week.)
On other fronts, municipalities are beginning to offer free WiFi and municipal broadband, and companies like Google have begun offering alternatives to the standard cell phone provider plans. Google’s Project Fi in particular is a shot across the bow of big cell providers.
For just $20 a month, it’s offering unlimited talk and text, free international texts and coverage in 120 countries. Data is just $10 per gig. That traveling portability alone is huge differentiator from my provider, AT&T. I had to pay a $30 fee for unlimited texts and a minuscule 120 MB of data when I traveled outside of the country recently. That kind of nickel and diming tends to upset customers.
Your Customers Matter
It would be easy to dismiss this as an isolated phenomenon affecting certain industries, but the fact is that every business sector is vulnerable.
You hear it again and again, customers should be at the center of every decision a company makes. When a company or industry is dominant, they can lose sight of that, but when a disruptor comes along, it brings this notion back into clear focus.
Unfortunately, trying to go back and win customer loyalty is much more difficult than assuming you should be working on it all along. Every industry is learning the hard way that their disruptive moment is coming and if you abuse or ignore the needs of your customers, you could be in for a rude awakening when a better, faster and more creative alternative enters your market.