Tuesday, November 22, 2005

Scarcity v. Abundance

A new way to look at Competition

A quick case study:

Pepsi and Coke. Which one is better than the other?

Well, according to 2004 numbers, Coke had about 43% of the US market share, and Pepsi had about 32%. The remaining percentages were taken by other companies, mostly Cadbury Schweppes, who makes Dr Pepper and 7-Up. Interestingly enough, both of those numbers were down from previous years.

What all this demonstrates is one philosophy of competition. This is the paradigm of scarcity. It says that there are only so many consumers with so much money. That is fixed. And all of the players in the business game are all competing for those same consumers. So, “market share percentages” show who’s winning and who’s losing. If one company gains market share, then the others have to lose. It all only adds up to 100.

So, a lot of money and effort is spent trying to convince the buying public that one is better than the other. Taste tests, market research, celebrity spokespersons… Every strategy is thoroughly tested.

The problem is that it assumes that the market is saturated. That means that everyone that possibly could know about the product has already been reached, and now it’s just all about brand loyalty. This approach has been with us for many, many years, and has been perfected in our general election system.

But there’s another philosophy as well, one that is often more difficult to grasp, more challenging to implement, but ultimately can be much more profitable. It requires a total change in paradigm, a complete adjustment of perceptions. It’s the paradigm of abundance.

This approach says that there is plenty of business for all. “What if,” it says, “instead of fighting and competing amongst ourselves for narrow slices of the pie, we were to work together to make the pie bigger?” What if efforts were made to increase the overall size of the market, rather than carving it up into chunks. Then the percentages could fall where they may, but as the overall markets expand, each company would still be growing.

Let me give you a personal example. When I was struggling, trying to establish myself in the Salt Lake area music scene and recording market, I very definitely had a scarcity mentality. There were only so many recording projects “out there”, and it was my job to pound the pavement and find them. I had to bring them to my production company, and quickly, because if I didn’t, someone else would get them. I worked very hard, and stressed myself very much trying to “beat the other guys”. I was very secretive, and clung very tightly to the clients I did get, because you can’t go sharing that kinda stuff.

Then I was introduced to the concept of the “Win/Win” world. The idea that we can all come out ahead. We don’t have to fight each other for the scraps that are around the table. When you look outside your narrow view, there are plenty of projects, plenty of customers that you didn’t even know existed before.

Previously, I was focusing on bringing bands into the local studios. Bands are very exciting to record. They’re usually working on fresh, original music, and they often have some fans that are eager to hear the new recordings. But the problem is that few bands are working enough to have the steady income necessary for the bigger recording projects. In short, they rarely can afford to come to the studio. In addition, there were lots of studios trying to attract the few bands that did have money. That’s where the scarcity mentality came from.

I saw the availability of other markets. Rather than just compete for “my cut” of the band niche, I started looking at doing arrangements and demos for songwriters. That’s not as prestigious as a band gig. When a band puts out a CD, you can hang it on your wall. Your name goes in the production credits. When a songwriter finishes a song, it gets sent off to publishers and producers, and hardly anyone sees it. But there were a lot of songwriters. I also began exploring the market for jingles and production music. Instead of just griping (although I did my share of that, too), I also looked for ways to expand the pie, to make the overall market bigger.

Sometimes, when I look at Coke and Pepsi, I realize that they’re just trying to be in business. They’re working hard to keep the money flowing and keep their bottom lines profitable. I can’t begrudge them that.

But then I look at all the money and effort they’re spending competing with each other, and I can’t help but wonder what could be accomplished if that same amount of investment were spent on something truly productive.

No comments:

Post a Comment