Beat your competition, do not eat the crumbs

Sorry that it took me so long to post again, but I have been preparing and learning about an obscure art in which sometimes we engineers cannot handle our big, fat brains. Marketing and sales.
Being confronted with some new soon to have responsibilities, I've been extensively studying and learning from the market.
And so, I began to wonder what do credit card services, mobile phone carriers, and financial services all have in common? An extreme dedication to the practice of arbitrage marketing.

Arbitrage marketing is used when you know that your products and your competitors’ products are equally unhelpful and hard to use, and that for every customer you tick off so much that they leave your fold for your competitor’s, that your competitor has done the same and their ex-customers will be coming your way. It is a strategy that forces customers to change lanes, but knows that since the road wasn’t built correctly, no one is going to get anywhere any quicker.

Example. Should I hold a BBVA credit card, or one from Santander? As far as I’m concerned, the service is equally bad, the interest rates are equally preposterous, the web-sites are equally as hard to navigate, down as frequently and calls to technical services are equally poorly responded to. So the only reason I would pick one over the other is because the other one ticked me off. And then when the new one ticks me off, I move again.

Every week I get about three offers from BBVA and SAntander’s competitors, so when I feel like it, I’ll move beyond them. It’s a commodity and no one is providing differentiated service.

Example. Mobile phone carriers. I use Telcel. Why? Because my father used Telefonica and had horrible coverage, a friend or two uses Unefon and hates her service, and another friend uses Iusacell and is always complaining about her network outages. Those are obviously not representative situations and I’m not meaning to speak badly about any carrier. My point is, I chose my carrier based on minimizing an expected poor result.

What though would I think about carriers, credit card services etc if I just made my judgments from advertising?

Iusacell is a hard worker and is always making sure I am taken care of, Telcel has a very attractive spokesperson (not sure how this would influence me, but they seem to want to stick to this strategy), Unefon is cute and the logo always looks to be having so much fun, and Nextel is the thinking-person’s carrier, just look how clever their ads are.

Citibank makes my world possible in a way no other credit card could do, American Express is relevant to me, just witness the introduction of the urban-oriented ‘black’ card, and the rest of the banks are always smiling.

The images projected by the advertising are beautiful, but totally irrelevant. I already have an opinion about carriers (or credit card services, or cars, or banks...) based on my experience and the experiences of those close to me. Their reputations have preceded them.

So all the money they spend advertising during baseball playoffs or anywhere else is in support of the arbitrage marketing strategy. They need to make sure that when I’m at my wit’s end with Telcel, that I choose them when I switch.

What though would be the opportunity if you decided that arbitrage marketing is not the correct strategy any longer, and you decided to follow proximity marketing?

Seth Godin describes proximity marketing as the opportunity to differentiate yourself in a crowded category by being BETTER than your competitor.

And how do I learn that you are better than your competitor? I certainly do not learn that from the latest creative campaign, no matter how fun-loving, image-relevant or attractive. I learn that because I experience your product as being better or, even maybe more importantly, I am told by someone I trust that your product is better.

Think about it from your customer’s point of view. Think how powerful it would be if your customer chose you not to minimize an expected bad experience, but because they are glad to engage with your product and company?

Arbitrage marketing is widespread and it is ridiculous, and wasteful. But it opens opportunities for those who are willing to walk away from it.