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Eight Myths about Alpha Companies

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In business, as in the animal world, just about every product category has an Alpha, a company that leads the pack. Alpha companies enjoy higher profitability, lower competitive pressure, and more control over future revenues than follower companies do. Alphas are so influential that almost everyone in their category looks to them before making decisions of their own.

What made Starbucks the Alpha of coffee retailers, when there were already many others with arguably better products? What made Harley-Davidson the most desired product in the world (even above diamonds), when its product quality was far lower and its prices much higher than most of its competitors’ motorcycles? What is the secret to making products people will pay almost anything for?

The secret to being an Alpha and dominating one’s product category lies in: (1) identifying your company’s real Alpha assets — the things your company offers that drive buyers — and (2) managing those Alpha assets and making them the focus of all decisions and performance measurements. Alpha companies help customers believe their products will provide them with self-satisfaction and personal significance. Make it possible for customers to feel smarter, bolder, braver, more influential, more knowledgeable, more admired, or more fulfilled, and customers will flock to your product.



Let’s dispel some commonly held myths people have about Alpha companies.

Myth #1: To dominate the category, your company has to be biggest. Size — i.e., market share, number of employees, number of locations — does not equal domination. Often a smaller competitor in the category is the true Alpha — the company the rest of the industry tries to keep up with, the one that drives customer expectations. A good example is Ben & Jerry’s.

Myth #2: Price is the deciding factor for consumers when they buy. If price were the ultimate driver of buying decisions, there would be no Mercedes-Benz, Dom Perignon, and Rolex. Consumers are willing to pay more for something they believe gives them more. Research shows price is actually the last thing customers consider before a purchase.

Myth #3: To achieve dominance, you have to be first to market with an idea. In truth, few of the Alpha companies today were either the first in their category or the first with the type of product they currently sell. Victoria’s Secret and Starbucks are good examples. They were not the first to sell sexy underwear or coffee — they were just best at marketing those products so that customers clamored for them.

Myth #4: The Alpha in a category offers the highest quality product. That would only be true if customers wanted the best quality. Evidence shows that customers want something else: a product that satisfies a functional need but also makes them feel smarter, more attractive, more admired, more significant, etc. A good example is Harley-Davidson, whose motorcycles are of poorer quality than Japanese bikes yet dominate in customer loyalty and price leverage.

Myth #5: To learn how to be an Alpha company, follow the leader. Every time you follow the leader, you convince customers in your category that the leader’s product is the one they should aspire to. To be an Alpha, strategic differentiation is critical. The real trick is to find unmet, higher-level needs that you can “own” as things you uniquely address well.

Myth #6: The fewer competitors in your category, the better. Quite the contrary. Eliminating or attacking competition is the worst thing you can do if you want to dominate your category and grow your customer base. Aggressive competitors drive more consumers to the products in your category, and demand for those products — yours and theirs — begins to grow geometrically. Furthermore, when you have competitors imitating you, customers seek out your Alpha products with even greater enthusiasm.

Myth #7: Sometimes, Alpha companies just “come out of nowhere.” Fortunately, once you understand how Alphas evolve, you can reliably predict who will grow dramatically before that growth even starts. By comparing all competitors in your category in the factors that constitute an Alpha, you can readily see which companies are in the process of creating growth potential and which are not.

Myth #8: It takes time to acquire a dramatic share of the market. Most corporate executives find it hard to believe that dramatic, revolutionary growth can occur for a company in a short amount of time. Evidence shows, however, that using Alpha learning can create significant growth usually within a year or less — even if the company is a top performer already or, conversely, has been in a prolonged cycle of stagnation or decline.

About the Author

Wes Ball is founder of The Ball Group, a strategic innovation management consulting firm, and author of The Alpha Factor: The Secret to Dominating Competitors and Creating Self-Sustaining Success (Westlyn Publishing, www.thealphafactor.com).
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Popular tags:

 customers  Victoria's Secret  Alpha company  retailers  Harley-Davidson  Alphas  Mercedes-Benz  Starbucks  Ben & Jerry  Rolex watches


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