Why Advertising is a Bad Idea if You're Not a Star Business

Advertising in an old category is sometimes a good idea since it allows you to take away small chunks of market-share from the leader. For example, if you came up with a new brand of cola and advertised you'd probably be able to get at least some consumers to try your cola.

However, if you are a follower in a fast growing industry (i.e. a question mark), advertising your business may be a very, very bad idea. This is because you will be educating your customer who will, in all likelihood choose your competitor which will be the leader in your segment. This is especially true of big ticket items such as expensive electronics, enterprise software, hybrid cars etc. The process will probably run like this:

You run an advertisement advertising your product. Part of your advertisement educates your customer about the benefits of the product. The customer considers buying the product but decides to check out what other companies offer a similar or competing product. Consumer realizes that there is indeed a market leader in the segment and decides to purchase from the market leader.

Result? You just made a sale on behalf of your competitor :)

One example of such a scenario is a hospital called Narayana Hrudayalaya which is primarily known for it's heart care specialty trying to break into the fast growing field of stem cell preservation and banking. They've been advertising on the radio but all that advertising is driving business to the market leader - Lifecell after educating customers about the product.

So what should you do?

Dramatize the difference of your product. In other words, figure out what is different about your product (when compared to the market leader) and then think up a creative way to show up that difference in a way that your consumer will understand. If your product is not different in any way from the market leader in your category, then carefully evaluate your offering. You need to either think of a way to make your offering different or you may run out of money before you beat your competitor.