Entering into a market dominated by incumbent is a daunting task for startups. Incumbents usually have huge financial resources to back them up. They have a known brand and established customer base. In such scenarios, acquiring and retaining customers is extremely tough for startups.
Big firms can afford to take incumbents head-on while entering a market by leveraging their brand and financial position. For instance, Microsoft is trying to take Google head-on with Bing. But that’s often impossible for startups. Startups have to be innovative in products or business model to be successful in such markets.
Here are three examples of strategies adopted by startups to penetrate markets already dominated by incumbents:
Verticalization of market:
Verticalization is segmenting the market into industry verticals and focusing on specific segment. This strategy is successfully adopted by quite a few startups in the past. For example, Kayak penetrated search market by focusing solely on travel search. Another example is Greplin. Greplin is a search engine for social networks. It connects with social networking platforms such as Twitter, Facebook and Linked-In and searches within these platforms. Social search market is nascent and Greplin has huge opportunity in front of it to grab a piece of search market that is already dominated by Google.
This is obvious one. Solve the same problems for the same set of customers but innovate on product to serve customers better. Example is Hipmunk. Hipmunk is travel search tool. It helps you create travel plans by searching flights and connections. It innovated on the way results are presented to create a much better user experience. Hipmunk is taking on giants such as Kayak and Orbitz. I find using Hipmunk much more convenient than some of the existing travel search sites.
This is another classic strategy that startups adopt. Focus on specific geography that is unexploited by incumbent and take first mover advantage. Flipkart.com has done this successfully in India. Flipkart is online retailer of books in India. Their business model is same as that of Amazon. Amazon is yet to enter into Indian market and Flipkart already has first mover advantage.
What are some other examples you have seen?