Not for beginners: Why new market entrants quit easily

In the just-concluded English Premier League season, Sunderland was one of the teams that attracted much attention.

Promoted from the Championship to the English Premier League during the 2024-25 season, and in just under one season, Sunderland impressed on the pitch, finishing in seventh position and qualifying for the Europa League.

Not many expect it to survive top-flight football next season, but the team is like the unheralded small-market entrant that’s written off long before its presence is felt because it doesn’t command a large financial muscle or speak the big-business language when setting up shop.

But over time, it begins to cause a tectonic shift that puts established brands in similar fields under pressure.

That market monopoly could have invested heavily in that market segment, making competition stiff, as other businesses find it hard to dislodge it.

We’ve seen in the past how local market monopolies have successfully stifled competition from new market entrants.

GTV and Kwese TV, for example, attempted to bring competition to a leading brand in the cable television business but did not survive the tough local business terrain.

The same is true of the South African Castle beer brand, which lasted briefly in the local market. Here are a few reasons why they may not have survived. 

Hype

When a company is about to launch a new product in the market, there’s always hype surrounding it.

Everyone will want to experience it if it’s a service launch or something innovative that promises to be an industry disruptor. Remember, some companies have a monopoly on pricing power and can adjust service prices, and everyone will pay the same without complaint because their services are essentials we can’t do without, like electricity or gas.

If the new hyped product or service is seen as bringing the needed competition that will see consumers torn for choice, then be it.

But what if that hype doesn’t live up to its billing? Because customers beat a path to your door doesn’t translate into a large customer base, as building a brand and customer base takes time.

Remember, customers may have been enticed by that low pricing compared to what the competing business is offering for the same. After sampling what you have to offer, you may never see them again as foot traffic dwindles. 

Intent

If you model your business on an existing one in the hope of dislodging it from the market and “inheriting” its customer base, put your foot on the brake.

You’re probably not in the market to address a need or fill a gap, but to outcompete an already established market leader.

It may even be worse when the competitor employs unethical means to drive the rival out of the market.

Consider the case where, in this age of artificial intelligence, AI is weaponised and used to wreak havoc on the competing business, for example, by taking its systems down. Locally, look at how new entrants have tried to compete with market monopolies and closed shops. That should be food for thought.

Who remembers G-TV and Kwese TV, which exited the market, leaving customers with useless decoders? It’s the same with South Africa’s Castle beer.

Be creative or original

Don’t try to “copy-paste” someone else’s business model just because you want to capitalise on their success. That means you have nothing new to offer.

Before you know their success story, what did they go through to get to where they are today?

It pays to be creative or original in everything, as you don’t know whether taking that less-trodden path is where your potential lies.

If you look around and see someone finding success in a snail business, you’ll see another person establishing a similar business at their doorstep and tapping into the former’s customers.

Think of something else to rival or supplement such a business in different aspects, instead of competing it out of the market.

Loyalty

When the hype after a product or service launch has died down, how do you know you have a client base?

Do you have what it takes to see customers stick with your product or service and become loyal or repeat customers?

Take the example of local telco companies. We all know Telkom Kenya was the market leader in telephony services but it let that opportunity pass by when it refused to innovate after mobile phones entered the market.

Instead, it saw the expansion of pay phone booths as its core business strategy.

Then came new entrants, and the rest is history. As the current market leader in the mobile services business, how will you have customers locked into your services or what you have to offer?

As with building a brand from scratch, the same applies when it comes to customer loyalty.