Competitive Imitation
A case study illustrating how small businesses can face unexpected threats from larger competitors copying their products, forcing difficult strategic decisions about pricing, differentiation, and brand loyalty.
THE IDEA
SITUATION
(Note: All the facts in this clinic are drawn from a case study in Inc. magazine, written by Jennifer Alsever. See endnotes for link.)
Kim Etheredge and her friend Wendi Levy cofounded Mixed Chicks, a brand of hair products for mixed-race women. After eight years of work, they’d built up the annual revenues to $5 million. Then, in February 2011, Kim got a disturbing e-mail. One of the retailers who stocked Mixed Chicks reported that Sally Beauty Supply—a retail giant with $3 billion in revenue—had just started marketing its own line of products for mixed-race women. The name? Mixed Silk. Etheredge couldn’t believe it. An hour later, another retailer called with a similar report.
Etheredge and Levy sent out a colleague to buy a sample, and when they saw the Mixed Silk product, they were furious. It was a rip-off of their own product, they felt, with a similar bottle and package—even the same fonts. And it sold for about half the price of their own product.
They were unimpressed by the quality of Mixed Silk, but they worried that customers wouldn’t know the difference when they saw the two products side by side. Soon, they heard from more retailers, who reported that customers were buying the cheaper option.
When to use it
A startup with a unique product faces a copycat from a market leader.
A niche retailer sees a big box store launching a similar private label.
A software company finds a competitor mimicking its features and must decide whether to innovate or compete on price.
A premium brand is undercut by a low-cost imitation, forcing a reassessment of marketing and positioning.
FROM THEORY TO EVERYDAY LIFE
In practice
Mixed Chicks vs. Mixed Silk
Mixed Chicks had $5 million in annual revenue when its founders learned that Sally Beauty Supply, with $3 billion in revenue, was selling Mixed Silk. They regarded the similar packaging and fonts as an imitation. Retailers reported customers choosing the cheaper product, which sold for about half the price.
A MOMENT TO REFLECT
Put it to work.
How should a small business react when a large competitor copies its product?
What factors should be considered before lowering prices in response to a copycat?
How can a company protect its unique value proposition when facing imitation from a market leader?
CONTINUE THE CONVERSATION
Source texts
- Decisive How to Make Better Choices in Life and Work (Chip Heath)