One of the great beauties of digital innovation is how quickly and economically an idea can go into production. Whether a large corporation is seeking a digital renovation or a group of entrepreneurs is vying to launch the next million-dollar online startup, the time and investment involved is marginal compared to what they would have been in the brick and mortar world of the past. Making changes or upgrades is also easier and cheaper—plus they can practically be implemented in real-time.  In many ways, this makes business in the digital world less risky, and less encumbered by barriers to entry. But these same advantages can also become a major threat in a big way: in a digital world, how do you fight off copycat contenders?

copy catIn the digital arena, anyone can sit back, wait for someone else to come up with a potentially great idea, and enter as a deeper-pocketed rival only if it proves to be successful. Consider a financial institution that, after months of strategic meetings and painstaking deliberations, decides to invest in a controversial (not to mention pricey) online customer service portal that could present huge cost savings and provide efficient 24-hour service if successful, but result in huge losses if customers don’t embrace the new technology. As the company moves forward and makes headlines with its bold decision, competitors watch from the sidelines as the repercussions unfold, making internal arrangements to follow suit if the portal flourishes—and capitalize if it fails. This type of scenario has become a real hitch for digital pioneers: once a visionary executes the thought leadership, doles out the investment, and undertakes the risk and grueling implementation, anyone can come in and swipe the blueprint.

For a modern-day example of digital copycatting, simply look to Groupon, the online couponing site that has become a sensation among consumers and businesses alike. Inc. Magazine reports, “The quickly growing start-up — which some estimate will soon exceed $400 million in annual sales — has also discovered a slightly more painful truth: that its lucrative business model will continue to attract a formidable army of skilled copycats as long as there is money to be made.…Because the concept is so easy for consumers and local business owners to grasp, it has also been ripped off perhaps more than any other online service in the brief history of the Web. Thousands of Groupon clones have sprung to life in markets stretching from Latin America to China.”

So the question is:  Is the innovator always the loser, the risk-taker that finances learning and ideas for everyone else?

The truth is, in the digital world, all innovators are guinea pigs under a spotlight. Once a new innovation launches, it will be closely watched until it manifests some sign of success or failure, particularly if it’s coming from a recognized brand or promising start-up. And as soon as it does, there will be thousands of media outlets and bloggers reporting on the progress—or lack thereof. The market will inevitably respond accordingly–if the concept is blatantly successful, emergent copycats should only be expected.  But although digital impersonators can be a legitimate threat, the innovator can still come out as the unparalleled winner. Here are 3 ways how:

  1. Truly leverage first-mover advantage. As the visionary forerunner, there will always be a window of time between your launch and the time it will take a copycat to catch up, even with digital momentum. This window is a huge opportunity in securing yourself against future contenders. During the initial post-launch period, things are often hectic as functional glitches and practical implications are still being ironed out—so it’s easy to put marketing, PR and branding on the back burner until things have settled down. However, a powerful marketing campaign should be an integral part of your launch strategy, and ideally, should be strategized far ahead of time. It is essential to tie your new digital concept with your brand—so that an initial association will be made in consumers’ minds. For example, ESPN presented a real paradigm shift to its digital advertisers when it began offering a premium advertising product allowing them to target visitors based on various consumer attributes, including interests, demographics, and affluence. ESPN named the exclusive offering “ESPN Select”, setting it apart from ad packages offered by various competitors.  There is always something to be said for “the original”, and studies show that consumers are naturally skeptical of newcomers in a space they already know. Heavy branding during the early phases of a digital launch is absolutely essential to positioning yourself in this new space in the consumer’s minds.
  2. Frontload your marketing budget. Your budgets may already be strained from development and implementation costs, but now is not the time to skimp on marketing. Let’s take another look at Groupon: despite thousands of competitors, the latter remain virtually unknown, while Groupon has become a household name. But what’s less known about Groupon is that its marketing spend was reportedly equivalent to 94% of gross profit in 2010. Groupon hired Crispin Porter + Bogusky, often revered as “the world’s most awarded ad agency” early on in its inception. The ensuing marketing success not only helped the startup’s international blowout, but created real barriers for entry to any incoming contenders. In December 2010, Reuters recounted the story of Todd Rideman, who personally invested $100,000 to launch WowWhatSavings, a Groupon copycat targeting the Boston area. But while he was able to sign up merchants, he was unsuccessful in driving traffic to the site. Six months later, he had just a few thousand people on his distribution list, compared with Groupon’s 115 million.  A planned, front-loaded marketing budget creates scale and recognition early on, which is invariably compounded by viral buzz and media coverage.  The result is a strong brand, or a strong association with an existing brand–before copycats have the chance (or money) to catch up.
  3. Invest in deep analytics & segmentation. Creating a positive user experience is the most important part of a digital launch. Even if you follow steps 1 and 2 successfully, everything crumbles if the user ends up with a negative impression of the new digital experience. This will instead create negative branding, negative PR, not to mention a very negative ROI. One key to avoiding this hazard is to plan and budget for glitches as well as quick changes and adjustments during the initial stages of the launch (Never count on a perfect pilot). But a deeper solution for both the short and long term lies in analytics and segmentation. While digital consumers are spending more time on the web, studies show they’re abound with more choices and advertising messages than ever, and are demanding more real-time action to get and keep their attention. A vital response has been heavy personalization, which allows digital services to customize its offerings and marketing messages to each unique user. This involves everything from information gathered during registration to unique browsing activity and targeted e-mail marketing. The savvier the analytics, the savvier the segmentation capabilities: some sites create a completely different user interface depending on the user specs. Investing in analytics and offering a targeted experience to distinct segments means offering digital users the best user experience and a highly distinctive product—something that will take competitors significant time and difficulty to match. By investing in analytics from the very beginning, you’ll have a wealth of customer data that you can start using far before copycats can even begin collecting it—consistently keeping you far ahead of the curve.