Competition Lessons from Zagat: How Brands Fall
My brother shared with me a recent NY Post article on how Zagat, the eponymous restaurant guide that once ruled food ratings is now struggling to fight off online competitors including Yelp.com and Chowhound.com. Much like newspapers Zagat faces an endemic problem: people can now get comparable information for free elsewhere, which has Zagat sweating more than garlic.
The situation made me think of other successful brands such as AOL, Gap, Motorola, and Sears that didn’t anticipate key market trends which cost them leadership positions. Jim Collins’ newest book, How the Mighty Fall, provides a great look into why companies fail. He says that often times they don’t notice until it’s too late.
Unfortunately that may be the case for Zagat. Take for example that over the past 12 months, Yelp and Chowhound have outpaced Zagat’s web traffic by more than 4 to 1. On the surface you could say that this isn’t that bad given Zagat’s 15% annual growth rate. It may be able to find its place as a niche brand, which may be suffice given it’s focus more on affluent segments and loyal “foodies” but the downward trend in the graphic below may be a tall-tell sign that there may be bigger underlying problems.
Unique Monthly Visitors (July 2008 - July 2009)
Data source: Compete.com
For many brands including Zagat, such a downturn could be simply a cyclical side effect or it could be the cusp of a steeper decline that is just beginning. Collins would argue that leading companies never take success for granted; they have a healthy dose of insecurity and neuroticism that keep them in check. We would add that leading companies always keep a close ear to the market. They collect and apply customer insights on a regular basis, which is where marketing can play a much more prominent role in keeping companies moving down the right path.
