When foreign companies attack your target market
Many startups think about building and testing their product, their marketing and their sales strategies in Australia and then taking their product into the much larger markets in Asia, Europe and the United States.
But what happens when your export plans are interrupted by a large, well-funded competitor entering the Australian market?
That is exactly what happened to Marketing4Restaurants.com, a company with a team of seven (and growing) that provides restaurants with online tools to find new customers and turn them into repeat customers. One of our products is an online booking feature which has been growing at around 8% per month and on a good day does 6% of all online bookings in Australia.
In December we discovered that leading European online booking company Restalo had raised $10 million for the express purpose of entering the Australian market – that is a significant war chest. (Although we have seen others spend more trying to build market share in Australia and still not get cash flow positive.)
They were probably focused on the largest online booking company in the world, Open Table, and seeing that they weren’t in Australia, they may have seen an opportunity. We sat down and came up with a plan to address their entry into our market.
We came up with the following action plan:
- Focus on what we do well. We focused on our competitive advantages – our bookings product is offered free and we never share a restaurant’s customers’ details. This is very different to our competitors and we ensured our marketing clearly got that message across.
- Educate our team. We made sure that everyone in the team knew about Restalo, what they offered and why we thought we were a better choice for our customers. This meant that every time it came up in a conversation with a customer, our team had all of the answers.
- Educate our market. Facebook and blog articles generated a lot of very targeted traffic, and provided us a very cost-effective way to get the message out to our prospects.
- Fight for information. We spoke to their customers, we searched to see who they were hiring and we talked to other companies in the industry, so we had a clear idea about what they were doing and what their strategy was. We learnt that they had 130 employees and we viewed that as positive for us. We are nimble and we are often a little cheeky in our marketing and being a small company makes that a lot easier.
- Home field advantage. Entering a new market means understanding their culture and language and Restalo had some issues with website and text. This highlighted to us the difficulty of entering non-English-speaking countries.
- Don’t panic! We knew our market and the largest player has less than 25% of the market (and decreasing), so it is quite fragmented and in reality another player with a decent share of the market wouldn’t be a particularly bad thing, because it meant that no one would have a dominant position.
We made sure that everyone was kept up to date with developments. Luckily, we didn’t lose any customers to Restalo and were able to continue growing fast enough that it was placing pressure on our provisioning system, which I guess is a great problem to have. In mid-May, we discovered that Restalo had pulled out of Australia.
They realised quickly that they were going to struggle to make their targets, tried a few adjustments to the plan and when they didn’t work, they moved on. They have gone back to Spain with a large part of the money they raised intact, and live to fight another day. We have seen others in this industry spend well over $10 million and still not be able to make it work.
For fast growing startups, it is a lot more fun playing offense, but at times we need to devote some time to playing defence and by spending a little time planning out the response. The competition is a great thing for us because it has reinforced our faith in our product, made us think about strategy and what our customers think of us and it has definitely forced us to make our marketing more focused.
James Eling is managing director at Marketing 4 Restaurants.