Outsourcing and Call Center Blog

15 April, 2007

Competition & Product Differentiation I

Filed under: BPO,Call Center,Marketing,Outsourcing — shamrin @ 12:11

On our recent trip through Rajasthan, somewhere between Pushkar and Jaipur, we went through the “marble district” where they are mining, cutting and selling some absolutely beautiful marble. Were the shipping costs not so high, I would have liked to have bought a giant block or two and shipped them home. As we were dodging the lorries carrying tottering multi-tonne marble slabs, praying they would not fall over and crush us, we drove past literally hundreds of small businesses making and selling these slabs. The interesting thing to me was how many marble vendors there were and how each one looked exactly the same. If a person wanted to buy some marble, how would he choose? Or, more importantly, how would one of these vendors stand out? What if you are the 76th shop along the road? What new customer will stop in to see your product, there are 75 other suppliers ahead of you and 100 after you?

I’ve wondered this same thing when visiting souks in the middle east. It’s common to have 20 shops all located right next to each other selling the same spices, dates or fruit. Well I’m no expert on marble nor on Asian economics and commerce theories, but I do know a thing or two about competitive markets in the West and here, if you don’t distinctly differentiate your product and you are in a competitive market, you’re dead meat.

Big fish eat little fish

Businesses that fail to differentiate their products or their overall proposition through features, quality, design, price or some other set of unique points (like being low-cost producer or inventing some new and unique business model) tend to either get acquired or disappear. Like fish in the sea, the fish with a clear advantage get bigger and either eat the little fish or eat all their food so the little fish starve.

What does this mean to us? There are currently a large number of small to medium sized call centres based out of India, over time there is bound to be consolidation (some believe this will happen sooner, rather than later). The financially strong and the ones with a unique product and/or superior business model will survive, the others probably won’t. It might be possible to find some niche to occupy where there is less growth potential and so does not attract the big fish (this we might call the “hiding under a rock” strategy which seems to work for fish as well). But the consolidation will come because markets abhor inefficiency like nature abhors a vacuum and there are economies of scale to be gained in this business. Moreover, the international market, an increasingly the domestic market is crying out for change in the services that call centres, or contact centres if you prefer, provide (more on this in the future).

The marble vendors of northern India have apparently found a way to survive in an utterly undifferentiated market. This won’t be the same with call centres. We operate in a global environment and the global forces of competition act on us in spite of protections provided by the Indian government. I think any independent call centre that wants to grow, prosper and stay independent will need to find the keys to differentiation. I will talk about these keys in a later entry but for right now I will say that price is definitely not one of them.



  1. I’m a database administrator working for a Call Centre company around Asia.

    I thought about creating a “CallCentre” / BPO blog because I’m very interested into the operation side of Call Centres. That is where the calls are done or received.
    I’ve been looking a little bit on the technorati for potential competition and found your blog.
    It’s very new and yet well furnished. You can count me as a reader of your blog. It’s very interesting.

    As for the marble vendors of northern India, I had the same feeling in Thailand. The shops of same category tend to gather in the same streets. That is even more true in China town.

    My theory on this economy is that it stands on 3 big rules:
    1) Having everyone at the same place, the customer knows where to find his goods.
    2) No shop should try to outstand it’s competitor. I suppose there might be some sort of social pressure if somebody tries to play “dirty”.
    3) It’s very likely that the whole area will be handled by a landlord who will make sure that no one would get bigger and more powerful than him.

    In the end, all of them stand at the same level of revenu. Some probably do better because of the location but not much. The habit of the customer will be to walk around, look at prices and negociate rather than just get into the first shop and buy at first price.

    For info, we are setting up a call centre in New Delhi. I might need to travel there in the near future.
    It could be an opportunity to meet. I’ll keep you informed.

    Keep doing the good work!

    Comment by Nico — 14 May, 2007 @ 7:47 | Reply

  2. Thanks for your comment Nico, I’m glad you found this blog interesting. I think your “Souk Economic Theory” sounds quite plausible. My degree is in Economics actually and I’ve always found most of the theory I studied to be quite intuitive, this one to me is not. In any case, I propose that it is a system that does not work in the west and Asian Call Centres (or any other business for that matter) must be mindful that certain concepts that work here will likely not work so well on an international scale. This is the converse of the lesson that we westerners (especially Americans) often learn when trying to export our ideas and approaches to overseas cultures.

    Comment by shamrin — 15 May, 2007 @ 17:50 | Reply

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