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Passionately Pursue Customer Captivity

There are three primary sources of long-term sustainable competitive advantage: customer captivity, economies of scale, and preferential access to resources. Lock on to one of these early and you can build a potentially insurmountable barrier to competitive threats. WebMD intelligently focused early on one of these three: customer captivity.

Wayne GattinellaWhen I pushed CEO Wayne Gattinella to tell us why WebMD has become the leading player in its field, he said, "The brand as in any category is very, very important, as we really did spend time in the earlier years establishing the credibility and the trust in the brand. That's what gives you the headroom to do more." While others might have sought out near-term profits, selecting a portfolio of business that blended together the right mix of risk and reward, WebMD decided to focus on building a brand of trust. Like any online business, it's important to make sure customers believe and trust that their information is protected and that the site is accurate and credible.

As Gettinella explained, "It wasn't many years ago when consumers were concerned about putting their credit cards on the Internet because some unknown person in some unknown country was going to rip you off. And over time you learned the trusted sites, like an Amazon, where you felt perfectly comfortable doing that, and now it's not even second thought."

The challenge is that such sources of long-term advantage take a longer time to establish than the more accessible short-term ones. It is quicker and easier to come up with a fun new feature, or maybe launch a new iPhone app, than to do the harder work of building a really meaningful advantage that competitors cannot copy next year. WebMD understood this early. It saw that its long-term sustainability depended not on clever pricing or flashy content, but rather by single-mindedly building a brand consumers could trust.

Ask yourself the questions below to see how you can capture customers with confidence.

  1. What can you do now to start building customer captivity?
  2. What is your company's strength and how can you communicate that value to your customers?
  3. Are there other ways to capture customers, like economies of scale or preferential access to resources?
  4. What steps can you take now that will have a long term impact beyond any short sighted gain?