Marketing Arbitrage

Crush Your Competition by Exploiting the Arbitrage in Your Industry

Marketing Arbitrage

Are the businesses in your industry using all marketing options available to them to their full potential?

The answer is no.  And in many industries, the answer is, “not even close”.

If you take the time to study your industry and your competitors, you will find that there are numerous examples of marketing arbitrage ready for you to exploit.

What is Arbitrage?

Arbitrage is a term traditionally used with financial instruments like commodities and stocks.  There are sometimes differences in the price someone is willing to pay for a financial instrument and what people are selling them for. Arbitrage is the exploiting of this middle price area where you simultaneously buy and sell that financial instrument and make a profit off of the price difference between the two.

You use arbitrage all the time.  A simple example is going to a garage sale where you see an antique table selling for $10.  You know it is worth more, so you buy it and then resell that table on Ebay for $50.  You took advantage of the arbitrage in what the table was selling for and what it was actually worth.  In this case you made a cool $40 because you were able to spot the arbitrage where no one else was.

If you are in a service industry like mortgage brokers, real estate agents, cleaning companies, you probably know of several companies offering to sell leads to you for a price.  These companies are already taking advantage of the marketing arbitrage in your industry.  In this case, they know they can get a lead at a certian price and then sell it to you for a much higher price.

So now that you understand what arbitrage is, do you see how this can be applied to marketing?

Marketing Arbitrage

Marketing legend, Jay Abraham, was the one who introduced me to the concept of looking for marketing arbitrage opportunities.

I'm primarily an internet marketer, that is what I sell and where I spend most of my time.  But I also own another business where we spend plenty of time and money on traditional marketing so finding marketing arbitrage opportunities is not just for online marketing.

You can find marketing arbitrage opportunities in many areas, like where businesses are marketing, how they package/position their product or bringing ideas from another industry into yours.

Finding the  Arbitrage in Your Industry

In some industries, marketing arbitrage is easy to spot.  Many traditional industries are still stuck in the stone age,  thinking that a Yellow Pages ad or a roadside billboard places you in on the cutting edge of marketing.

Lawyers, especially older firms, are an example of an industry still living in the past.  I personally know of two lawyers who have been paying for Yellow Pages ads for over 25 years just because that is what they have always done.  Neither of them have a website.  Yes, no website.

Car dealers still spend the vast majority of their advertising budget on billboards and newspaper ads.  They still go with the outdated  motto of, “people are coming through the door and buying cars so it must be working”.  What a waste of money and what an opportunity for the car dealer down the street who is ready to venture into new marketing territory and to think differently from their dinosaur peers.

On the flip side, you have many internet first companies spending 100% of their resources with online marketing, which is why you are seeing some internet companies starting to use more traditional methods of advertising, they are looking for areas of opportunity in their industry that are not being exploited.

While many of the arbitrage opportunities we are speaking about revolve around marketing, you can find opportunities in the actual product/service, technology and how you deliver your product/service.

If you want to spot the opportunities, then you need to study what your industry and competitors are doing to market themselves.  Search online, subscribe to competitor newsletters, buy the local papers and look through the ads.  Buy their products, call their companies, let their sales reps give their pitch to you (or a friend) You need to know what your competitors are doing (or not doing) before you can find the arbitrage and exploit it.

Some questions to ask.

  • Where are they spending their time and marketing dollars?
  • Who are the innovators in my industry and what are they doing differently?
  • Who really impresses you with their marketing?
  • What was the last big change or innovation in your industry?
  • Are the businesses in your industry marketing the same way they did 10 years ago?

What you will usually find is that there are a handful of first movers who are always on the front line of news things, some do it very well and some are still trying to figure it out.  The majority of your competitors though are still stuck in the status quo, going along with everyone else like a school of guppies.

Some industries innovate faster than others, but many are just waiting for someone to come along and turn the industry upside down.  In your case, you don't have to turn your entire industry upside down (unless you want to), just your local market.

Examples

Diamond Candles

Candle making is thousands of years old.  It's an industry, for the most part, that has been left unchanged aside from new scents and candle shapes.  Unless you sell bulk, it doesn't really make sense to sell online since anyone can go their neighborhood box or dollar store and buy a candle.

Diamond Candles came in and turned the candle industry on its head.  And they did it with no budget, no prior experience in candle making and no connections in the candle industry.  I believe last year, they had revenues of over 20 million dollars selling candles online and they have only been in business a few years.

So what did they do differently?  

They looked at a complacent industry and looked for ways to bring innovation to it.  They used the classic “combining” creativity technique and brought together two industries.  Candles and jewelry.  Every candle has a ring inside it, with some of them having a diamond ring inside it.  So when you purchase a candle from them, you get the suspense of waiting to see if there is a diamond ring waiting at the end of your candle.  People have gone nuts of this concept and has spawned dozens of copycats and variations on this concept to the candle industry.

If you want to learn more about the creative technique of “Combining” along with dozens of other creativity exercises, read the book, “Thinkertoys”, by Michael Michalko.  It is the best book I have found on creativity.

Uber

The Taxi and Limousine Commission has left the taxi industry virtually unchanged in 50 years.  They still use the same radios, pricing system and equipment they have always used, despite numerous opportunities to bring innovation into their industry.

Along comes Uber, who said, “people getting frustrated not being able to hail a cab, yet there are thousands of people driving around in their cars who would love to make some extra money”.

So what did they do differently?

They combined technology and an untapped workforce to democratize the taxi industry, allowing just about anyone to make some extra money whenever they feel like it.  They also made a lot of enemies and pissed a lot of people off along the way, but like it or not, that's how you innovate.

Is your industry underutilizing technology or other resources that you can exploit?  I bet if you do an hour of brainstorming you will find at least one gold nugget on your list of ideas.

Similar to Uber, Airbnb has disrupted the hotel industry and has turned anyone with a rental property or a spare bedroom into a hotelier.

Some Arbitrage Ideas For You

There are hundreds of opportunities waiting for you, but below are some ideas and examples to get you started.

Online Marketing

I have a client who uses Google Adwords for their Pay Per Click marketing.  Problem is that virtually all of their competitors are on Google Adwords, with a single click costing over $20.  But when it comes to Facebook Ads, there is only one other competitor on there, leaving the entire platform wide open for us to dominate it and at a fraction of the cost of Google Adwords.

Look for online marketing opportunities in your industry that your competitors are ignoring or don't really understand.  This could be SEO, paid advertising or email marketing, the point is to look for the gaps and opportunities you can leverage.

Sales

Are your competitors only using outbound sales practices like cold calling, door knocking, email marketing?  If they are not using inbound marketing strategies then that is a golden opportunity for you to leverage your expertise to become the thought leader in your industry.  Think of Dr. Sears for pediatrics or Seth Godin for marketing.

On the flip side, if everyone is focusing on creating content and waiting for the leads to come to them, go out and initiate some outbound sales practices and account based marketing for your business.  The key is, if the norm in your industry is to do “X”, then go and try “Y”.

Product/Service Innovation

If you offer a service, look at productizing some of your offerings.  If you have a product or service, think about how you can bring a product or idea from another industry and apply it to yours, just like Diamond Candles did.

Create value propositions that will make your competitors too scared to match.  An unconditional money back guarantee is something most businesses are afraid to offer, but can increase sales by 10x.  The truth is, and why most retailers like Amazon offer them, is that the rate of return is minuscule compared to the increased revenue they get by doing something others are afraid to do.

If you want to listen to how it's done from an expert, click here to listen to Tony Robbins interview Jay Abraham.

If the standard warranty for you industry is 1 year, make yours 5.  You've seen this in the auto industry over the last few years where standard 3-year warranties have become 10-year bumper to bumper warranties.

If people come to your business, then go to their homes.  If your product comes in a certain size, offer more sizes.  Use healthier ingredients in your products or just offer more of it at the same price as your competitors.  Start a generous loyalty program or awesome value adds with every purchase.  The thing is to look at what your competition is not doing, or doing poorly, and leverage it to your advantage.

Partnerships

Make strategic partnerships in your community.  Other businesses, non-profits and local government are all ways to stand out from your competitors.  Most of your competitors probably don't have the time to do this kind of business development, but strategic partnerships can not only grow your business, they can also give you leverage in your community that your competitors can't easily copy.

Find the arbitrage opportunities in your industry

Now that you know what arbitrage is, examples of how other companies used it and some ideas to get you started, where is the arbitrage in your industry and how will you take advantage of it?

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Gary

CEO at 3Bug Media
Gary Shouldis is the founder of 3Bug Media, a web marketing company that helps businesses create 360 Marketing Strategies to dominate their market. His blog is read by over 15 thousand small business owners a month and has been featured in the N.Y. Times Small Business, Business Insider and Yahoo Small Business.