Here are 5 strategies companies use to become market leaders.

They have great operations -

Operations that let them be more efficient than you at getting order picked, packed and delivered so that customers’ expectations are exceeded. These efficiencies in operations also allow them to keep their costs down.  At the same time those interested in capturing additional market share invest those efficiencies back into improving the customers’ experience. Walmart.com online exemplifies this quality.

They do a better job at generating word of mouth -

Everything they do is focused in on delighting customers. They are driven by service. They understand that success is a long term strategy and can afford to do what they need to in order to please their customers. They go to every extreme to delight their customers and offer lagniappe in many ways.

They live on “life-time value” metrics. They are driven by a passion to serve and a philosophy that it is easier to keep a customer for life than to try and keep acquiring new ones. These some times over the top efforts that lead to so many of their customers sharing the amazing experiences they have had with the brand. Zappos.com exemplifies this quality..

They deliver as good of a product/service in a more customer friendly way -

I’ve seen this one happen so many times. One day you, the market leader, the first person to market with the product, with significant marketing budgets, and with the hugest market share become aware of some smallish competitor and ignore them because their product isn’t up to snuff.

They slowly start winning customers, that just need the basic features they offer. All the while they keep building up their product/service. However,  from the get go they eliminated many of the hassles of getting started with their business. Instead of a complicated sale processes, or in-the-way sales people they made their pricing transparent and made it easy to sign up online to get started right away. GotoMeeting employed this strategy when competing with Webex.

They do a better job at being found when people need them -

Location, location, location. Budweiser is not the world’s finest beer. However, they sell a lot of beer. Bud dominates so many channels that they are always available. We know Bud and so we order it because often good enough is good enough. Amazon applies this principle online.

Wherever or whatever you search for comes up on their site or on Google as being sold by them. I am not just talking about having a first place ranking for the most competitive single word key phrase, but they have invested in having content (a large portion customer generated) that spans the long tail, from early in the buying process to later in the buying process. Their pages tend to keep showing up time and time again. They thrive on generating content that is relevant and are thrilled to live off the 3 or 4 searches a month for a particular piece of content or obscure product as long as they have thousands of them that people are finding. Amazon has utilized this to keep adding product categories to their vast catalog.

They developed a culture that continuously optimizes the customer experience -

This is different than being customer intimate, it is more incremental, it is about being metrics driven. The key is to focus on key performance indicators that drive success for your business and being relentless and innovative in way to drive up those numbers. They may not often start off as the category leader but through relentless testing and optimizing they gain market share. These companies tend to be less risk averse preferring gradual and continuous change. This is a very powerful strategy for companies to leverage in a down economy, because while your competitors are trying to maintain status quo you focus on constantly improving. Many of Intuit’s brands exemplify this strategy.

How can you leverage these strategies to drive your own growth?

Although the company used last week’s announcement that they’re seeking a buyout as an opportunity to blame a tight credit market and competition from discount chains like Wal-Mart, Borders‚ disappointing performance stems from a failure to take e-commerce seriously.

For Borders not to have an exclusive online presence in this day and age boggles the mind. The homepage is a drab catchall for store locations, gift cards, and company information. The coupons that Borders Rewards members receive via email are good for in-store purchases only. And if you do decide to shop Borders online, type in “Borders.com” and see where it takes you to an Amazon.com boutique, complete with “amazon.com” in the URL.

Why brand your biggest competitor (which, despite market conditions, grew by double digits last year)?

Borders does have a beta site that they’re testing and promoting on the current homepage (Bordersstores.com, not Borders.com), assuring visitors that “whole new Borders experience is coming.” The beta site is very attractive and conducive to buying — except for one minor detail. You can’t buy anything. There’s still no e-commerce attached to Borders, only the ability to “save” a book for pickup at the store nearest you.

To ignore the ways in which online shopping has permeated the lives of untold millions of customers is one of the biggest business failures of this decade.

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[About the author: Michele Miller is a guest contributor for GrokDotCom. Michele is co-author (with FutureNow's Holly Buchanan) of The Soccer Mom Myth "Today's Female Consumer: Who She Really Is, Why She Really Buys". You can buy it online from Amazon.]

This comes after Amazon snuck One-Click past the patent system by changing the word “a” to “the,” and adding the phrase “purchasable through a shopping cart model.” According to Slashdot, lawyers for Amazon “apparently managed to reinstate two of CEO Jeff Bezos’ 1-Click Patent claims that were rejected a month earlier.”

Once again, Jeff Bezos is making his mark on commerce.

Amazonian Customer Disservice

If you don’t get your order on time, just chalk it up to Amazon thinking you aren’t worth it as a customer. Do you think they’re doing this to prevent other companies from providing lousy service?

I recently purchased a set of Sony Ericsson earbuds from Amazon.com. I already knew the type of earbuds, which color, and even the model number I wanted to order. (That’s what we call a “late-stage” visitor.) Amazon didn’t have to do much to convince me to buy. All I wanted was a clear product image, showing what I could expect with my purchase.

I didn’t just want a new set of earbuds; I wanted the Sony Ericsson brand earbuds, since they’re specific to my phone. The product image confirmed that I was receiving a genuine Sony Ericsson product, and I was further convinced by the product title and description. As a repeat Amazon customer, I expected to receive what I was shown (see thumbnail pic).

You’d think Amazon fulfilled my expectation, but no. Here’s what happened…

The headphones were delivered in a flimsy envelope — not quite the bubble wrap-protected box I imagined. The shabby packaging, held together by a piece of tape that looked 10 years past its prime, was an unwelcome surprise. Where was the original Sony Ericsson packaging I saw on the site? It took me about 15 minutes just to be sure this was actually what I ordered (”Is this even an authentic Sony Ericsson product?”). These types of situations are what have kept me away from online auction sites.

Granted, this was a small, $10 purchase. But imagine ordering an expensive watch or handbag online, or even a gift delivered to a loved one. How can you be certain that the product is authentic or will be appropriately packaged and well-presented? We can’t. Instead, we rely on past experiences, product images, and brand recognition to do the job..

I’ve been spoiled by some great e-commerce sites, including Amazon, over the years. They’ve made my shopping experience delightful from start to finish by delivering the product as I imagined it, almost every time. And I’m a loyal customer to those sites. But now I’ve got a strange feeling about Amazon. They’re the industry leader for a reason. They revolutionized online order fulfillment. In fact, they’re supposed to be the gold standard of e-tailers.

Am I expecting too much from e-commerce sites? I don’t think so. In fact, I’m verbalizing what all people who purchase online are thinking — no, expecting. Consumers demand an easy and delightful shopping experience, from the first click to the time the order is in our hands.

I won’t give up browsing on Amazon just yet — they still have great product details and customer-generated reviews — but they’ve lost me as a paying customer for now. And regardless, I don’t see myself buying electronics from them anymore.

All of this makes for a case study. Persuasion isn’t a problem for this particular brand; they have legions of fans around the world and have tens of millions of records in the past 15 years. Still, e-commerce is new territory for them, so it’s time for a crash course in conversion rate marketing. I’m going to show you how, despite selling a reported 1.2 million downloads before the album was even released, Radiohead left £’s (tons, actually) on the table — most of which could have been recovered with better planning, minimal web copy, and a simpler checkout process.

Web Copy in its Right Place = No Alarms + No Surprises

A couple weeks ago, when the band announced they would release their new album online — through their own shopping cart, letting people pay whatever they like — Radiohead was widely praised by media and fans alike. The move was hugely disruptive (especially coming from such popular act) and record executives at the major record labels were left shaking in their boots as the likes of Madonna, Oasis and Nine Inch Nails dropped their recording contracts in favor of (non-iTunes) online distribution. Although they’re said to have changed the record industry with the move online, the impact would have been far more substantial had Radiohead anticipated fan’s customer’s questions in advance and addressed them with proper web copy.

Of the four dominant personality types, the slower-paced Methodical and Humanistic fans were the worst hit. Methodicals were upset because, since past Radiohead albums had been available at 320 kilobits per second (kbps) — a superior bitrate, twice that of the 160 kbps version they received — they assumed they’d be getting the best possible bitrate. Methodicals, and people in methodical mode, don’t like being duped over technical specs. Humanistics, meanwhile, were upset because once their Methodical friends (the detail-focused mavens they are) informed them they were given a second-rate product, and they’re likely thinking this is very “un-Radiohead” of them. This video clip from MTV illustrates the variety of reactions among personality types:

Here’s Radiohead’s In Rainbows website. Although “keeping it minimal” seems to have been a considered design choice, some basic copy at each stage to let people know something, anything about the album would have kept word-of-mouth focused on the you-choose-what-to-pay conversation — or even, say, the album — instead of what they didn’t do. The good news for the band, though, is that if they really did want to start a conversation about what music’s worth (as their guitarist mentioned to Rolling Stone), they’d done an amazing job of it. For instance, PureButtons.com paid $1,000 for the album — but the difference between them and Radiohead is that the button company has its online marketing in order (evidence).

A Fitter, Happier, More Productive Checkout

Before purchasing the album, I wanted to see what my friends in the music biz had to say. For instance, URB Magazine editor Joshua Glazer offered this anecdote:

“Funny thing, I couldn’t be bothered to figure out the shopping cart on Radiohead’s site. I tried to enter something in the ‘amount’ space (or what I think was the amount space) and it stayed blank. It was just too vague, so I still had a friend IM me the MP3s. “

As promised, I bought the album at the full, would-be iTunes price of $9.99 (or £4.90). Josh was right, though. They didn’t exactly make this easy.

Unfortunately, this is all too common. There’s no good reason to ask people to register before checkout. In this situation, all they really need is a name, credit card number, address (to verify credit card), and check-box to agree to terms and conditions, and a button that says something like “Place My Order.” If there’s any registration you’d like to lure people into, they need to know why they should do it. It’s like proposing marriage on the first date. Still, it’s the next step that makes the least sense.

Of course, there were two additional steps. I had to enter my credit card info on the following page, with a confirmation page after that. But all of this could have been handled in two steps had they offered registration as an option on the confirmation page instead of hitting me with this hurdle. Also, it would have been nice to know how many steps there would be. A simple breadcrumb indicator at the top to illustrate the steps (e.g., “Step 2 of 4″ or “Register”) would have been nice, as well. People — especially fast-moving Competitive and Spontaneous types — like to know how long things will take. Nothing bleeds the joy out of music like signing a web form. They could have also made this easier for Competitive and Spontaneous types by adding Google Checkout or PayPal as one-step options.

I did finally receive my digital copy of the album. After a couple of listens, it’s pretty good. Not exactly a departure from what they’ve done over the past five years, but they’ve definitely still got it. I’m not quite sure why people are complaining, either. The sound quality is good enough for me, as was the price.

P.S. — If your b(r)and wants to convert multi-channel to multi-platinum, we can help.

[Hat tip to the Wizard of Ads Group's Tim Miles for linking me to the MTV News story, and reminding us that "you can't outrun word-of-mouth." And, in case you're interested in how the music business shot itself in the foot, leaving room for bands to go it alone online, Don Dodge can tell you all about it.]

But that depends on what your definition of the word “free” is. If city governments pay, taxpayers flip the bill. If Google picks up the tab, “free” means ad-supported. Any way you slice it, innovation isn’t free, and Wi-Fi doesn’t mean what it used to. That seems to be why Google recently announced its Wi-Max ambitions and plan for creating a free wireless mobile network.

We’ve seen this before. Back in 2005, Google claimed it would give free Wi-Fi to San Francisco residents, which it hasn’t — yet. Meanwhile, several U.S. city governments, moving at a snail’s pace, have been talking about “municipal Wi-Fi” for years. Very few have made it happen, and the ones that have are regretting it to various degrees.

As it turns out, what’s good for Spokane, WA, may not be work for Philadelphia, PA.

BusinessWeek’s Olga Kharif reports on “Why Wi-Fi Networks are Floundering“:

While 415 U.S. cities and counties are now building or planning to build municipal Wi-Fi networks, “deployments are slowing down slightly,” says Esme Vos, founder of consultancy MuniWireless.com. Vos’s tally still marks a nearly 70% jump from mid-2006, when there were 247 muni Wi-Fi projects on tap, but that’s down from the torrid pace of a year earlier, when deployment plans doubled.

Perhaps the clearest hint of trouble ahead is that some of the companies partnering with cities on these projects, including EarthLink (ELNK) and AT&T (T), are having second thoughts about remaining in the municipal Wi-Fi business.

In San Francisco, recent developments have left many observers scratching their heads over whether that city’s Wi-Fi project, announced more than a year ago, will ever get off the ground. In July, the president of the city’s Board of Supervisors revealed that he was seeking to change the terms of the preliminary contracts awarded to EarthLink and Google (GOOG)

Could it be? Is Google the “deadbeat dad” of free wireless internet service?

I wouldn’t count on it. Creating a Wi-Fi grid for a city as hilly and tech-obsessed as San Francisco is way more complicated than partnering with Sprint to retrofit its existing cell phone towers with longer-range Wi-Max equipment. (In the past, they’ve explored other alternatives )

Google is playing it smart by stalling on free Wi-Fi. Perhaps they spoke too soon, but they’re planning their business model from every angle before giving it away for free in the form of Wi-Max.

Maybe the cities should have done the same. Being an early adopter is great, so long as you’re not stuck with outdated technology to support the huddled masses and their $1,000+ laptops.

UPDATE — GigaOm reports that a company called Meraki will give San Francisco free Wi-Fi. It would seem they’ve beat Google to the punch if not for the fact that Google & Sequoia Capital funded Meraki earlier this year.

Consider the numbers:

• 6 years since the iPod’s release (November, 2001)
• 4 years of iTunes Store (April 2003)
• 3 billion downloads
• 5 million songs available (as of today)
• 100k iPods sold (as of April)
• 12 songs per album
• Just over 2 albums per ‘Pod (since April ‘03)

Of course, you can upload any music you’ve bought, “borrowed,” or stolen onto an iPod, and surely there are iTunes customers who use another device. In just 4 years, iTunes has become the #1 music retailer on the Web and #3 overall, next to Wal-Mart and Best Buy. But while iTunes may be the default online music store today, they’ve done precious little to innovate.

Meanwhile, rival EMusic, the Web’s #2 music retailer — which, unlike iTunes, is not ignoring the long tail — just launched a mobile store; a coup for independent music distribution. It’s not just indies; big-name artists are fighting back. Today, multi-platinum rapper Eminem announced he’s suing Apple because of iTunes’ shady deals and slim margins. And let’s not forget that EMI and other major labels have teamed up with Amazon to compete with Apple, or that the biggest record company in the world dropped iTunes last month.

They may have “5 million” songs available today, but soon you won’t even be able to buy any U2 songs to fill your red U2 iPod.