Who are your competitors? It’s not as simple as it sounds. How you answer the question can be the difference between a successful or a failed growth strategy.
There are a couple tricks to preventing this fatal strategic oversight. As someone with small children, I spend many nights reading Dr. Seuss. So, in the spirit of The Cat in the Hat, here are a couple of things to consider.
“I know some new tricks,�? said the Cat in the Hat. “A lot of good tricks. I will show them to you… You will see something new. Two things. And I call them Thing One and Thing Two.�?
- Dr. Seuss (1957)
Thing One: Your competitors might not be obvious.
There are likely multiple answers to the question “Who are your competitors?�? Why? Well, competition exists at different levels. Which competitors are most relevant depends on the occasion in which the customer is purchasing or using your product.
Thing Two: Your customer decides who your competition is, not you.
You can do your best to influence your customer’s frame of reference, but ultimately she decides what your offering is good for and how it compares to everything else in her life. And it’s the customer’s frame of reference, not our own, which influences buying behavior and thus our financial success.
Just as the Cat in The Hat opens his “FUN-IN-A-BOX�? to entertain on a rainy day, digging into customer insights can shine light on competition from your customer’s viewpoint. Recently, I’ve witnessed three Vennli clients surprised by customer insights related to their competition.
Example 1: Healthcare electronic diagnostic tool
A company developed a comprehensive electronic tool to help diagnose a particular set of conditions. The developers were confident there was nothing on the market quite like it – that it marked the beginning of a new category. The primary competitor was thought to be traditional pen and paper-based diagnostic methods.
However, when we surveyed physicians and practice managers, we found that the vast majority was aware of alternative electronic tools, and almost all respondents said that they were planning to use one. Digging deeper, we uncovered that several large technology platforms had a less comprehensive tool available. Therefore, in the eyes of their customers, this company’s product had many direct electronic competitors. Instead of focusing their attention on converting physicians from pen and paper methods, the company needs to understand its unique position relative to other electronic tools that come bundled with a practice’s existing technology platform.
Lesson learned: It can be tempting to believe that our product or service is truly unique. Sometimes we may be blissfully unaware of alternatives similar to ours. Talking with customers and prospects can quickly clear up our misconceptions.
Two questions I recommend asking are: “How would you define [product category]?�? and then follow-up with, “What would you do if [your product] was not available?�?
For example, “How would you define mobile wallet? What would you do if Apple Pay were not available?�?
Example 2: Industrial packaging product
An industrial packaging market leader was concerned about the erosion of market share from smaller, aggressively priced competitors. They came to Vennli seeking to differentiate and restore profit margins.
However, the market for the product category is projected to shrink. This was confirmed by surveying customers, many of whom indicated that their demand for alternative packaging was increasing due to several perceived benefits.
Therefore, a two-pronged strategy is needed to address competition within and across the product category. Perceived benefits of the new packaging alternatives can be addressed through messaging efforts to customers. Changes to their product portfolio should also be considered in order to take advantage of growth in new alternatives.
Lesson learned: We can get so embroiled in the day-to-day battle with our direct competitors that we forget to look to the horizon. If the size of your market is stagnant or falling, you have a much bigger problem than winning market share, especially if you are the market leader.
When speaking with customers, I recommend leading with “What would you do if [your product] was not available?�? Then, follow up with, “What are alternatives outside of this that could fulfill your business need?�?
Example 3: For-profit private university
A for-profit university just opened a campus in a new location. They offer a degree program in a high-demand specialty. The market is crowded with other local for-profit universities, non-profit private universities, and public universities offering similar degree programs.
The university expected that it would have strong competition particularly from one popular for-profit university. While this was confirmed, it was surprising to learn that their current students did not commonly consider other for-profit universities in the area.
Of students who considered the for-profit program, it was surprising to learn how many students chose the local public university. This was contrary to some preconceptions about the target market of the for-profit university. It was also surprising to learn just how strong of competitors the large non-profit private universities were to this new for-profit university.
Lesson learned: We tend to buddy up in highly diversified markets. We identify the organizations most like ourselves (for-profit universities in this example), and we assume they must be our fiercest competitors. Even our most loyal customers may have a more liberal view of their alternatives in the market than we do.
Uncovering this information is as simple as asking customers or prospects, “What other alternatives did you consider?�? or “What other alternatives have you chosen in the past?�?
Top-line growth depends on customers choosing our offering over competing alternatives. Therefore, it’s vital that we understand which alternatives they consider. Those alternatives may not be limited to direct competitors, so it’s worth talking to your customers. You may learn something new.
“Have no fear, little fish,�? said the Cat in the Hat. “These Things are good Things… And so, I will show you another good trick that I know!�? - Dr. Seuss (1957)
Watch for a coming blog post on how to think about different levels of competition.