As a kid, I loved Sesame Street - especially a game called, “One of these things.�? The audience was invited to identify which of the objects in the set of four that was “not like the others.�? Sometimes the objects were shapes; other times they were children doing different activities. Either way, the goal was the same— determine which were similar and the one that was different.
The answers on Sesame Street are always straightforward. As an adult, I sometimes find myself facing a similar challenge but with greater complexity. At Vennli, I often assist our clients in identifying their relevant competition in the marketplace. This is trickier than it sounds. If we don’t have the right level of focus, it’s easy to end up with a mixed up competitive set. Cracking this challenge ultimately leads to more actionable customer insights and better growth.
At Vennli, we break down a business’s growth strategy into narrowly defined “growth challenges�? that focus on a specific customer making a choice between the company’s offering and competing alternatives. Growth depends on our customers choosing us rather than someone (or something) else. But which competition is relevant when we’re crafting our strategy?
To answer this, we need to understand how customers make choices. There are different levels of customer choices - from the brand she buys to the way she uses the product. First, we need to identify the specific choice being made, and then we need to identify the alternatives from the customers’ point of view. (My recent post discussed how the most relevant competitor preventing you from reaching your growth goal might not be obvious. Ultimately, it’s your customer who decides your competition, not you.)
For example, let’s pretend you’re a fat bike manufacturer. Who are your competitors? Clearly, other fat bike manufacturers are competitors. But wait, the fat bike is a relatively new bicycle category. (Raise your hand if you just Googled “fat bike!�?) Not everyone is aware of fat bikes. There are probably few people actively in the market for a new fat bike. You would do better to focus more on growing the fat bike market as a whole than beating up on your nearest fat-bike-manufacturer neighbor.
Where to start? Consider a few customer purchase scenarios:
- A child is looking for a bike, sees a fat bike at a big box retailer during a shopping trip with her parent and decides that is the bike for her.
- An outdoor enthusiast sees a fat bike and is struck by the opportunity to add something new to his range of winter activities.
- A resort town bike shop owner needs to refresh her fleet of rental bicycles. She thinks that more people might rent bikes if they had the opportunity to ride on the beach.
- A cyclist lives in a cold climate and is disappointed about needing to stop cycling outdoors when winter comes around. He has heard about fat bikes on blogs and forums and is now curious if they could extend his biking season.
Each scenario involves a different type of customer, and, for each customer, potentially a different set of competing alternatives they would consider.
Consider the last scenario, which we can watch play out in the blogosphere:
Let’s say we’re trying to grow sales of fat bikes by creating more value for cycling enthusiasts in the Northeast (like HcPhil) than other competing alternatives. We need to get inside HcPhil’s head to understand his decision-making. We can build a “choice tree�? to represent factors impacting his fat bike purchase:
Our choice tree includes four levels. Each level represents a different way to think about the decision to buy a fat bike.
Making the choice between various fat bike products is at the first level. However, a cyclist may be weighing the benefits of purchasing a new fat bike versus replacing one of his existing bikes within the broader bicycle category – the second level.
On the other hand, our intrepid cyclist may weigh the benefits of winter cycling compared to other alternative activities during the winter months. All choices ladder up to an allocation of resources, usually time or money. A fair weather cyclist may ultimately decide that his recreation dollars are better spent on other budget categories entirely instead of health and fitness.
Now that we have this, we can test it by talking to people like HcPhil. Our conversation should dig into both the level of the choice and the specific alternatives at each level.
After confirming the levels of choice with actual customers, we then need to identify the level at which we will focus our strategy. For example, if we focus at the level of product brand choice we will consider other fat bike brands and focus our efforts on improving our product, price, and distribution network relative to our direct competitors. If we choose to focus on the cycling category, we may focus on building awareness among the cycling community, emphasizing the fat bike’s unique value proposition for winter and sand riding. Or we may find an effective strategy to be “intercepting�? potential customers involved in other activities such as visiting the gym or buying home exercise equipment.
Limited time and resources prevent us from addressing all of these choice levels simultaneously. Instead, we need to pick the one we believe will have the greatest influence on achieving our growth goal.
Finally, once we identify the choice level that’s appropriate for our strategy, review the competing alternatives one more time. Does each of the alternatives reside in the same level on the choice tree? Play the game: are they all similar… or is “one of these things not like the other?�? If so, remove the competitor that is out of place. An appropriate competitive set is a critical element to framing a growth challenge, obtaining actionable customer insights, and building an effective strategy.
- Build a choice tree to understand the customers’ decision-making process.
- Validate the choice tree by talking with potential customers about how they consider decisions related to your product.
- Select a level of choice and appropriate competitive set to build your growth strategy.
(And for all those Sesame Street history buffs out there, check this out for more background on “One of these things.�?)