I was thinking back to the many meetings I have had over the course of my career and I remember securing a sizeable contract against a competitor who was 40% cheaper than the solution I was providing. I remember the fist pump my manager and I did when we got the call and it felt incredible. We had studied our handful of competitors in great detail and this went way beyond their pricing and functionality. We studied how they presented themselves in comparison to competitors – in particular us. We knew that they would oversell their product and then undercut us on price. This company was a direct competitor of ours so we were confident in stacking ourselves up against them. However, not all competitive solutions are in direct competition with our businesses and this is what we will explore further.
If we strip it all back, a competitor is defined as a company in the same or similar industry as another company which offers a similar product or service. Depending on our business requirements, we can approach our analysis of competitors in a variety of ways. For example, from a business strategy standpoint, we may wish to adopt Porter’s Five Forces framework to assess our overall competitive strength in our marketplace. This takes into consideration;
- Bargaining power of buyers
- Bargaining power of suppliers
- Competitive rivalry amongst existing competitors
- Threat of substitute products or services
- Threat of new entry
This uses a strategic lens and although it is powerful, we would be unlikely to use this granularity in our everyday engagements with customers and prospects but we will have a very clear overarching view of the competitive environment. Companies may also look at competitors through a SWOT analysis lens to identify strengths, weaknesses, opportunities and threats that a particular set of organizations may pose. There are a host of different approaches we can take but the one that I like the most and that can be easily applied in everyday interactions, is the direct, indirect and replacement competitor framework. It’s simple and we like it!
- Direct – same industry, similar products and services. A good example is Salesforce Marketing Cloud and Adobe Experience Cloud
- Indirect – different industry but products and services help achieve similar results. Think about an investment mobile app as an alternative to a high street retail bank’s investment options.
- Replacement – anything and everything that can help to achieve the desired results that is outside of our immediate industry. For example, if we need to get information onto a database, we could either purchase an e-document solutions or hire someone to do it manually.
I like this breakdown because it highlights a very important thing – whilst we can choose some competitors and be quickly categorized based on your products and services – we can not determine who all of our competitors are. I’m really sorry to disappoint but, it’s true. Do not get me wrong, Gartner, Forrester, Capterra (A Gartner company) and G2 exist to help businesses make informed decisions on software procurement. Through extensive research and peer reviews they are able to give a comprehensive breakdown of similar products and services or direct and indirect competitors. With that being said, with the uncertainty that exists today, businesses need to invest energy in better understanding all of the wonderfully creative ways their future and existing customers can succeed with replacement competitors. To do this, we need to spend time with customers to understand all of the options that are on the table even if they are completely different to what we are proposing.
As an example, a customer may want to increase newsletter sign ups on their website and we know full well that we have a product that can enable them to do that. However, they do not know about our product, they only know about their problem and are seeking ways to address it. At this stage we are competing against every single possibility of solving this problem. We can not go in with the assumption that the customer already needs what we have, we are simply an alternative. This is why it is imperative that we proactively probe into how the customer is planning on addressing the challenge. Ask them, how have you and the team thought about solving this? Where are you in the process of exploring ways to address this? What types of partners have you already met with? What happens if you do not make any changes to the existing process? I’m not going to list a full set of questions here as I am hoping you catch my drift …
75% of the work we need to do in order to understand the options available to our customers can be done prior to meeting with them. We can make some realistic assumptions about replacement competitors and create a cheat-sheet of where those alternatives may be weaker or stronger than our proposed solutions. This will help to control the direction of the conversation and provide well defined ideas that customers can either elaborate on or dispute as not suitable for their needs. Either way, we are in a position to move a conversation forward and show credibility and empathy by putting ourselves inside the customer’s shoes.
To know our competitive landscape is key to competing in the marketplace. What is even more powerful than this is knowledge of how our customers go about doing things, and how we can really create a step change. If the choice was there, most companies would shy away from change as it affects businesses at so many different levels and typically requires more resource than initially planned for. Remember, experienced teams recognize that during periods of economic downturn we are competing against anything that our customer or prospective customer deems a viable approach to solving an existing or future challenge or need.
We need to move our prospective customer from a place of acknowledgement that change is required to a place of consensus that our products and services are one of a small group of similar solutions that they are willing to review as the best approach to achieving their desired results. So if we revisit our e-document example, they are in agreement that using software is the best approach rather than hiring someone. Or since I am snacking on some apples right now, we do not want the customer to say they want fruit, we want them to know what kind of fruit it is they believe they need and why.
I hope you are able to take some useful points out of this blog post and apply them inside your organization. Feel free to get in touch if you want to know what type of apple I was nibbling on.