Winning Market Leadership Against Established Competitors
October 4, 2011
This is a guest post from Paul Higgins, Consultant with Rapid Innovation Group
It’s good to have a competitor.
In sales for an expansion stage company, it’s much easier for your prospect to understand your value proposition if you can say, “We’re like Company X, but we’re cheaper/faster/better,” instead of trying to claim that you’ve invented a new concept so revolutionary that there’s no competition at all.
Check out our recent podcast to learn more about the strategies early and expansion stage companies can use to put themselves in the best position to bury the competition.
Talking about your competition gives you the opportunity to firmly establish a favorable comparison in your prospect’s mind, rather than hoping they won’t look for alternatives (they will) and hoping they’ll work out for themselves why you’re the better choice (they won’t).
You can also benefit from your competitors’ brands in the same way that Foursquare is mentioned every time anyone brings up Facebook check-ins, or Quora is mentioned every time someone brings up Facebook Q&A.
Market leadership strategies
When you’re trying to identify markets in which you can become the clear market leader, the presence or absence of competition is an important factor.
At a high level, you can consider three strategies for taking on the competition:
- Avoid the competition altogether
- Pick on a competitor and compete for their lowest-value customers
- Pick on a competitor and compete for their highest-value customers
Imagine you’re a young runner who wants to builds up your profile by winning races around the world. Your primary competitor has been winning the biggest city marathons for years.
Follow Strategy 1 by only entering races that your rival doesn’t enter (either because he doesn’t know about them or they don’t interest him for some reason). Build a profile as the winner of these sorts of races and let your rival carry on elsewhere.
Follow Strategy 2 by entering races that your rival enters, but isn’t too bothered about. These may not be the high-profile gala events but as you get into the habit of winning the minor races you can gradually compete at higher and higher levels.
Follow Strategy 3 by going straight for the big one – enter your rival’s favorite event and win by being better prepared and more focused. Become a specialist at this type of race; you’ll have to fight harder but the reward is much greater.
In other words, if your competitor has a market focus in telecoms, then you may want to leave that sector to them and focus on financial services instead (Strategy 1). Or, if you decide to go for the telecoms market and your competitor has 500 customers, you can try going for their least profitable ones (Strategy 2), or just go ahead and pick on their favorite “trophy” customers (Strategy 3).
Choosing which market leadership strategy to follow
Avoiding your established competitors is often the best strategy in the short term – particularly if you are based in different territories. But it might also put you at a disadvantage when you finally come up against them with no experience of a competitive pitch.
Targeting a competitor’s least important customers might make sense if you can offer the majority of the same functionality for a fraction of the cost. You can compete here by positioning yourself as the value alternative.
One French e-commerce technology company decided to go up against the U.K. market leader by offering 80% of its functionality for 20% of the cost. It dominated competitive pitches where cost was an important factor and they were happy to ignore the more demanding customers that expected customization or extra support. It became the market leader in providing e-commerce technology to small businesses with simple requirements.
Targeting a competitor’s most important customers has the greatest risk (in terms of the amount of time and effort it will take) with the greatest reward, and it will require you to defend a position as the high-value alternative. For instance, you must be confident in the quality of your customer service and product implementation. Winning a high-profile customer could ruin your reputation if the collaboration is not successful.
One corporate communications technology company in the U.K. decided to pick on its established U.S. competitor by defining itself as the “premium option” for blue-chips. It competed primarily on the flexibility of the technology and the experience of the customer service team, and soon it was able to claim an 80% win rate in competitive pitches. Of course, they brought up this statistic in every competitive pitch from then onwards and it became a self-fulfilling prophecy.
Each of these is a valid competitive strategy. Which one you select will depend on your resources, the strength of your value proposition, the size of the market, and the long-term objective for your expansion stage company.
Paul Higgins is a consultant with Rapid Innovation Group, a U.K.-based strategy and execution firm that helps emerging tech companies accelerate their revenue growth and achieve market leadership. For more insight from Paul, check out the Rapid Innovation Group blog and follow him on Twitter @paulhigginz.