Know Thy Competition!
In thinking about selling a product or service, ask yourself one question: who is your competition?
If you answered, "My product doesn’t have any competition," perhaps it’s time to rethink your position. Your answer has an impact not only on the product, and the marketing strategy that will form the foundation of your Website content, but also on your bottom line.
You do have product competition, whether you realize it or not
Perhaps you, or someone you know, have a product or service idea that seems unique in the marketplace. Your initial reaction may be "there’s no competition for this!", while visions of dollar signs and early retirement spring to mind.
Big mistake! You may not think you have any competitors, but your prospective customer knows you do. After all, the world has done without your product until now, hasn’t it?
There are two key groups of potential prospects for your product:
1. Current users of an existing competitive or alternative product or service that fulfills the need
These prospects already use something to derive the ultimate benefit that your product offers.
Implication: Your product requires a compelling point of difference that will cause a change of buying behavior, in order to make prospective customers sample and/or switch to your product.
Examples: If you’ve watched recent TV infomercials or the shopping channels lately, you’ll have seen all kinds of cookware aggressively promoted: from knives and rotisseries, to steamers and grills. Think about each product and its primary benefit: low-fat, one-step convenience, little or no maintenance, warranties, attractive product, promotional pricing and so on. Some products may also be promoted in print media, in-store displays ("as seen on TV!"), the Internet and even direct mail. If you’re trying to sell cookware in this crowded category, what will be your point of differentiation? What marketing strategies will you implement to be "heard" above your competitors?
2. Those who may have a need yet opt to do without, or who don’t perceive a need at all
These prospects don’t fulfill the need, perhaps due to pricing issues, the nature of the product as a luxury or necessity, or the perception that they don’t actually need the promised benefit.
Implication: Your product requires a compelling benefit story that will cause a change of behavior to sample and/or use your product.
Examples: Did you ever think the world would need items like the Chia PetÂ® or the ClapperÂ®? Through savvy product development and marketing, these "nice-to-have" items have become staples of the holiday gift-giving season.
As for opting to do without, recent events and the state of the economy have forced many to reconsider their priorities. For example, where previously we might’ve purchased a new car every year or so, we’re now spending that money on less expensive car maintenance to stretch out the car buying cycle by a few more years. It’s bad news for car manufacturers, but great news for local oil and lube establishments, auto dealership service departments, or do-it-yourself auto parts stores.
Analyze your competitors’ marketing programs
Focusing on how your product is different or better is a critical step. However, it’s not the only one.
There are many worthwhile products that have come to market, yet failed. Why? Most likely, the combination of the product and its marketing efforts didn’t sufficiently compel people to change their buying behavior.
When we talk about marketing, we’re referring to the overall marketing mix — not just advertising. There are "5 Ps of marketing": product, price, promotion, physical distribution, and people. You’ll need to evaluate how your competitors approach each of these elements if you’re going to successfully develop your product or service idea into a viable business.
"We can build it, let’s sell it" doesn’t always change buyer behavior
Consider the proliferation of state-of-the-art wireless devices that cnsolidate a cellphone, pager, and PDA into a single handheld device. Today’s technology enables telecom providers to put such all-in-one devices in the marketplace at an affordable price.
However, sales aren’t growing as fast as the telecom providers would like. Why?
Many people already own a cellphone that may or may not have a built-in pager. Most of these cellphone users are locked into lengthy agreements that incur a penalty for early termination. Others already own a Palm or other handheld organizer. Many people own both devices, perhaps with accessories that enable additional wireless services, like Internet access.
The products themselves are, of course, very much at issue. In order to accommodate all the communication benefits in one device but maintain a compact size, restrictions must be placed on product design. And these restrictions: small keypads, tiny screens, short battery life, etc, may create barriers to customer acceptance. And on top of the device’s purchase price, there’s the threat of mounting monthly usage fees to further deter the swift adoption of these products.
Given this situation, what would compel someone to throw away their investment in the devices and associated accessories they already own, and switch to a more expensive model with all the bells and whistles? This is exactly what telecom companies are struggling with now, and the strategy of maintaining and growing their subscriber base through up-selling them to more expensive devices is falling short of revenue goals.
Don’t fall into the same trap! You need to examine how you will persuade someone to change his or her buying behavior and purchase your product.
Evaluate the product’s benefits from your customer’s perspective
Too often, business ideas fail because a competitive analysis is not given the depth of consideration and understanding it needs.
Don’t fall for two myths related to competition:
1) "If I build it, they will come"
The same product development principle addressed in the previous telecommunications example applies to the development of your Website.
In the early days of the Internet, many Websites were built based on the advertising revenue model, where sites would supposedly be profitable only if they sold advertising space to businesses. The sites’ sole reason for being was to generate enough traffic, or "eyeballs," to justify charging top dollar for ad space.
One client had an Employment portal developed strictly to generate revenue by selling ad space to recruiters, online employment sites, resume services, etc. This client was confident it could outperform other employment sites, generating enough advertising revenue to support the business, despite the existence of such powerhouses as Monster.com, HotJobs.com, and others.
This site failed.
Why? There were too many other employment Websites competing for the same pool of advertising dollars. There was no discernable competitive advantage that persuaded potential employment site owners to shift marketing dollars to the client’s site. In addition, as a start-up, this site like so many others built solely to generate "eyeballs," didn’t have the content or marketing dollars to sustain the minimum volume of traffic required for advertiser consideration.
The lesson is to be realistic about your competition — and its impact on your product design and marketing strategies.
2) "People will want my product because it’s different"
I recently consulted with the founder of a non-profit organization who wanted to acquire grants for a rather unique program that would benefit adults and children around the world. When I asked him to identify his competition, he advised that his charity work was for a cause that no one else in the world was addressing. In his mind, he had no competition at all.
Yet, he didn’t realize that the for-profit companies and foundations that were to be contacted for donations would perceive his proposal as just one of many grant requests. Many of these organizations are not completely altruistic; there is an expectation of wanting something in return for the outlay of funds, even if it is prestige or brand name awareness among a specific target market.
As a result, we created sponsorship opportunities where different levels of brand recognition on the Website and on the product itself would be provided based on the amount donated. The marketing communications message within the grant proposal (and on-site) was refined to focus on the brand recognition benefits that an organization would receive by making donations, as well as the positive image benefits derived from its association with a unique charitable offering.
Competition can make your product even better!
There’s no question that the Internet has shifted the balance of buying power into customers’ hands. It’s now easier than ever for buyers to comparison shop for the optimal solution at the best possible price.
Yet the Internet is a rich initial resource to uncover your true competition. Find your competitors (you may be quite humbled to see how many there are online!) and compare your product with theirs by asking these key questions:
- What is the specific need that your product would fulfill?
- What are your target audience prospects using now to fulfill that particular need?
- What does your product or service provide that’s superior or different to what’s being used now?
- What is the most compelling reason that would persuade your target audience prospects to change their buying habits and select your product?
- How does the pricing of your product compare to what’s being used now?
- What is the value-add proposition offered by your product? In other words, will the price of your product provide an equal or greater amount of benefit than the product being used now?
- What primary marketing message should you use to have your product clearly stand out from competition?
- What other marketing vehicles, aside from the Internet, are your competitors using?
Compile this information into a side-by-side comparison chart so you can see – in black-and-white – how your product fits within its overall competitive arena. By using these questions as a guideline to start determining your competition, you’ll put yourself in a better position to create and promote a product that will benefit both your customers and your profitability.
In the end, "know thy competition even when you don’t think you have any" may be the best watchwords of your overall marketing program.