The Press, August 2005

Unless you live in North Korea, competition always exists. Nevertheless I often hear the statement "my product has no competition" as evidence of impending commercial success. This view betrays a misconception of an absolute fundamental of marketing - understanding not just what your product is, but what it actually does for the customer.

An interesting example is the Segway. The futuristic scooter was launched with much fanfare in December 2001, inventor Dean Kamen stating that it would "transform the way people work and live." It was unique and amazing. The Segway had 'no competition'. The company projected 50-100,000 sales in its first year - it recorded only 6000 in 21 months. Four years later the Segway is struggling along, little more than a cool toy for those with the money to indulge.

From the perspective of the makers of Segway there is no competition. Nobody else was making a sophisticated mobility device like this - it would race out of the shops. But from the customer's point of view, there are many alternatives to convenient short distance travel around cities - motorcycles, bicycles, skateboards, mobility scooters, public transport such as buses or trains, and even the humble old feet. All of these options are 'competitors' of the Segway, and obviously seen by consumers as offering more value.

Marketing starts with understanding a customer need, and working out how you can provide a way of meeting that need. Another way to look at this is to understand what contribution your product makes to potential customers. For example, a company manufacturing electric blankets isn't simply in the electric blanket business, they are from the customer's perspective in the 'warm bed' game. Their competitors are not only other electric blanket makers, but hot water bottles, woolrests, warm pyjamas and temperate climates.

The more you understand the customer need, the better equipped you are to determine how potential consumers perceive your product against competitive choices. You can also more clearly espouse the relative benefits of your product, determine the best pricing, the most convenient ways for consumers to access it etc.

Of course determining your competition can be difficult for a complex product, such as business-oriented software or electronics products. One way of uncovering who you are competing with is to use the 'so what' test.

Take a customer relationship management (CRM) software system, which is basically a sophisticated database of customers and other stakeholders. So what benefit does this offer? It provides all kinds of useful information about these people and how your company has interacted with them. So what benefit does this offer? You can use this information to make decisions about how to service customers. So what benefit does this offer? The better those decisions, the more likely you are to achieve greater levels of customer satisfaction. So what benefit does this offer? Greater customer satisfaction means better returns for your company and its shareholders. That is the ultimate benefit the customer is interested in, and the market in which the CRM provider is really competing.

The customer doesn't want to buy a CRM system, they want to achieve better returns through increased customer satisfaction. They are many ways a company can improve customer satisfaction, from dropping prices to improving product quality to using another CRM system. Being able to demonstrate why investing in your solution would deliver better value than investing in all of the possible alternatives is the key.

Your product may be unique in meeting the customer need in the way it does, but there will always be alternative solutions to the customer. In fact you need to be sure that the lack of direct competitors (i.e. making exactly what you make) is not an indicator that your product solves a customer problem that simply isn't that compelling. That is, if there are direct competitors in your market it means customers are willing to pay for this solution. As the only manufacturer of the one legged stool and no rung ladder I would have no competition, but would I have any sales?

Big brands use this thinking to drive their businesses. Starbucks define their competitive landscape not as the coffee drinking sector, but as the 'third place' business. That is, third place after the place you live and the place you work. With that perspective, they are not simply competing against other cafes, but other provides of potential 'third places' - the movies, fast food restaurants, bars, even libraries. That is a powerful force for both motivating their employees, and shaping the way they provide their products and services.

This way of looking at your business can do a lot to empower your marketing. There are four key steps to getting there:

  • A crystal clear view of who your customer is.
  • An in-depth understanding of what they do and their needs.
  • Understanding the connection between your product and solving those customer needs (i.e. doing the 'So What' check).
  • Establishing all of the other ways of meeting your customers needs.

If you want to set up an office in Pyongyang, go on thinking you have no competition. But if you want to spark growth in your business, understand what your real competition is and how you can beat it.

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