Six Types of Competition That You Must Be Aware Of
Sometimes your competitors are not the usual suspects. They might not be the products that appear exactly in your category, and honestly, they might not be products at all. Here are six categories of competition that you must be aware of.
A few months after I joined Twiggle as the VP of Product, the CEO gave me a list of competitors to review. Since we played in the e-commerce search space, the list included almost exclusively e-commerce search engines, and one was a generic search engine that seemed to be a good fit for e-commerce apps.
The CEO wanted a competitive analysis. I could start comparing features and value statements, but there was a problem: I never met any of these names as part of our sales cycle. Not a single one. With any of our customers.
I am guessing that the CEO didn’t invent this list out of nowhere. It would be the list of “usual suspects” when talking about the e-commerce search space. But our real competition wasn’t there. It didn’t mean that there was no competition (which is usually a very bad sign), but that the traditional search engines weren’t it.
The reason we didn’t see them in any of our POCs was because they were targeting a different market segment. They were built to serve much smaller shops than the ones we targeted. It wasn’t just a random selection. It impacted everything from the depth of the underlying technology to the product itself, the go-to-market strategy, and the entire business model.
I’m sure that your product, too, has a generic list of competitors. Perhaps you monitor them to see how they progress, maybe you even have a Google alert in order to follow every press release that they make.
But when you define your product strategy, and your differentiation from the competition, it is important to understand what your real competition is. Unless your market is very mature — which means every company needs your product, they know they do, and the question is just which product to go with — your real competition is not so straightforward.
Here is a list of real competitors that you want to consider.
Direct Competition
These are the competitors that are more or less an equivalent of your product, as your customers see it. Unlike the ones listed on Google or some generic list, these are the products that your customers are actually considering before they make a purchase.
I know your product is one of a kind, unique, and different from anyone out there (that’s what you usually work hard to show against any competitor), but when I say equivalent I mean that these are products aiming to solve the exact same problem for the exact same market segment. It could be that they do so among other things. For example, if your product is one of the most mature in the market, and you sell to large enterprises, a direct competitor could also be a younger product, that up until recently only worked with smaller companies, but is now making a move toward the big ones. Even if you win them time and again, they are something to look into and watch over time, because if they are serious they will make progress in your primary market despite the late start.
When I said earlier that if you don’t have competition at all it’s a very bad sign, I meant direct competitors.The reason it’s a bad sign is that it usually means that there is no market or that you are way ahead of your time.If no one else thinks that the problem you are trying to solve is worth solving, it could be that you are truly innovative and everyone will soon get it, but it could also be that the market is not there. In most cases, it’s the latter. I’ve been there, and it’s not pretty.
So the next time investors ask you about your competition, make sure you have a good answer and do not just dismiss them with “everyone else is not worth talking about”.
Alternative or Completing Products
These are companies that are competing with you on the same budget, or on alternative approaches for solving the problem.
For example, if your audience is overweight people trying to lose weight, potential solutions could be all types of diets — from real ones to magic ones, pills, or bariatric surgery. Someone with a little overweight would probably only consider dietary solutions. Someone who is obese might go directly to bariatric surgery. But someone who is in between might consider adding pills on top of or instead of their diet. If you are selling pills, both dietary solutions and bariatric surgery are probably your competitors.
You can often see this if you are using maturity models. People and companies vary from each other in how they deal with the problem you are solving — how far along are they, and what they have tried before.There are usually pre-conditions to using your product — phases that they must go through before they are ready for you.
For example, if your product is protecting from a new kind of cybersecurity threat, companies would most likely integrate solutions for more common threats in your domain before they are ready for you. Not because it’s a technology issue, but because it makes sense to handle the more common threats first.
In such cases, the products already in place might have a solution for the problem you are solving. Even if their solution is not as good as yours, and they only provide a minimal solution, your customers might consider using theirs, because it’s already in place, or because one product that solves two problems is considered a better investment.
In-House Development
If you are selling to technical teams, this is a major competitor. Sometimes, it’s part of the maturity model: they would need to try it themselves before they realize it’s too complex to keep investing in and would prefer to buy a solution from you. But sometimes it’s not a phase.
At Twiggle, for example, we used to sell to the largest e-commerce companies. Not the largest-largest (Amazon, Alibaba, etc.), since they had 1000+ engineers working on search and wouldn’t want an external solution instead of their own (we tried, and they loved talking to us, but didn’t really want to use the product, just to learn from us and then implement it themselves. And they probably could do so). This type of competition drove us to one tier below, where we found a better fit.
If you see this competition a lot, and it’s a real one and not just a phase, you might want to redefine your ideal customer profile and market segment. The need might be there (or else they wouldn’t have invested that much in it), but they don’t like your approach to the solution. Not the technological approach, just the fact that it’s not something they own directly.
By the way, it sounds like the NIH problem, and sometimes it is, but in many cases, there is a good reason for such an approach beyond pure ego.
Manual Solutions
In-house solutions aren’t limited solely to tech solutions. These might be processes that people put in place in order to solve the problem, that provide good enough coverage. There might be a good enough solution that involves throwing many people at the problem, to cover it manually.
These are valid solutions that you might see more frequently than you think if you know what to look for. In some cases, this provides a good case for your product, since those manual solutions are limited. But in others, they are good enough, at least for now, and your tech advantage is overkill.
On-Paper Competitors
Those are the competitors that appear on the list but you don’t see them in the field. This is usually because they are not targeting the same market segment that you do. For example, if your product is a CRM solution for small businesses, most likely Salesforce isn’t your direct competitor, despite the fact that both of your solutions are CRM systems.
You should still monitor the competitors on this list, to make sure they are not moving to your market segment, but most likely to be able to explain why they are not the real competition that you are working to win over.
Doing Nothing
You should always remember that that’s also a possibility. You will most likely encounter it with nice-to-have problems, or with super innovative ones. But as with the diet example from above, sometimes the problem is real, your audience knows it, but the gap seems so big or otherwise hard to tackle that they would give it up altogether.
Understanding your real competition is important for your ability to address questions from potential customers and investors, but more importantly for your ability to build a winning product strategy that would tackle the real challenges you would be facing with your customers, even if those challenges do not appear on the formal list.
Our free e-book “ Speed-Up the Journey to Product-Market Fit” — an executive’s guide to strategic product management is waiting for you at www.infinify.com/ebook
Originally published at https://infinify.com on December 14, 2023.
