Startup competitors: How much of your attention do your competitors deserve?
As a startup, competitors are likely to be on your mind regularly. In fact, startups are inclined to obsess about their competitors. They spend so much time and energy looking at competitors that they risk becoming distracted from the most important task—growing the business.
But don’t we need to watch our competitors?
Yes, sometimes. But it’s important to learn how to identify when your obsession with your competitors is benefitting your business and when it’s needlessly taking up your time.
Here’s an example of a common situation you may find yourself in:
A customers asks for a product comparison document
In a more mature market, savvy customers will often have their requirements written out and are evaluating several possible solutions. They may then ask you for comparison documents comparing your solution to one or more competitors. Be careful. Creating these documents can be a liability for your startup for several reasons:
- Time suck. Creating a comparison document will take a lot of time and energy. First, you’ll have to do thorough research on your competitors. Then you’ll have to do it all again (say every 6-12 months) as new features are added frequently.
- Commoditizing. Slicing and dicing all the products into lists of “yes” and “no” does not do justice to the intangible aspects of your product. You may decide to differentiate your product based on usability, flexibility, extensibility, speed of adoption, simplicity, industry understanding, or something else; not on simply whether you have feature x or y. Reducing everything to a matrix will commoditize the product space and cause a race to the bottom on price. If all products are the same, then price becomes the only differentiator.
- Liability. If there are any mistakes in your comparison document you open yourself up to liability because you’re spreading false information and customers are buying based on that information. It’s safest to not circulate comparison information. If you must provide a comparison, then make it public on your website, and high level / vague enough that you reduce your chance of getting sued.
You can also include disclaimers and state that the comparison is “as of” a certain date. This may still not reduce your liability enough, and you may find yourself faced with a “cease and desist” notice, or even getting dragged into court. Even if your comparison document is completely accurate you may still have issues – a bigger competitor may decide to take legal action just to distract you and run up your legal costs. The legal game is very expensive and distracting. Also, justice is not always served, especially when you are the smaller party with limited resources.
A better approach for customers requesting comparison documents is to say “All the vendors in this space do a similar sort of thing. Companies choose our product when <intangible differentiator> is important to them.” Then, follow it up with a good story to highlight this point. Note this only works if all the vendors have most of the same features!
Here’s how this approach to a product comparison request translates into a real-world example:
“You’ll find that all the vendors in this space do a similar sort of thing. Companies are choosing our product when time to value (their key differentiator) is important to them. (Story) Our competitors sell to the Fortune 500, so their solution implementation requires a full-time consultant for several weeks. Then they need a consultant again every 6 months to do upgrades. When we created our solution over 10 years ago, it was being used by small customers and for a very low price. We couldn’t afford to provide a consultant at the time, so it was essential that our product worked right out of the box – same for upgrades. Over time, our product has grown significantly in its capabilities, to the point that it is now used by many Fortune 500 companies. So, our product is just naturally faster and easier to get running and maintain. This means companies see much faster time to value and easier adoption. They also appreciate the lower overall cost to use our solution.”
Your competitors will change their offering to differentiate in the sales process
As you get into competitive sales situations with your competitors they will look for ways to beat you with capabilities that they have and you do not. Unfortunately, you will likely start hearing this from your potential customers first. “Do you have reverse market recalibration analysis?” Or something like that. The first time your sales folks hear it, it will be new to you. Chances are it’s some bullshit capability that your competitor has “invented”.
Maintain your composure and ask the customer some probing questions to uncover their actual need. Figure out if this capability is a legitimate solution to a real problem or if it’s just snake oil. If the customer does not really understand the need then they are probably just repeating what your competitor’s sales people have told them. This is simply your competitor trying to push the conversation in a certain direction and it’s probably only a short-term problem for you. Your task is to understand the real need, come up with something to counter it, and bring the conversation back to the core problem and your intangible differentiation.
You can try to second guess what your competitor will come up with next, but it takes a lot of effort and may not be worthwhile. Your time is better spent focusing on your customer and understanding their needs. Good product management involving beta customers, customer panels and surveys will help you understand the market and where it’s going.
Side story with a lesson: Occasionally I’ve been involved in building a capability that we just guessed at and didn’t do proper market research (shame on me). The feature isn’t really needed by the customer, so they don’t care and don’t use it. I love it when a competitor then copies this useless feature because they see that we have it. This is a good example of watching a competitor too closely rather than listening to the customer. 😊
Competitors may be outperforming your marketing efforts
Unlike obsessing over your competitors’ products, paying attention to a competitor’s marketing can be very worthwhile. Which tactics appear to be working for them? It could be that they develop free tools to entice customers, provide industry white papers, attend certain industry events, or use certain keywords in ads and SEO. It’s worth investing the time to understand how your competitors are generating inbound leads and identifying where your marketing efforts could be improved. This can yield very big results with very small effort.
In conclusion, stay focused on listening to the customer, but periodically check on your startup’s competitors to look for quick wins to improve your business.