Who IS Your Competition?
You’re competing against the wrong business. In fact, you’re probably competing against the wrong thing. You are.
Remember way back when Blockbuster was still a thing? As the story goes, in its early days of operation, Blockbuster had the opportunity to acquire Netflix for $50 million and said no. Blockbuster brushed them off. Back then, of course, Netflix was not the juggernaut of home entertainment it is today; in fact, Netflix was losing money at the time of the proposed acquisition. Despite this, the missed opportunity has spun a story of mythic proportions – a David and Goliath tale of a little startup overtaking the giant of an industry.
As the story goes, Blockbuster didn’t say no because of Netflix’s poor financial position. They said no because they believed the experience Blockbuster gave (visiting a store, talking with a Blockbuster rep about their favorite new film, buying concessions to take home, etc.) was so valuable that the option of staying home simply couldn’t compete.
Clearly, Blockbuster was wrong. Though this isn’t exactly how the events occurred, the story resonates with people. Why? It’s laughable, sure. Looking back, it’s hard to imagine how the draw of being home could have been so underestimated. There’s something else to it, though. Blockbuster rightly identified the experience they provided as valuable. I’m sure that, internally, they were comparing their guest experience to that of direct competitors like Hollywood Video, Family Video, etc.; but they did not think about how the experience could be replaced altogether. That was their big mistake, and it’s a lesson every business can learn from.
When thinking through marketing strategy, identifying potential customers and competition, marketing gurus and business professionals alike have typically described two kinds of competitors: direct competitors and indirect competitors. Important as these are, a third category exists: replacement competitors.
For example, I was listening to an interview with a representative from a local ski lodge and resort. When asked who the resort’s competitors were, the representative said something surprising. He told the interviewer it wasn’t the weather, indoor activities like bowling, arcades, or movies…Netflix was the competition.
Now, I think he meant that it wasn’t Netflix per se but what Netflix represented. People ski and sled and snowboard to be active, sure but that’s not really what they’re buying. They’re paying for an experience; they’re paying for entertainment. To be entertained at a ski resort takes effort on the part of the customer. Netflix doesn’t. It’s a replacement for the service that solves the same pain point.
I’m not saying that replacement competitors should be your only concern. Direct competition (businesses offering similar products or services in the same market) is important, too. Wendy’s should be concerned with McDonald’s, just as Apple is concerned with Android, Pepsi with Coca-Cola, and Starbucks with Dunkin’ Donuts.
These guys should be identified when developing your marketing strategy. Fortunately, they are easy to spot.
Similarly, indirect competition (competitors in the same category offering different products or services to the same market) matters, too. A fast-food customer has a finite dollar amount to spend on lunch – they can go to Subway or Taco Bell. Both exist in the fast food category but offer different menus (solutions). These businesses are sometimes tougher to identify than direct competition but should be known and considered as you market and position your business.
Why Traditional Competitive Analysis is Wrong
Any marketing professional worth their salt will tell you that some degree of competitive analysis is important when growing your business. Understanding what your competitors are doing and how they are doing is a good business practice for a lot of reasons, not the least of which is identifying how to position your business to your target markets. Where the analysis goes wrong is in its perception of competition.
I was once asked by a local bar and restaurant owner to come in and talk to his team about customer service. When I asked the team to tell me who their competition was, they predictably rattled off all the other bars and restaurants up and down the street. This is where I think the traditional perception of competition is wrong. Direct and indirect competition often aren’t a hindrance. They’re complementary. A bunch of restaurants in the same area makes the space a bigger, more attractive destination, bringing more people to all of the businesses.
So no, your direct and indirect competition are not your biggest threats. In the case of the bar and restaurant, the greatest competitor is the option to stay home.
At home the drinks are cheaper.
There’s no one to fight over the remote with you.
The jukebox is playing all the right songs and at exactly the right volume.
You can sit in your underwear without anyone indicating that’s not appropriate.
The competition is home. How do you beat home? That’s the question. The competition you should be most concerned with in your competitive analysis is replacement competition.
Why does this matter?
I meet with a lot of businesses. Whether we are in onboarding or just discovery or just networking, the idea of their ideal client or customer is always discussed. Who is it that they do business with or want to do business with? Most businesses have a decent grasp of this. Business owners pretty much know who their target audience and potential customers are. The question they can’t always answer is who is their competition. Not really, which is a challenge because this is actually the question that tells you what you need to know. This is that magic question that will change your messaging so that your target audience doesn’t just hear you say that your bar is better than being at home, they believe the experience of being at your bar is better than being at home.
Who is your competition? The answer to this question changes your messaging. It may even change your offering or business strategy. If Blockbuster could have answered that question when Netflix came calling, you might just be Blockbuster and Chilling this weekend.
Digital Sandwich Can Help
Exercises like this are how we start working together at Digital Sandwich. When working with us, we’ll not only execute an excellent digital marketing strategy for you. We’ll help create clarity in your business’s purpose and goals, helping to more strongly engage, attract, and convert more of your perfect prospects. If you’re looking to ensure that you have clearly defined audiences, your message is clear to your target audience, and you are positioned as an expert that your prospects know, like, and trust, we can help. Contact us to start building your content-driven online marketing strategy today.