There's Always Room For Value (Part 2 - Competition)
In my last post, I talked about how there’s always room for value when deciding to enter a market and that the key is in defining that value in a way that matters to the customer, and is profitable for you.
In this post, I’ll discuss the idea of competition and how defining who you compete with, as well as how they go to market, can and should influence your decision to play within a specific space.
Now, our initial tendency as we evaluate a specific market will be to consider the most obvious competitor in that space. This is our direct competition, and they are always the ones with the biggest brand, revenues, mindshare.
And it may well be that that is the brand we will be competing against. If so, we need to ask ourselves what we bring to the table to be able to do battle effectively. This could be in the form of positioning, it could be clout of some sort (marketing, distribution, etc.), in which case we should also assess whether we are appropriately resourced to conduct that battle. (For example, if your goal is to dislodge Coke or Pepsi in the Cola wars, or Apple or Samsung in terms of smart phones, or Sony and Samsung in terms of TVs.)
But dislodging an incumbent is a difficult task and usually only happens when the market is disrupted in some fundamental way. Blockbuster ruled the roost until Netflix came along and changed the way customers transacted with and consumed their content. There has to be some fundamental change in the business to consumer model for the change to occur - pricing, delivery, etc.
The other category of competitor is Indirect. This is a brand or product that services the same core need for your customer (entertainment, education, information, etc.) but in a markedly different way. DIY stores and supermarkets don’t tend to compete with each other, but when it snows in Chicago and you need salt to put in your driveway, both are viable options. Similarly, a soccer ball, a book and a video game compete with each other in terms of providing leisure time options to a specific consumer, despite the fact that they are completely different activities and the buying criteria will usually be very different. But they still compete.
Playing into all of this is also how you go to market. Direct or indirect, how you play in a particular space can mean the difference between success or failure for your specific offering. It will absolutely also have implications as to the size of the pie you can go after, but those might be acceptable tradeoffs depending on what you want to be in that industry.
For example, the t-shirt business is, by any definition, a crowded space, but there are companies thriving there all the time. How they go to market, how they target their customer all plays into their model and approach. Pure play versus bundled offerings. Dedicated versus department store brands. Online versus offline. Crowd sourced and beyond. We can argue about the viability of being “in the t-shirt business” but there are profits being made at Target, Urban Outfitters, Amazon, Supreme, Versace and a thousand other avenues.
The point I’m trying to make in this and my post last Monday, is that there are a wide range of variables to consider when assessing whether or not to enter a specific market. What you are offering (and whether you should sell it) has to be evaluated taking into account these different variables and asking yourself how your product or service is best suited to compete.
Many times, the answer is not to go head on, but rather to position differently, to capture a segment that has been overlooked or not cared for by the larger players. Other times, it may be to service a specific targeted segment better than anyone else - because you understand the needs of that segment better than anyone else. Does this shrink your total market size? Absolutely? But does it better position you for success? Certainly.
To be clear, my goal here is not to discourage entry into a given market. Quite the opposite - my goal is to suggest that if you are going to enter a market, do it with a complete thought process about how you can play and importantly how you can win in that market. (And it should go without saying that how you define “win” is exactly the point.) Every market has opportunity, it just may not be where we usually think it is.
Look for the niche, look for where you can own the market and be willing to push past ‘conventional wisdom’ or egos or past precedent in that assessment.
There’s always room for value. We just need to do the work to find it.