B2B competition strategy is like just every other aspect of strategy – there is no ‘of course’ approach to strategy for addressing your competition. Anyone who tells you that you always need a competition strategy in B2B is spending too much time looking behind them, and not looking at where they are going.
In sales and marketing, where we are going is to the buyer. Often, the best B2B competition strategy is to ignore the competition all together and just focus on the buyer. Except for that strange stage where you can’t and you actually have to attack them. Here, we’ll explore why, and help you set the right competition strategy for your business.
Different buyers at different market maturities
Buyers are different at each stage of the market maturity. There is a different kind of buyer who is ready to buy at each stage of the market’s maturity. And oddly enough, that’s what we should focus on to set that competition strategy. So here I’m going to remind you exactly who the buyer is at each of the stages in the market maturity, what they need, and therefore what a competition strategy should be.
- Early buyers: In the very early stages of a market, when an innovation is brand new to the market, the only buyers willing to buy are those who have a reasonably high risk appetite, but are looking for a return. They are looking to gain some advantage. There’s no sense in their mind of who the competition is. The competition is the incumbent. And frankly they don’t even think of competition like that. Their focus is on what’s this new thing and what it’s going to do for me. Your focus should be on that too.
- Pragmatists: The next group of buyers are a little more pragmatic and they draw comfort from the fact that each other is buying which is why we have to focus on a narrow niche. They are not yet getting any comfort from the fact that there might be other solutions. So if they are, just ignore them.
- Bowling alley: At some stage after we have mopped up the early market we move into the ‘Bowling Alley’ which is where we find our niche and an another couple of niches and an another few niches, at some point, everybody’s buying. Normally when you reach that stage, competition has entered the market. And because of that, the buyer actually does care about who the competition is. Because they have already worked up and they need to buy it, now it’s question of whose.
- Main street: The next group of buyers, once we get into ‘Main Street’, are different again. At some point this becomes a “business as usual” purchase. Once it becomes one of those kinds of purchases, normally the buying process is handled by some internal admin function. What Geoffrey Moore, the author of this model, called the Infrastructure Buyer. Maybe it’s IT, maybe it’s HR, maybe it’s admin, maybe it’s procurement. Whoever it is, it’s no longer the end-user department. There is some specialist buying group that has responsibility for this now. What do they need? They need your product or service to comply with their expectations. I will come back to that when I talk about competition in the conclusions.
- End of life: Finally we reach end-of-life, it’s the end of the model out here. And when we reach end-of-life, you’ve still got the infrastructure buyer who is the procurer of your product or service. But now if we’ve written that wave well and we are in a strong position, we probably want to slow the decline of this market down. We may even have the capacity to do that. How? We are looking for new users and new uses. And what are those new users and uses looking for? Innovation, advantage. So once again we are dealing with the end-user, maybe even the boss of the company but we are certainly not dealing with the infrastructure buyer for the new bits, only for the old bits. What do they need? The opportunity to get ahead.
Your competition strategy for each buyer
Given all this, at each stage as the market matures, we have got a different kind of buyer. Therefore what should your competition strategy be?
In the early market, forget them. There probably generally isn’t any competition. In the ‘Bowling Alley’, when you are focusing on a narrow niche, they’re not focused on the competition. They’re focused on whether they should buy at all. Remember they’re not quite yet ready to buy. So they’re not focused on the competition, you should not be either. There may be competition, just ignore. It’s irrelevant.
Then we get into ‘Tornado’, suddenly it is relevant. Certainly the demand side of our businesses got a lot easier, buyers know they need to buy. What’s got harder is convincing them to buy ours rather than the other guys. So now suddenly from having ignored the competition, we now need to not only focus on them, but frankly, attack them. Product comparisons, definitely. Why is yours better? Where is yours better? Go hard.
If you’ve got some scale advantage (that is, you rode the early stage of the market well) and you actually built up a bit of infrastructure and yours a business where there are scale economies. That’s not true in every business. But if there are scale economies and you have the scale and your competition doesn’t, seriously consider using price as competitive weapon against the competition right now. You might even drive price down, even artificially, because it’s going to hurt your competition more than it’s going to hurt you. So if you ignore the competition, now suddenly we are attacking them.
Now let’s go to ‘Main Street’. Remember we have moved buyers now. It’s no longer the end-user department buying, it’s now IT, finance, procurement, admin, HR, it’s the infrastructure buyer. And that infrastructure buyer cares about very different things. But they need you to comply with their expectations. You need to know your competition, where they are weak, so that you can find out your strengths.
Finally we get into end-of-life. Now here we have got a bit of a fork in the road. If you’re the weak guy in the market, seriously think about making friends with the competition so they can buy you. Because being in a weak position in a market is a horribly unprofitable situation to be in except in a very small number of circumstances. So you are probably going to get bought out. Consider your strategy for that. So what’s your competition strategy? Getting them to buy you. If you are a strong guy, remember we have attacked them in the ‘Tornado’ phase. In ‘Main Street’, we focused again kind of on procurement. At end-of-life, we still got that procurement type buyer that infrastructure buyer, as Geoffrey Moore calls it. But we got new uses and new users. And so now, the competition strategy for those new uses and new users is ignore them! Again, because it’s new. This innovative buyer who is at the end of a cycle looking to apply your product or service to a new use case. They don’t care about the competition if there is any competition at all.
That’s what your competitor strategy should be at each stage in the market maturity.
Putting it all together in your go-to-market planning
As you may know, the Funnel Plan captures the strategy, the velocity, and then the tactics that you are going to deliver that velocity in a single page go to market plan. If you’ve determined that your market maturity is early in the market and therefore you shouldn’t be focusing on the competition, you can focus elsewhere in your plan. But if you have to focus on competition, let’s take a look at how we do that in the Funnel Plan software.
What we do with the competition analysis is we stack ourselves up against up to five other competitors. The key with competitors is to think about not who else makes stuff like mine, but who else can solve the problem that I solve, because that’s who your true competition is. Having worked out who else can solve the problem, then compare yourself against them on five factors.
Now the five standard factors that we will use in Funnel Plan are:
1. Share. How compelling their proposition is (the unique selling proposition or USP), and the “U” is there for a reason. It’s not how good is your proposition, but how good and unique is your proposition. If you’ve got a great proposition but so does everybody else, then it’s not unique. Share has a strength all on its own. The gorilla enjoys advantages that the chimps in the market don’t. Assess yourself simply on the factor of share.
2. Unique selling proposition. Once again, the question isn’t how well do you solve the problem, but how well and uniquely do you solve the problem. So the product serves itself, your price, your after sales service, if that’s a function that you’re offering, all of the elements that your customer would consider that which I get from you when I pay you money, how unique and strong is that. Remember you don’t need to be strong for the whole market, just the market as you have described it. As I discussed, we are really only going to use competition strategy in ‘Tornado’, ‘Main Street’, and end-of-life. If you’re in those stages, then it’s broad competition, who else can solve the problem like I can?
3. Recognition. You might have great share but nobody knows it. How well are you known in the market? I know they are related but they are a little different. Assess yourself against the competition. Do the same thing for cost.
4. Cost. Be careful here, it’s not price. Cost is your base cost. The reason we are focusing on cost and not price is because if you have got the lowest cost, then you can choose to either offer the lowest price or not offer the lowest price and take the most profit. Either of those is an advantage. Either being able to offer the lowest price and stay in business or being able to bank and make the market’s price. That’s a strength. Price is just a decision on the day. Cost is a current reality. So we are looking here at your base cost, does it cost you less or more to make the product than the competition.
5. References. You might have great recognition, but it could be that you don’t have the ability to prove that you can deliver. References are all about proof. Clearly they’re critical in the ‘Bowling Alley’ but competition isn’t. So your references need to be broad enough to be used in the ‘Tornado’, ‘Main Street’, and end-of-life phases. Assess yourself against the competition on each of those five factors and then set a strategy to take advantage of areas where you are strong and mitigate weaknesses. You might chose to leverage a particular weakness if a single competition or you might chose even to find a way to mitigate your weakness against that same competitor. You might go broad and think about your strategy for leveraging your strengths and weaknesses overall or you can go by competitor. The real key here is what you are going to do about that analysis to improve your position, mitigate your weaknesses, and leverage your strengths. And that’s your competition strategy for the ‘Tornado’, ‘Main Street’, and end-of-life phases.
In next weeks show, we are going to move from the buyer talking from a strategy perspective, to talking about how buyers buy, or what we call the buyers’ journey, the term I coined in 2003 when I wrote ‘The Leaky Funnel’. But for now, may your funnel be full and always flowing.
