According to Netflix CEO Reed Hastings, his company’s top competitor isn’t Prime Video or Hulu. In fact, it’s not even a rival streaming service at all. It’s sleep.
How can that be? Sleep isn’t pouring millions into advertising or going out of its way to develop top-notch shows.
But when you think about what to do at 10 PM, it’s likely that “watch Netflix” is going up against “catching some shut eye.”
April Dunford is a product positioning expert who helps executives zero in on the real competitive alternatives to their product.
In this post, we’ll share some of her tips.
1. Ask yourself “what if?”
Start with a hypothetical question: “If we didn't exist, what would a customer do?”
For a new rideshare service, that could mean hailing an Uber.
For an online retailer, it might be turning to Amazon.
For a company that specializes in automation, that could be hiring an intern to take on mind-numbing tasks.
One of the most frequent answers, however, is “nothing at all.”
The problem that your team solves might simply go unaddressed. Instead of seeking out a solution, your customers’ indecision would leave them with the status-quo.
Let's look at a few examples
What if you had never launched your quick transcription service? Your customers would rewatch recorded Zoom calls or take notes on a notepad.
What if you had never developed a personal desktop manager? Your customers would use their download folder to find recent documents.
What if you had never released an app to find restaurants that only serve humanely raised meat? Your customers would comb through Yelp reviews – or just pick one based on their intuition.
Those old standards are clear-cut competitive alternatives - even if they're lower-tech or clunky.
2. Listen to the right customers
To identify competitive alternatives, you need to figure out what your customers were doing before you came along.
You can get that info by asking your sales team or surveying your customers directly, but be careful. Drawing from too broad a sample can taint the results.
If someone made a purchase but never understood what they were signing up for, their feedback isn’t going to be helpful.
Every company has good-fit customers and bad-fit customers.
The bad-fit customers:
- Use your product wrong
- Need a discount to stay interested
- Are always the hardest to please
The good-fit customers:
- Intuitively understand your product
- Close quickly
- Are excited to let you solve their problems
As anyone who's ever blocked a Twitter troll knows, the best thing you can do is tune out the haters. It helps you cut down on the noise and avoid dealing with folks who’ll never be happy.
Separate the two and focus solely on the good-fit customers. You can do this by using Net Promoter Scores or your preferred consumer satisfaction metrics. Happy customers who gave you better marks are likely the best fits for your product.
The good fit answers will identify worthwhile competitive alternatives and help you establish a pattern for attracting similar customers who you know can be won over.
3. Focus on the present
The “next big thing” isn’t always your competitor.
Think about all the companies that generated a lot of buzz and then fizzled out (or crashed and burned.)
- Quibi set out to win the streaming wars and raised $1.75 billion. They shut down after two years.
- Ozy Media raised over $70 million to upend digital news. Erratic leadership lead to a quick collapse.
- Theranos was valued at $9 billion and … well, I’m sure you’ve watched at least one of the documentaries by now.
There’s always industry chatter about what’s on the horizon, and it may seem like a company that does something remarkably similar to yours is about to make a splash.
It’s tempting to automatically consider them a competitor, but stop and ask yourself this important question.
Is your "competitor" even on your customer’s radar?
Your audience isn’t obsessively googling your differentiators or pouring through trade pubs like you are.
New would-be challengers may walk and talk like you, but until they end up on your customer’s shortlist, keep your eyes on the here and now.
When the time comes, you can deal with them. Until then, they’re a distraction, not a competitor.
Identifying competitive alternatives is just one step toward standing out in a crowded market.
Join April Dunford’s Product Positioning Sprint to build your strategy.
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