Do you know who you are competing against & how to win?
What type of company is Netflix?
We don’t mean things like ‘modern’, ‘innovative’ or ‘cutting edge’, although it is probably all those things. We mean what type of business are they in?
Are they a video streaming company? Well, that is how they provide their service. Are they a production company? Well, they now develop a lot of original content. But, if you asked Reed Hastings, the CEO, he would say that they are an entertainment company.
Does it matter what type of company they are? Well, yes, actually it matters a lot. Because what type of company they think they are, has a big influence on who they think their competition is.
For instance, if Netflix thought they were a video streaming company their competition would be other streaming companies. But if Netflix think they are an entertainment company the competition is much wider – all other forms of entertainment. This is a different type of competition. And they will need to do different things to compete and win.
Many companies define themselves by what they make. However, shoppers are often not looking for a specific product, they are often looking for a solution. As Ted Levitt, a Harvard professor said, “People don’t want a quarter inch drill. They want a quarter inch hole”. The product centric company thinks about quarter inch drills. The solution centric company thinks about quarter inch holes. It is a subtle change, but an incredibly important one.
We think it is becoming increasingly important in the grocery retail and FMCG industry. A lot of companies think category. They think about the direct competition – we need to beat the people who sell products like ours. When actually they need to be thinking about the shopper need (or problem). Then thinking about the potential solutions to that need or problem. The companies who can offer solutions for that need = the competition. And the companies that offer the best solution(s) become the winners.
So, how can you become solution centric rather than product centric?
Know what the battleground is. Identify what the need you are trying to meet or the problem you are trying to solve is. Don’t start with what you sell and how you could sell more of it. Start with the need and then figure out what the most relevant product or solution for that need is.
This helps you define the basis on which you are competing. For instance, if you know you are competing for the breakfast occasion, you should know that convenience (prep time, portability, minimal mess) are key. If you are competing for the mid afternoon hunger fill, you know you need to have something substantial enough to keep people going until 6pm. You can have a brilliant product, but if it is not the right solution it won’t get bought.
Know who you are competing against. Once you know what the battleground is – the need you are trying to meet – you can start identifying the competitive set. The competition is often much broader than you think it is. Let’s imagine you have defined the shopper need as “find an easy way to eat more fruit and vegetables”. Now imagine you are Innocent. Who is the competition? Other juices and smoothies? Yes. Fruit? Yes. Vegetables? Yes. Soup? Yes. Now imagine you are a pineapple supplier? Who is the competition? Maybe Innocent, right? You might have the best ever crop of pineapples, but if it’s easier for people to get their pineapple hit from a juice or smoothie, you might still lose.
Your competitive set can often change according to which channel or type of retailer you are in. A shopper doing a stock up trip online may well be choosing between products within a category. The same shopper looking for something for lunch in a convenience store may be choosing across a range of categories. A product being sold in a Discounter may have a very different competitive set to the same product being sold in a drug store or specialist outlet.
Know how to win. Once you know the need you are trying to meet and who the competition is, then you need to identify how you win. This is about your point of difference. What makes you better than the alternatives?
If you are competing for the mid-afternoon snacking occasion, what are you offering for that occasion that the competition can’t? It could be a functional product benefit. It could be an emotional benefit. It could just be about convenience (e.g. pack format). Either way, it is your job to frame the choice in the way that maximises the chances that a shopper will choose you. Similarly, if you are competing against lower priced brands in a discounter, how do you frame the choice around product benefits and quality?
These feel obvious questions, right? What do you sell? Who is the competition? Why buy your product? And the answers seem obvious. Until you take a step back and properly think about it.
“People don’t want a quarter inch drill. They want a quarter inch hole”
Are you selling drills or drill holes?
Feel free to forward. Have a great weekend and speak to you next week.