How A Tiny Business Can Beat Big Competitors

Part 1

This is part one of a 3 part series on how to beat your competition.

The purpose of the series is to give you 3 strategies that you can use to gain an advantage in the marketplace, and ultimately get customers to choose you over competitors.

These strategies are meant for small companies, even one person, that are at a resource disadvantage compared to their competitors.

Part 1 contains the introduction to the series, and the first strategy: counter-positioning.

Introduction: Why the bigger fish wins in business

If you go head to head with a direct business competitor that is bigger than you, you’ll nearly always lose.

For that reason, it's understood to be a natural feature of free market economies that any industry will eventually be dominated by 2 or 3 players.

The rest will fight for the long tail.

This happens for many reasons.

  • If a product is already the most popular, it will be recommended the most.

  • When a competitor gets ahead they can use their economies of scale to get even further ahead, creating a positive feedback loop.

  • They can afford to spend more to acquire new customers compared to their smaller counterparts.

  • They were often the first to the market and so had the easiest time finding new customers. Once a customer picks a product, it’s very expensive to get them to switch.

This creates an environment where the giant (for our purposes, a giant is all the competitors competing with you for customers) in the space, regardless of the size of the space, will always make easy work of competitors trying to eat their lunch.

Giants are giants because they found a winning strategy and scaled it. Because that strategy has worked they’ve committed their whole company to it. And it’s that commitment, the sheer unlikeliness that they will stop doing what is working to try something new, that we can use for our own purpose.

Competitors leave clues to where there are gaps in the market you can take advantage of. And to build a competing company that doesn’t get swallowed up by the giant you have to find those holes.

You find them by understanding your competitors and paying attention to what they are NOT doing as much as what they are doing.

The rest of this 3 part series will guide you on creating competition-resistant small businesses in crowded markets.

Counter-Positioning: Hit them where they can’t hit back

What is counter positioning

Every company takes a position to become successful. They have a certain price point, features, ethos, customer service policy, marketing channels, customer profile, etc…

As a company becomes a leader in a market, its position on everything inevitably becomes average. They take positions to appeal to the broadest audience or use case because they have undergone the most expansion.

An enterprise software company might automate its customer support through bots and help docs because that’s what’s most helpful for most people.

Yet, you have to imagine that there is a minority of customers that sees that position as not ideal for them. Maybe high-touch customer service is a bigger priority for them.

Counter positioning is about identifying your competitors’ positioning, and then finding an area where they are leaving big buckets of customers behind for you to lean into.

By dividing their audience you can pick weak spots they aren’t able to compete with you on because it would mean making things worse for the majority.

Identify the giant’s soft spot

all big companies and markets have these soft spots. As companies’ market share grows they will diversify their position to cover the most territory.

We can take advantage of their diversification by being decidedly better in fewer areas for fewer customers.

But we can’t do that without first figuring out what those soft spots are, and that takes research. Within that research, you want to study all of the companies in your category.

You should look at:

  • Their pricing and offering.

  • Who their target audience is.

  • Where they fit on the quality scale.

  • What their customer hate about them.

  • Their customer service policies and processes.

  • The product benefits they promote the most.

  • What distribution channels they sell through.

  • What their customers love about them.

Even with all that research, it’s not obvious where that soft spot was going to be. The trick is in understanding that it’s not what you see that matters but what you don’t see.

The opportunity is in what’s missing from the picture.

Microsoft created the product category that’s now called the Office Suite. They did this by bundling what became the essential software for computer work: Word, Excel, PowerPoint, and Outlook.

Microsoft Office, as the bundle was named, came out in 1990 and they were the leader in the category for over 20 years.

Then Google decided they wanted to get into the market. But they didn’t just make Google-branded versions of the products and try to sell them. They looked for holes. The first opportunity they saw was in Gmail.

They made a free email service that was easy to use and accessible from anywhere on the internet. Then they offered it to everyone that landed on Google.com, the most viewed page on the web.

Two years later they added Google Docs, Sheets, and Presentation. All were included for free, stored on free cloud space, and made it so you can collaborate with people live. Google’s products were not better than Microsoft’s. They actually only had 20% of the functions that Microsoft had.

But by segmenting Microsoft’s audience and servicing them with a product that was different in a way that mattered to them, they blew up. Microsoft in turn, did nothing for a long time. They were still selling software by CDs. To adapt they would have to change their entire distribution method. By the time they figured out how to do it, Google had gained too much momentum to stop.

Design a weapon to attack that spot

Once you’ve found the soft spot in the market, design your entire venture around exploiting it. The interesting thing about a good soft spot in the market is nobody will follow you there.

They will let you beat them up in that area and do nothing about it until it’s too late and you’ve already become the leader on those issues.

Take Duck Duck Go for example. Google gained the reputation of a company that’s using your data to profit off of you, and when things got political, a platform that censored stories based on a political bias.

Duck Duck Go built its whole mission around the idea that enough people wanted their searches to remain private, and for algorithms to be untampered with by bureaucratic incentives to build a business around.

They also knew that this could not have been more than a large minority of all potential users. Meaning, Google has no incentive to ditch a majority of users to win the preference of a minority.

In simpler terms, Google would do nothing to stop the growth of Duck Duck Go.

Rumble is doing this with Youtube, by betting on non-censorship and bringing everybody who got kicked off of youtube onto the platform.

Tesla did this with the car industry by focusing only on the production of electric cars when most companies didn’t have plans to produce a single one.

Bumble did this to Tinder by making it a forcing function that women have to be the first ones to start a conversation.

Netflix did this to Blockbuster by removing late fees altogether (late fees made up a majority of Blockbuster’s revenue).

Conclusion

If you can position yourself in a differentiated way that a portion of the total audience finds valuable, and your competitors aren’t willing to change their business model to follow you, you’re going to have a pretty easy road to growing your company.

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