Competition is a fact of life in startup land. A differentiated position in the market is vital. Good competitive positioning communicates to the world the set of assumptions one has to believe to envision your success. It is not only a boon for fundraising, but for sales and hiring as well. It turns out that everyone wants to know why you’re going to be around in 5+ years, and why you’re going to be insulated against the machinations of other players.
Too often do we find competition framed in the context of better/faster/cheaper. It’s an old trope in software, but I’ve never found it useful in practice. It fits a limited number of businesses that sell a commodity product. Otherwise, better/faster/cheaper fails for a few key reasons:
- You don’t actually know if it’s true. You know your own product better than theirs, and so suffer from both information asymmetry and a bias towards your own work.
- Your competitors will say the same thing about their products. If you’re a startup and they’re a big company, they will have more credibility in making that claim.
- Customers hear it all the time and have been programmed to be skeptical.
My advice is to ignore better/faster/cheaper, and instead focus on a differentiator that your competitor would agree with. This is a subtle, but powerful move. If you get it right, your competition will actually reinforce your positioning. Why? Because for them, your approach is a bad idea. They love telling customers why you’re not really focused on the same thing they do. By trivializing what you do, they’re inadvertently spreading your gospel.
I’ll explain with a few examples.
HotelTonight v. Priceline
Online travel experienced waves of consolidation throughout the late 2000’s and early 2010’s, driven by a competitive desire to get consumers the cheapest flights and hotels. Priceline Group and Expedia led the way, eating up Booking.com, Kayak, HomeAway, and Orbitz, amongst others.
Priceline positions itself as “best price, guaranteed.” It pioneered and trademarked “Name Your Own Price” in 1997. The entire brand promise of Priceline is finding you the cheapest possible flight or hotel:
When HotelTonight launched in 2010, it didn’t attempt to compete on better/faster/cheaper with a consolidating set of larger players. Instead, it focused on last-minute deals. These deals were likely cheaper than you could find on Priceline, but more important for HotelTonight was the “book in the moment” positioning:
HotelTonight positioned itself away from the cost-conscious Priceline shopper by focusing on two core user profiles: (1) the splurger and the (2) spontaneous booker. The former wanted a luxury experience at the last minute. The latter didn’t particularly care for planning where he was going to stay and trusted the HotelTonight platform to come through for him after he arrived at his destination.
If you asked Priceline at the time, it would have claimed that HotelTonight had a small market, which it had no interest addressing in the near term. Too much work. Too few people. That window of opportunity gave HotelTonight the ability to scale without direct competition and gave a differentiated value proposition to its customers and travel partners.
Zola* v. Macys
The wedding registry was created by Macys in 1924. Since then, nearly any seller of home goods has created some form of registry. They view the registry business as a strategic tool — inviting new customers into the store to build brand affinity. The average U.S. couple receives around $1,800 of gifts on a single registry and registers at ~3 stores, so the prize is quite large.
Because Macys and its peers, Bed Bath & Beyond, Target, and Crate & Barrel, view registry as an extension of their core businesses, registry nothing more than a tab on a larger website. The entire UX of the registry is born from the broader UX of the site. You can see below that the positioning is broad and bland — “find the perfect look” or “give the perfect gift”:
Zola differentiates with bold claim: “the wedding registry that’ll do anything for love.”
The slogan makes two promises: (1) broader selection than any single vendor (including experiences and cash funds), and (2) customer service that will do any thing to ensure you have a great registry experience. None of its offline competitors can justify a claim around the same degree of product breadth. Nor can they credibly hold up to the level of service provided by Zola’s dedicated customer success team.
The likely knock on Zola from its competition is that it lacks an in store program, but that’s exactly the experience millennial couples want to jettison!
Stitch Fix* vs. Norstrom
Nordstrom is well known for its free, in-store personal styling service. The idea is that you book an appointment, enter the store, and spend a ton of time going over “trends” and trying on different outfits from all over the store. Nordstrom markets the in-depth process and the personal touch of a human focused on your style. All told, your appointment is probably going to take 1–2 hours of your time, including getting to the store:
Stitch Fix could have argued that its data science-driven approach created better style choices. Instead, it chose to market its simplicity. You don’t need to talk to a human. You don’t need to make an appointment. You don’t need hours of your time. All you need to do is fill out an online survey:
Nordstrom’s argument back is likely that “Yes, Stitch Fix is simpler, but our personal stylist can understand your needs better and draw from the entirety of our inventory.” Of course, that logic entirely misses the point — a new generation of men & women want a more frictionless experience than Nordstrom can offer.
Different is far better than “better”
When it comes to competition, it’s more important to be different than better. And it’s vitally important to be different in a way that your competitor will reinforce themselves in the marketplace.
* Designates a Lightspeed portfolio company.
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