A Buyer-Centric Approach to Competitive Positioning

Welcome to the positioning show where we discussed topics related to the practical application of positioning for marketing, sales, and product teams. I'm April Dunford, a consultant, author, and the world's leading expert on positioning for BAB technology companies. Hello, welcome to another edition of the positioning show with me, April Dunford. So great for you to join me again at this podcast today. I wanted to talk about something that I've written a little bit about in the newsletter, but I thought it would be neat to kind of revisit the subject in the podcast. And I want to talk about the different types of competition that we have and the different ways that we can position against those specific types of competitors, because I think it changes a little bit depending on the exact type of competition we're talking about. One of the things that I think is really interesting in the work that I do with customers we often start a positioning workshop with a conversation around competitive alternatives. And this definition of what is competition varies wildly across different members of the team. So for example, if I ask sales, who's our competition, sales will talk about anybody that lands on a short list basically. And in fact, they will often over rotate on competitors that we lose deals to. They generally don't consider status quo competition because I think in the minds of most really good salespeople, if they lose to status quo, they think, oh, well, we're going to get those guys later. They certainly don't consider do nothing, for example, as competitors. If I look at the way product management looks at competitors, they're often looking at what I would call horizon competitors or competitors that aren't causing his pain right now, but could in the future because they're worried about the product roadmap. For positioning purposes, we don't really need to position against those types of competitors simply because they're not causing us pain right now. When and if they do start to cause us pain in the future, we'll worry about positioning against them. In my mind, I think we have three big buckets of competitors. And I want to talk about how we would position against all three. So the first would be status quo. That's whatever the customer happens to be doing now. That might look like something that you would consider a competitor, but quite often, it's things that don't look anything like us. Like I'm doing it with manual processes or I'm using an Excel spreadsheet plus a bunch of manual processes or I've got some legacy thing or maybe a monolith software like a big ERP or an accounting system and I'm getting by with some edge features of that and a lot of manual work and I'm making it work. That's typically what we're talking about in status quo. The second type of competitor we've got are what we typically think of as competitors. So direct competition, that tends to be things that land on a short list. So if I'm taking a customer viewpoint on this, it's not really a competitor. If a customer doesn't put it on a short list. So a lot of the things that product would consider a competitor aren't really competitors in the minds of customers quite yet. But anything that lands on a short list is, so we would consider that direct competition. And then the last competitor we have, I'll call it do nothing, which is often mistaken for the first category of competitors, which is status quo. So people will say, oh, we'll do nothing. Just means the customer actually voted to stay with status quo. Sometimes that's true. Sometimes a customer will look at all their options, decide that none of the options fits their requirements or the pain of changes too much or I don't know what and decide, you know what we like status quo. We're going to stick with status quo. Let's just do it. A lot of the time though and the research tells us the majority of the time when a customer starts on a purchase process and then in the end chooses to do nothing. The majority of the time that do nothing is actually representing customer indecision. So what it means is the customer looked at their options. They may have actually chosen something as the preferred option, but in the end decided to do nothing because picking something seemed too risky or they weren't exactly sure what the right thing was to pick. And in the end, they decided, you know what, we're just going to kick the can down the road and we'll figure this out later and there's no good course of action right now. So we're going to choose to do nothing. So those are the three status quo direct competitor do nothing. I'm going to go through each one of those and talk about what can we do to position against all three of those. So let's talk about the first one, which is positioning against status quo. The obvious way that we position against status quo, first of all, is to demonstrate the additional value that the customer can get by using our product versus doing what they're doing today. Now that value may take the form of, hey, you're going to save a lot of time and that's going to free you up to do better, higher value things. We're going to help you make money because you can do this thing at scale in a way you couldn't before. We're going to help you save money because instead of having all these people assigned to this manual process, this is going to happen or we're going to help you make money or save money because there's going to be fewer errors because there's fewer manual processes. You really need to nail your value versus the status quo in order to beat the status quo. Nobody's even going to really consider you unless there is significant value to be gained from leaving the status quo and going to your thing. Now that's not the only thing we have to do to position against status quo. Often the customer will look at other options and decide that status quo is okay because the pain of change is simply too much. We have to be very careful if our main competition is status quo. We can't rely just on demonstrating the value of coming to our side. We also have to show that the pain of change is worth the value. Often that means we're trying to look at tactics and strategies to reduce the pain of change. That could be things like we have some software that makes it really easy to migrate your data out of the old tool and into the new tool. It might mean that you have training to help people get up to speed on the new thing. It may mean that you have professional services. They're going to help folks do the integration work that they need to do or do whatever it is they need to do to migrate things over and move things over. You can't just be about your value versus status quo. We also can't forget that there's this pain of making a change. We may need to really, really lean into lowering the pain of making that switch or doing that change. Those are the two big things when our main competition is status quo. The second type of competition that we have are threat competitors. Then the main way that we beat threat competitors is to lean into our value. The difference here from value against status quo is now I've got competitors that look just like me. Typically, the value that I'm talking about is not just about the value of not doing this in a manual way anymore or not doing it in a way that causes a lot of errors or takes a lot of horsepower or add more headcount or doing things in a spreadsheet. Now we're actually getting into something that is a little bit more specific, specifically against competitors that do look like us. We're not just leaning into value here. We really lean into this differentiated value versus our competition. B to B, sometimes we don't have direct competitors. We're just competing against status quo, but a lot of times we are competing against these other short list competitors and we cannot simply act like the only competition we've got is status quo. We have to really understand who those other competitors are and lean into this idea of you should pick us because we unlock this value that the other alternatives cannot unlock. Now, I've talked a lot about differentiated value before in this podcast and on season one, I spend a lot of time on that. In my opinion, one of the main things we have to do in order to help customers understand our differentiated value is customers have to really understand our point of view on the market and they have to understand how the competitors fit in the market versus us. So often that means somewhere we have to be painting a picture of the entire market and helping customers understand the pros and cons of different approaches to the problem. The way I recommend we do that is typically in a first sales conversation, we can have a conversation around, look, this is our point of view on the market. We see the market this way and because we understand this particular thing about the market, if we look at the other alternative approaches to the problem, we can say, look, there's this approach, but the pluses and minuses are this. There's this approach, the pluses and minuses are different and then we sit here and the advantage of coming with us is we can we can deliver this value. The other approach is simply cannot do that. So if we are in a head to head competition with other things that look like us, we really need to lean into this differentiated value. Now, The second thing that I think is really important is getting a really tight handle on what does a good fit customer look like for us. So if we are in a situation where our main competition is this direct competition, one of the main ways we win there is to ruthlessly disqualify accounts that do not fall into our best fit criteria. Now this might seem a little counterintuitive at the beginning and I think a lot of companies are actually talking to way more accounts than they need to be talking to and are essentially wasting a lot of resource trying to close deals that are never going to close. If we have direct competition, we need to really understand what our differentiated value is against that direct competition and then we need to be really, really tight on what are the characteristics of a target account that make them really, really care a lot about the value that only we can deliver. If we understand that, then we should feel very confident about disqualifying accounts where we know we don't have anything special, we know that we don't stack up all that well against our direct competitors and we should be letting those accounts go or essentially disqualifying those accounts as early as we can. The flip side of that coin is where there is an account that meets our criteria, we should fight like heck. So we should treat every single deal where we know that the account falls into our very tight definition of an ideal customer, we should treat those like we should win every single one of those and be very careful that the ones that don't meet that criteria and don't fit exactly into what our definition of an ICP is, we should ruthlessly disqualify those. Before we did that, I think companies would be much more successful and they would be able to run much leaner because they are not wasting as much marketing and sales resources, trying to go after deals that are ultimately we're never going to get. The third type of competition we have is probably the worst one and it's the worst one for a lot of different reasons and that is do nothing. So do nothing is the worst one. First of all, it's the most common. The research tells us that 40 to 60% of B to B purchase processes end in no decision. It also tells us that the majority of the time that no decision is actually happening not because the customer has decided that the status quo is better. It's happening because the customer looked at their options and became indecisive in a way where they basically decided no decision is the best decision here. Now that indecision is coming from a lot of different places. So sometimes it's coming from the customer can't really tell the difference between different alternatives. They look good, but they all look good and they got to pick one and the customer is so worried about making a bad choice that they end up making no choice at all. Sometimes the stakes are very high in these decisions, particularly we're talking about B to B here. So if a customer makes a poor decision, there's a lot of bad things that could happen. They could end up looking stupid to their boss because they recommend this thing up to their boss and their boss says, what, you pick that? I hate that thing. That's bad. Or the end users don't like it and then they're all complaining, ah, you're the jerk that picked that thing or, you know, maybe the project fails and a big enterprise B to B software deployments that does happen and that would look very bad on the person that picked it. And so people are worried, maybe I'll get passed over for a promotion. You know, maybe there's a possibility that I might get fired for making a bad choice here. So there's a lot of stress on deal champions who have the responsibility for actually making a purchase recommendation here. So if we are in a situation where we feel like we're losing a large number of deals to this no decision and we sense that that no decision is due to customer uncertainty or a lack of customer confidence in making choices, then we have a few things that we can do to help fight against that. The first way we can help customers get more confidence in their decision is we can be educating them on the trade offs associated with different approaches to the problem. So if we think about it that way, our job here is not just about communicating the value of what we do and the differentiated value of what we do, meaning why pick us over the other guys. But it's a little bit of here's why you wouldn't take this other approach to the problem. So that involves typically looking at the competitive landscape, separating the competitors out into different approaches to the problem and having a conversation with the customer or educating the customer in your marketing materials or wherever else you like to do it. About, look, if we take this approach to the problem, it is very good for these reasons, it is very bad for these reasons. If we take this approach to the problem, it's good for these reasons, it's bad for these reasons and we sit in the middle like this. I've worked with a lot of different companies that have done a very, very good job of this and often the way we need to do it is a way that comes from a place where we fully admit to the strengths of our competitors. That might seem counterintuitive and it might seem we should try to position ourselves as better there are competitors in every way, but often it's not. So in order for us to be credible doing this kind of market mapping and attempting to educate a customer about pros and cons of different approaches, in order for us to be really credible there, we have to be able to admit that, hey, you know, Oracle is a great company. We like what they do and they are very good for customers that are trying to accomplish XYZ, but they are not good for customers that are trying to accomplish ABC. If we're going to do this really well, we have to admit that our competitors are good at things. We have to admit that certain approaches are better in certain situations, but here's why we think our approach is the best approach for customers that look like you. So that's the first thing. We need to help customers understand the trade-offs associated with different approaches to solving the problem. The second thing I think we need to think about when we've got customer indecision, often the customer indecision is coming from a place where we have done a very good job of selling the champion in the deal, but we have maybe not armed the champion sufficiently to handle the objections of all the other players involved in making the deal happen. So again, typical B2B purchase process, we've got five to 11 different stakeholders involved in this thing. So that's a lot of people. We have our champion. Our champion is the person who's going to ultimately make the recommendation to the economic buyer. And part of that champion's job is to go and get agreement across all the different teams and handle all the objections of end users, the IT department, the legal department purchasing, compliance, legal, all these different groups. If we get in a situation where the champion is like, yes, yes, yes, this is great. I love this, but then the deal ultimately doesn't go through. Some of the time what's actually happening is they're stuck because they can't get one of these key stakeholders to agree. So for example, they might go to the IT team and say, hey, we want to buy this software. It's going to be great. And the IT team looks at it and says, seems pretty difficult to manage. Or how are we going to integrate that with our accounting system? I don't think it actually works to integrate with the accounting system. Now it's our job as a vendor to arm the champion to handle those objections. In some cases, we may get the opportunity to pitch directly to the IT department, in which case that's great because we can do our best possible job of handling those objections. But in other cases, often it's the champion that has to go have that conversation without us. So it's our job to be able to anticipate what those objections might be and then make sure that the champion can come in and knows the answers to all those things. If you find you're losing a lot of these deals and it's potentially due to the fact that there's objections happening with other stakeholders in the room, we need to get really, really clear on what those objections are. And we need to do a better job of handling those objections in advance and arming the champion to be able to do it even if we're not in the room. And then lastly, while we're on the subject of increasing the customer's confidence in their choices, the last thing we can do beyond helping them understand the trade-offs of other alternatives and helping them handle the objections of the other stakeholders in the deal, the last thing we can do is offer our [BLANK_AUDIO] very specific recommendation. This is an interesting technique that I first really got thinking about when I read Matt Dixon's latest book, The Jolt Effect. And in there, they showed that very effective sales reps would often make a very specific recommendation. And this was particularly good, where we had software there was multiple peace parts or options or add-on things that a customer could choose. Often, the indecision came from the fact that there were too many options. And the customer wasn't sure which package they should pick. Which sounds terrible. But when I read that chapter, it got me thinking about one of the very big companies that worked at IBM. And we had a lot of different add-on things. And we would have deals stall at the very, very last stages of the deal, because the customer wasn't exactly sure which package they should pick and what the trade-offs were between the different packages. And this indecision got them so tripped up that we'd sometimes end up not doing the deal at all. What the Jolt Effect research showed was that sales reps that made a very specific recommendation and said, look, like here's all the options. And you could do this anyway you want to. What I would recommend based on where you're at and what I've seen with other companies like you, I would recommend that you get this package with these options. Again, if you can do this in a very authentic way, it increases your ability to get the deal. And in fact, the Jolt Effect research showed that it improved your chances of closing the deal by 144%. So those are the three things under increasing the customer's confidence in their choices. Help the customer understand the trade-offs between the different approaches to the job, arming the champion to handle the objections of the other stakeholders in the deal. And then lastly, making sure that we are making a very specific recommendation so that the customer doesn't have this added burden of trying to figure out exactly what is it we're trying to buy. The second way that we can help customers get over this do nothing or indecision is to help decrease the risk of doing a deal. So often the customers are indecisive because they're worried about the risks involved in making a decision. So what happens if the project doesn't deliver the value that we think it's going to deliver? What happens if we don't get the user adoption that we thought we were going to get? What happens if the project just takes way longer to implement or is way harder to implement or maybe the budget goes over who knows what? So there's all of these things that can cause a buyer to say, nah, I don't think I'm ready to do this quite yet. So what can we do to decrease the risk in a deal? There's some obvious things we can do. Things like guarantees work really well. And I've seen that work well in lots of companies that I've worked with, that there's essentially a money-back guarantee or a guarantee that says, if you don't achieve this or if you're not perfectly satisfied, you can break the contract, we'll give you your money back. Often these guarantees are time-bounded. So you have 30 days or 60 days. And within that 30 to 60 days, if you feel like things aren't going well, you can get out of the deal. That can help a customer feel like this isn't a terrible decision to make because if two weeks from now, we decide we're doing the wrong thing, we can still get out of it. One that I've seen work really well and that I've implemented a lot back when I was in in-house VP marketing and working on really big, big deals is often a really big deal can seem extraordinarily risky. And in those cases, we may want to break the deal down into chunks. Now, you have to be careful about this. And you have to feel confident that you can win the additional chunks. Often companies don't want to break the deal down into chunks because they're worried. We'll only recognize revenue from chunk one this year. And it'll be next year by the time we get chunk two or chunk three or chunk four, would we want to get this big deal? But if the alternative is getting no deal at all, maybe it's OK to break it into chunks. I found that with a customer that's really worried about risk, we could often do a pilot deployment or a smaller deployment or we could look at the deployment in phases. So phase one, we're only deploying out this far phase two, we're getting out here, phase three, we're getting out to here. That helps the customer again feel comfortable that if things are going off the rails or we're not delivering what we say we're going to deliver, they haven't bitten off the entire meal. They've just taken a little nibble at it and it doesn't seem so risky. Associated with that are things like proof of concept or test projects. Now, I have a very love-hate relationship with proof of concepts. I worked for a while on a company we were here selling into financial services. And in those bigger banks that we were selling to, they always wanted to do an on-site proof of concept. They would never pay for those proof of concepts. So they were very expensive for us to do as a company. They tended to slow the deal down. And often, it wasn't unusual for us as the smaller vendor to get sucked into a proof of concept only to have the company choose the bigger vendor over us. So in some cases, I thought doing a proof of concept was actually a bad thing. It slowed down the deal. In those companies, we were always trying to avoid doing a proof of concept. So we would really lean into, well, why are we doing the proof of concept? What are we trying to prove in the proof of concept? If we're just trying to prove that it works with your data, maybe we could do it in a test setup in our offices, for example. That said, I've worked in other industries where a proof of concept is actually a deal accelerator. So at a different company I worked in, we were selling into big retailers. And some of those big retailers had concept stores or test stores. And they were very used to doing a proof of concept at the test store before they would then roll it out anywhere else. So we found if we could get into the test store very quickly, if we could structure the proof of concept which meant we would have a very specific definition of what is past frail criteria. We would make sure that there was a start and an end point. We didn't want these proof of concepts to go on forever. But if we structured them very well, it could actually accelerate the deal. So in some cases, I think where you have a customer that's indecisive and they're worried about the risk of the deal, doing a test project or a proof of concept can help take that risk off the table. So if we look at this across everything-- so again, we have these three types of competitors. We have status quo. We have direct competition. And we have this do nothing. If we have status quo, what we're trying to do is demonstrate our value versus the status quo. We're trying to lower the pain of making a change. Those are the two big things. If I'm dealing with short list competitors, I want to really lean into my differentiated value. And I also want to be ruthlessly disqualifying folks that are not a good fit for my stuff. And then lastly, if I've got do nothing on the one hand, I'm trying to increase the customer's confidence in being able to make a good choice. At the same time, I'm decreasing the risk of doing a deal. If we look across all three of these things and the tactics we're looking at, taken together, we can make some conclusions here. So one is, we really got to nail our positioning. If we want to really win deals and prove our value, we have to get really tight on our definition of differentiated value or why pick us over the other guys. And then secondly, we also have to be really tight on what's our definition of a best fit customer. The second thing is, ideally, we've got a sales pitch that helps our sales team act as a guide. That sales pitch needs to be able to do things like express our point of view on the market. It needs to be able to very clearly communicate the different alternative approaches to the problem and the pros and cons of those different approaches and how we fit in the middle of that or why and when do you pick us over the other guys? And then lastly, we need to really think about creative ways to de-risk the deal, take risk off the table to help customers be able to make a decision and not feel like, ooh, something really bad is going to happen if I choose unwisely here. That's it for this week. I hope you thought that was interesting and informative. Thanks so much for hanging out. Hey, a couple of things. This podcast is relatively new. I would love it if you would leave a rating or review. I would really, really appreciate that. Secondly, I have a newsletter. You folks should subscribe. It's aprildover.substags.com. Or you could go to my website and sign up for it there. One of the things I have, if you sign up for the newsletter, is a set of templates. Those templates go with the two books. So there were some templates that came with obviously awesome, as well as some templates that came with the second book, sales pitch. If you've read either one of those books, the templates will help you if you're doing any of these exercises internally with your own team. The way you get those templates is you go to aprildover.com/books. Scroll down a little bit. You will see a box. there where you can sign up for the newsletter. In the bounce back email, you get after you subscribe for the newsletter, you will get a link there to download the templates for free. Anyways, I hope you thought that was fun and cool. You guys are great audience as always, and I'll talk to you in a couple of weeks. Hey, thanks so much for listening. If you're listening to this podcast and you're thinking to yourself, "Hey, my company could you some help with positioning?" Maybe we should talk. So as a consultant, I work with tech companies, but very specifically B2B tech companies that have a sales team. I don't really have a size requirement. I work with very, very large businesses, but I also work with growth stage companies that are as small as 10, 20, 30 million revenue. The work I do with companies is focused on getting a very tight definition of how you win in the market, and then taking that and translating it into a really compelling story that clearly answers the question, "Why pick you over the other guys?" If you're interested in learning about how we might work together, you can visit aprildoneford.com/consulting. Thanks again for listening.