What is your target group(s)? How many potential buyers are there, and what is their buying power? Who are your competitors – and how many are there? Having lots of competitors can be a good sign, if they are the right kind of competitors – ones who are lagging behind in areas you can move in and cover as part of your brilliant idea.
It’s quite common to see even large, sophisticated companies battling for market share, all using very similar weapons and strategies. That is, very similar products and services, and marketing approaches that are much alike. They don’t seem to be thinking in terms of reaching new and broader markets, but instead struggling to take away market share from each other. This is a zero-sum mentality – the idea that the number of potential customers is fixed and finite, so that in order for one company to increase its customer base, it must lure away or steal their competitors’ customers.
This is both narrow-minded and a waste of marketing money and resources. In actual fact, no one else has to lose in order for you to win. If you seek out, develop and expand your own market, and sell more individuals within that market more of your products and services, you expand – and there will still be plenty of market out there for other companies to attract and serve. If you look for a moment at the sheer number of people in any given city, region, country and the world, this becomes clear at once. There are SO many people, with so many needs and desires.
Now, this doesn’t mean that you won’t end up taking customers from your competitors. With a truly brilliant idea, competently implemented, you’re sure to appeal to lots of people who are patronizing other companies. If you can give people more exactly what they want – or at least something much closer to it – they’ll happily bail on your competition and come over to you.
The point is don’t just be smart. Be brilliant! Don’t waste time and treasure trying to directly take market share from the competition (while offering essentially the same products and services). What do your competitors’ customers want, need and desire that they are not currently receiving – and then figure out how you can satisfy them. Make it known, loud and clear, that you can and will satisfy them. AND DO IT. You’ll have plenty of market share – and you will very likely create a new market in the process.
Look at the diagram in section 1.2.1 – the one with the copy cake area and the cool unique area. The companies jostling about in that copy cake area are all fighting for shares of the dotted area – symbolizing an over-crowded market. There’s plenty of market awaiting you in that unique area. It can even be yours and yours alone!
Are there any competitors to take into account?
Part of developing your pricing strategy – even if you will be offering products and services with a brilliant new twist that no existing company can match – you do have to consider what the competition is charging. Be sure to do your homework well and discover your target market’s price points, for the things you will be offering.
One factor that influences those price points is existing companies’ prices. Even with a truly unique new offering, if your price is too far above the competition, you’re likely to be in trouble. And if your price is too low by comparison, your offering may be thought to be inferior, and fail despite its “great” price. Get it right the first time – it’s tough to change price strategies once you’ve launched.
If you have no real competition, you can set your prices, with- in reason, as you like. Care must still be taken, though. No matter how unique your new offering, unless its value is very, very clear to potential buyers, a high price can scare off even the most adventurous of early adapters. You may make some sales anyway, but not enough to generate the sort of buzz that would make your offering “catch on” the way it could and should. Your pricing structure needs to be sustainable – both for your business and to encourage continued and repeat business from your customers. You can do the simple math in your head. For example would you rather have 100 customers paying you $200 a month or would you rather have 500 customers paying you $100 a month?
What we did in starting Billy’s Billing was quite simple. Even though the service we were offering was significantly different from what was on the market, we matched existing-market pricing (for the closest similar offerings), and then gave users considerably better value. We knew that our competitors were directing their products and marketing focus toward auditors and accountants; we focused on start-ups and small businesses, without specialized accountancy training or lots of cash to spend on professional accountants.