How Can I Compete in a Competitive Market?

A mature, competitive market can be a total bloodbath, but it can also be a fantastic place to grow your business once you get a foothold.

For one, a competitive market is proven. You already know that people are willing to pay for the problem your product solves. If you can figure out a way to stand out among the crowd, you could be looking at a very lucrative business.

For another, it can be a great place to find an underserved niche of customers who are frustrated with what the big incumbents have to offer.

You’ve heard stories of small startups disrupting the status quo, but usually they’re led by an experienced founder, or they’re backed with impressive amounts of funding. I don’t recommend starting your first startup in a highly competitive market without prior experience or funding—or both.

But if you’re getting a foothold in a mature market and you’re ready to scale up, here are some ways to do it.

Competing on price is tricky, but you can get traction if you offer more than 80% of the product for half the cost.

In a mature market, the large players have pricing power that allows them to raise prices relatively frequently. When you don’t have the brand or credibility, it can be hard for customers to justify paying the same price for your service.

In addition, your competitors’ pricing power often leaves plenty of room for you to underprice them and still have significant profit margins.

In this case, if you’ve built a product that’s easier to use than the large players’ products and you are less expensive, it can be an incredible one-two punch when convincing early adopters to switch.

I’m not recommending that you remain the low-cost provider indefinitely, but before you’ve built a strong brand, this can be a good strategy. Of course, you should keep adding value to your product and raising prices as it matures.

Another place to innovate against bigger competitors is with your sales model.

Many incumbents in competitive markets have a high-touch sales process where customers must schedule a demo before learning the price. They may also have mandatory setup fees.

If you enter the space with a low- or no-touch sales process and your pricing is listed on your website, you can start winning customers who don’t want to jump through so many hoops.

When we launched Drip into the marketing automation space, one of the biggest players, Infusionsoft, wouldn’t let you see their product until you had paid a couple-thousand-dollar setup fee and gone through the required training.

With Drip we offered a free trial—all you needed was a credit card. This made early adopters more willing to give us a shot.

The third area in which you can outmaneuver larger competition is your product—especially if you’re dealing with larger companies who have 10- or 15-year-old code bases and clunky user interfaces.

In the world of accounting software, many Quickbooks refugees are looking for a solution with better UX or more streamlined features. Xero was able to get a foothold by building a cloud-first accounting package.

In customer relationship management (CRM), plenty of people are looking for a Salesforce alternative that feels fresher and like a better fit for their business. Pipedrive, Close, and many others have been able to carve out pretty great businesses by improving product usability and ease of setup.

If you can enter a competitive market with modern UX and the ability to ship features quickly, you can build a great product while also developing the reputation of being innovative and nimble.

This is a temporary advantage. Over the years, your UI and code base will age, and you won’t be able to ship as quickly. By that time, you should have a more mature product that handles the majority of use cases versus the early days when you’re using any advantage you have to compete against full-featured products.

In Judo, you’re taught to use your opponent’s weight and strength against them. The same holds true in business.

You’re not going to outmuscle or outspend entrenched, well-funded competitors. You need to use their biggest strength (their size) to your advantage.

With big companies comes slowness to react to the market, dated UX, legacy code, and all the competitive disadvantages we discussed. If they’ve been dominating the market for years, they probably also have a group of users who have defaulted to using them but are frustrated by the experience.

If you can find this group that desperately wants to escape and help them migrate to your tool, not only will you gain new customers, but they will rave about you to others in their circle.

You’ve turned the strong brand of your competitor into a massive lever: word of mouth.

People also love the scrappy new underdog, which can be a great marketing angle for a startup in a competitive market.

Rental car company Avis did this with its “We’re #2, we try harder” ads in the 1980s.

I did this with Drip. Our home page essentially communicated that we were “not Infusionsoft, Marketo, or Pardot.”

The headline on our homepage was “Lightweight Marketing Automation That Doesn’t Suck,” which was very much a swipe at our larger, clunkier competitors.