Hey friend 👋
Today, we’re playing a numbers game: 3 scenarios to watch out for, and 6 strategies to overcome them.
W’re continuing our theme of short reads, so I hope I won’t be competing for your attention.
(and, no, I don’t feel good about that pun)
Read time: 5 minutes.
Most first-time founders resist talking about their idea in public.
They’re worried that word will get out, and someone will steal their idea.
But it almost never happens.
I often just quip: to keep it a secret from everyone is to keep it a secret from your customers. But I’m feeling particularly sassy today, so lemme double-down here for a sec…
To launch a startup is to spend the next 2 years of your life working harder than you’ve ever worked before, on something that probably isn’t going to exist 3 years from now.
But your idea is just so f•••ing amazing that when Rando Foundrissian hears it, he’ll leap forward to volunteer for that? No.
And he’s going to attack it with as much passion as you? No.
In the immortal words of the current president:
Are you saying I shouldn’t worry about competitors?
Of course not. If you’re onto anything at all, competitors will come for you.
But it’s much easier (and less risky) for competitors to wait until you’ve proved you’re on to something.
But, like everything in life, there are exceptions:
Here are three scenarios where you should be cautious from day one — and six strategies for overcoming them.
Competitor 1: Same customer, related product.
If a potential competitor is already serving the customer your product serves, their risk to get to market is much lower.
They don’t have the product yet, and they haven’t proven desirability, so they can’t crush you overnight. So that’s cool.
But they’re better off than you are:
- No competition
- Access to capital
- Quicker time to revenue
- Fewer sales & distribution challenges
- More initial data on customer preferences.
In other words, it’s relatively inexpensive for them to test for desirability and viability with the audience they already have.
And if they’re starting with high loyalty from their audience? Danger, Will Robinson.
On the flip side:
Competitor 2: Same product, related customer.
Similarly, a potential competitor could have a product very similar to yours, but that they are serving to a different audience.
Again, it’s relatively inexpensive for them to test that product with a new audience, and they reap some of the same rewards:
- No competition
- Access to capital
- Quicker time to revenue
- Few product development challenges
For example, because they already have a product that words, their landing page test can have easily have revenue at the end of it — not to mention retention and referral. Yikes!
Competitor 3: A crowded market with low loyalty.
This isn’t where there’s one competitor to worry about, but many.
It’s pretty common to see new startups enter a crowded market. That’s not a problem in itself. You can make a good business out of differentiating yourself in a sufficiently compelling way — though, to be honest, it wouldn’t be my first choice.
But if it’s a crowded market that is also plagued by low customer loyalty?
Because low loyalty means easy switching, and it creates a minefield. Not only do you have to worry about lower retention and lifetime value, but also about the constant stream of new entrants into the market.
You’re signing up for a life of endless sustaining innovation, constantly chasing the stickiness you need to survive.
It’s a tough place to be.
This is me… Whoops! Are my dreams dead now?
No, none of these mean your startup isn’t viable or feasible.
And we’re talking mostly about timeline, anyway: regardless of your product or the market, when you prove there’s a there there, competitors will take note.
But you do need to ensure defensibility — the ability to retain your customers in the face of copycats.
Here are six strategies you can put to work to help against these, or any competitors:
Strategy 1: Network effects
Let’s start with the obvious: any platform that creates a viral loop promotes easier acquisition.
But there’s way more to network effects. The real question?
How can you ensure each new user makes the platform more valuable for other users? More desirable to use for the next user?
- Tiktok and Instagram are more valuable to you the more of your friends are there.
- YouTube is more valuable to you the more content creators you like are there.
- Amazon becomes more valuable each time a user leaves a product review.
The result of these network effects?
It’s less appealing for customers to switch to the competition.
Strategy 2: Economies of scale
Everything’s cheaper and easier when you’re already big (except innovation).
It’s just easier to be competitive. You can:
- Acquire materials at volume;
- Gain efficiencies to decrease cost;
- Pass the efficiencies in to the customer.
It’s more expensive for customers to switch to the competition.
Strategy 3: Economies of scope
While economies of scale are efficiencies gained by volume, economies of scope are efficiencies gained by variety.
In other words: closely related products are cheaper to produce together than separately.
As you grow and scale, you can increase the scope of your offering by serving your customers in multiple, related ways.
This is part of what we mean when talk about building a business, rather than a product — and definitely rather than a feature.
It’s harder and more expensive for customers to switch to multiple competitors.
Strategy 4: Integrations
As the name implies, this is when you embed yourself in a way that makes it difficult for the customer to extricate you from their life.
We most commonly think of this in the context of business-to-business (B2B), where you embed your product into your customer’s infrastructure.
But it also applies to consumer products (B2C). How can you integrate your product deeply into the day-to-day experience of their life?
It’s difficult for customers to switch if I have to change how they live their life.
Strategy 5: Engagement aka stickiness
In a sense, engagement is the opposite of integration:
Integration makes it difficult to stop using you; engagement makes it desirable to keep using you.
How can you continuously create value in a way that continuously drives customers back to your product?
There are a myriad engagement tools. You can:
- Gamify the process
- Provide in-app support
- Provide incentives for use
- Use off-platform notifications
These seem obvious, but there’s a bit of sublety here. You can’t just give users a reason to come back.
You must also create extraordinary value when they do.
It’s less appealing for as customer to switch if they’re consistently getting value.
Strategy 6: Experience
Let’s end with the one that’s consistently undervalued by founders:
Cultivating a product & brand experience that resonates with the customer’s identity.
It speaks not to just what they want to get done, but to who they are.
I’ve talked about this before. People use Apple products (in part) because they project an identity of creative elitism, and it’s always reflected in their campaigns:
- Think different
- I’m a Mac, I’m a PC
- Shot on the iPhone
(Note to Apple users: please forgive the verbal harpoonery “elitism”; I run Android, which is obviously superior in every way. Come at me, bro.)
Magic happens when brands become part of a customer’s identity:
No one wants to switch to the competition if it means they have to reject who they are.
Let’s put a big bow on this.
Even if your competitors don’t look like the three I mentioned above, you’re not forever safe.
When you prove there’s market for your product, competitors will take note. But the presence of competition — even dangerous competition! — doesn’t mean your startup isn’t viable or feasible. It just means you need to think hard about defensibility.
BUT! Don’t take this too far, and definitely don’t take it too soon.
If you’re just getting started, keep your priorities straight:
Customers will kill you long before the competition gets the chance.
Whenever you're ready, there are 3 ways I can help you.
If you’re still in the idea-to-seed stage, trying to get early traction, I’d recommend starting with some coaching:
→ Book a 1:1 coaching session to tackle one key challenge, from prototype to pitch.
→ Apply to my Traction Coaching program, and we’ll find traction together.
- If you already have early traction, I’d recommend running a Traction Sprint to find the traction you need to get from Seed to Series A.