Michel Porter’s time-tested “Five Forces Model” argues that business executives define competition too narrowly. In reality, rivalry within an industry comes from far more than direct competitors. In our competitive landscaping projects with brands across several verticals, when asked, Brand Managers cite names of their direct competitors only. It often turns out that to fulfil their needs, consumers opt for choices which did not even belong to the category. Here are a couple of examples.
Do you know for sure who your competitor is?
Gyming
A leading gym experienced customer attrition of 68% due to the coronavirus. We asked where did your customers go post the coronavirus? The brand team was convinced that people have bought machines and are exercising at home. Reaching out to ex-gym-goers, we learnt that:
19.7% had bought fitness machines (out of which 38% said they bought machines on installments).
14.6% had now subscribed to fitness apps or online programs and are following fitness regimes from the comfort of their homes.
9.3% said they now prefer to walk in the park, in a mall, or out in the open.
23.9% gym customers were lost to competition that was not foreseen by most gym brands.
Snacking
A leading confectioner saw a rise in sales during the coronavirus period but has seen a gradual drop in its chips and biscuits products sales over the past 7 months. The rise in sales was attributed to consumers munching more during lockdowns while the drop was believed to be due to opening up of other snacking options. When we probed consumers, we found out that of those who used to take 2 sweet or savory snacks per day:
26.3% have switched to eating fruits as one of the snacks.
9.1% have started eating vegetables at snack time once daily.
7.4% have replaced 1 of the 2 snacks with fresh juices.
As much as 42.8% consumers have replaced 1 of their 2 daily snacks with products that were never seen as competition by confectionery brands.
What is in it for you?
At times while innovating, Brand Executives suffer from blind spots, over-estimate the significance of what they know, or mostly rely on information that confirms their perceptions. This is one of the reasons that NPD at several brands is not delivering the desired results.
The real source of competition is identified by understanding:
- Consumer needs
- How are those needs being fulfilled, or
- If they are unmet, then what are consumers doing about them.
Accurately learning consumer needs is also the key to successful product innovation.
