When a low (or zero) cost competitor enters a marketplace, existing companies get worried. This is especially true in smaller, high technology industries where those existing companies can charge high prices on products like unique sensors, complex measurement solutions, or product specific consulting services. These small markets have high barriers to entry so it can take decades for competitors to appear and win market share, but when they do, watch out, the competitive landscape can shift rapidly. Once a few large customers switch successfully, it becomes easier and easier to convince others. Quality, loyalty, and long sales cycles are like a finger in the dike, the problem must be addressed immediately before the dam breaks, but how?
A recent article from KISSmetrics, “How to Retain Your Customers in an Age of Free SaaS” explores an extreme example in the Software as a Service industry (SaaS). They describe the worst case where competitors are giving away free products. There are many examples of this in massive industries. Apple does it with OS X and IOS, so how does Microsoft compete? Google does it with Gmail, Photos, Calendar, Drive, Maps, Android, etc., so how does Apple compete? Facebook does it with… well, they do it with something since industry experts seem to think that Facebook is one reason that Google’s growth has stalled.
Today, no industry is immune. If you are successful and you are not in this situation now, there is a good chance you will be in the near future. I have seen companies that had a 50 year dominant market position lose it to aggressive competitors. The KISSmetrics article makes some excellent points right after the vague initial suggestion of “restrategize.” First, re-marketing is a good start. There is always a group of buyers who just care about cost so provide an entry level product (something decent, not “crippleware“), but shift focus to areas the low cost competitor(s) can’t or won’t address like quality, reputation, reliability, stability, capability, versatility, ruggedness, warranties, training, support, etc.
Second, spend time with key customers and actually listen to them. Shockingly, they will tell you what is valuable to them. Why do I pay more for Apple’s products and pay at all for Google’s Apps for Business? Because these solutions make me more productive. There is a definite cost associated with the effort required to utilize a “low cost” $699 Windows PC, an Android phone, or free business apps. Apple and Google both listen to customers (in the larger sense), implement the best of this input, and then effectively market these solutions.
Finally, regularly remind your customers why your solutions provide more value through both your sales and marketing efforts. 90% of the time white papers, application notes, case studies, marketing materials, and consistent sales training go a long way to maintaining a healthy customer relationship. Once in a while, going head to head with the competition is required. As BGR reports, even Apple has started doing this with their recent “Hardware and Software” campaign directly pointing out the advantage of making both iDevices and IOS. BGR rightfully points out that it is risky to mention a competitor directly, but occasionally it is necessary. So if you are still milking that cash cow, you might want to take action now, it’s no fun being stuck on the fence.