Should You Focus on Your Competition?
This episode might reference ProfitWell and ProfitWell Recur, which following the acquisition by Paddle is now Paddle Studios. Some information may be out of date.
Originally published: February 13, 2019
“Focus on your customers, don’t even think about the competition.” I've heard this piece of advice consistently for the past decade. Yet, when I ask why, the responses are typically pretty lukewarm and appeal to a time of tech company past when there were only a few companies in existence for each space.
What’s the data actually say?
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First, let's talk about the rise in competition in the subscription space.
When surveying founders and executives around how many competitors they had in their first year of business, we find that those who started their businesses five years ago were looking at two to three competitors, whereas those starting a year ago were looking at double digit competitors.
So should we focus on all this new competition?
When we explore marketing data, it turns out some level of competitive focus does work. Customer acquisition cost or CAC is roughly 15% lower for companies with a competitive focus, which includes comparison pages, competitive ads, and the like.
When done well, the data suggests that competitive comparisons can actually help buyers make a decision, because they’re already doing research in a competitive market. So it stands to reason that you should help them with their research and respectfully show the differences between you and your competitors.
However, we haven't approached the question from all appropriate angles yet. Product is a whole different issue, where those companies with a competitive product strategy are actually doing worse from a customer satisfaction perspective, as measured through net promoter score.
These competitive focused product teams are seeing roughly 50% lower NPS scores compared to their non-competitive focused counterparts, and note that this trend has remained consistent over the past number of years.
So should you focus on your competition?
Well, it’s hard to say. You never want to do anything that sacrifices product quality, and the data suggests that these companies who are focused on competition presumably are good at lowering their CAC, but not so great at defending their NPS.
Another possible outcome here is these companies aren’t disciplined enough to focus on competition in the right places and ignore the competition in the other places.
Like most cliches then this comes down to your situation and your discipline.
That's all for this week. Want to learn more? Check out our latest episode: Founders With Hobbies Slow Company Growth 20% and subscribe to the show to get new episodes.
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You've got the questions,
and we have the data.
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This is the ProfitWell Report.
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Hey, Neil.
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Landon here, cofounder of
User Feed and Ad Reform.
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Just had a quick
question for you.
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Should you focus on
your competitors?
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Thanks. Focus on your customers.
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Don't even think
about the competition.
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Being in product,
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I've heard this advice consistently
for the past couple years.
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Yet when I dig into why,
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the responses are pretty
lukewarm and appeal to a time
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of tech companies past when
there were only a few companies
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in existence for each space.
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What does the data actually say?
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Well, to answer this
question around competition,
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we're gonna look at two and a half
thousand subscription companies.
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Denying competition has
increased is a fool's errand.
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When surveying executives
and founders around how many
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competitors they had in
their first year of business,
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we find that those who started
their business five years ago
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were looking at two
to three competitors,
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where as those that started a
year ago were looking at double
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digit competitors.
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The rise in competition though
doesn't mean that you shouldn't
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focus on competition.
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Yet, when we explore
marketing data,
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it turns out that some level of
competitive focus does in fact work.
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Customer acquisition cost or
CAC is roughly fifteen percent
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lower for companies with
a competitive focus,
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which includes comparison pages,
competitive ads, and the like.
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When done well, the data suggests
that competitive comparisons can
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actually help buyers
make a decision.
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Right?
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Because they're already doing
research in a competitive market,
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so it stands to reason that
you should help them with the
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research and respectfully show
the differences between you and
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your competitors.
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Product is a whole
different issue though,
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where those companies with
a competitive product strategy
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are actually doing worse
from a customer satisfaction
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perspective when measured
through Net Pro order score.
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These competitive focused
product teams are seeing
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roughly fifty percent lower NPS
scores compared to their non
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competitive focused
counterparts.
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And note that this trend
has actually remained fairly
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consistent over the
past number of years.
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So should you focus
on your competition?
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Well, it's hard to say. Right?
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You never wanna do anything
that sacrifices product quality,
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and and the data does suggest
that these companies who are
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focused on competition are
presumably good at lowering
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their CAC, but not so great
at defending their NPS.
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Another possible outcome here
is that these companies aren't
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disciplined enough to focus on
competition in the right places
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and ignore competition
in the other places.
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Like most cliches,
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this comes down to the
situation and your discipline.
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Well, that's all for now.
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If you have a question,
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send me an email or video
to neil at profit well dot com.
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any other week of the report,
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we appreciate any and all
shares on Twitter and LinkedIn
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because that's how we know
that we should keep doing this.
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I'll see you next week.
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