The common question I ask frequently, and often get asked too, is “who are your competitors?”
Although there is nothing wrong with thinking about competitors, sometimes the question is less relevant.
You should not always think about your competition, because competitors are not always who you are truly competing with. Instead, you should think about alternatives. In fact, most products are competing with alternatives or substitutes.
Basically, alternatives and substitutes are what your target customers are using today to solve their problems.
The competitive environment
According to Michael Porter, a guru on competitive strategy, a group of competitors that provide similar products or services form an industry.
Porter developed the fundamental framework called the five forces model helping organizations understand their current competitors as well as organizations that could become competitors in the future. As such, companies can find the best way to compete in their market.
In addition to their direct competition (rivalry), organizations must consider the strength and impact of the following factors:
- Substitute products
- Potential entrants (new competitors) in the marketplace
- The bargaining power of suppliers
- The bargaining power of buyers
When any of these factors change, companies may have to respond by changing their strategies.
Example of alternatives and substitutes.
Coke and Pepsi are direct competitors in the soft drink industry; however, if you think about alternatives and substitutes you need to include water, coffee, tea, milk, and any liquid a person can drink whether or not he or she feels thirsty.
Similarly, for the treatment of obstructive sleep apnea, there are several options available. For example, milder cases with lifestyle changes, such as losing weight, quitting smoking, and treatment for allergies.
Different devices are available to open up a blocked airway; for example, Continuous Positive Airway Pressure (CPAP), Automatic positive airflow pressure (APAP), Bi-level positive airflow pressure (BiPAP), and oral appliances.
Surgery is usually an option after other treatments have failed and, in this case too more options are possible; for example, uvulopalatopharyngoplasty, tissue shrinkage, implants, maxillomandibular advancement, and more recently hypoglossal nerve stimulation.
Therefore, if you produce a CPAP device, you are not only competing with your direct competitors but also with the alternatives in the continuum of care.
Focus on competitors: The consequences
Focusing on competitors is important and since you are not the only player in your industry, it is mandatory. On the other hand, if you focus on competitors, you must be aware of the following risks:
- Lack of Differentiation: When a company focuses only or mainly on direct competitors the result is conformity. If all the competitors look at each other, they will develop products around the same features and similar designs. The technical data, clinical evidence, and promotional messages will be similar.
- Lack of a Wider Horizon: Substitutes and alternatives are the solutions your target customer is using to satisfy a need. They are what your customer hires for the job to be done instead of your product or competitors’ product. In some circumstances, alternatives have an incredibly high use compared to direct competition. Basically, focusing on competitors reduces the size of the ocean where you could fish.
- Lack of Understanding of the User: When you focus on competition you will not understand the real psychology, motivation, needs, and wants of your target customer. Most of your potential customers using alternatives or substitutes have built a habit, a protocol, and a guideline around the use of substitutes. By investigating the user and the environment, you can build against those pathways to break the habit with the current solution and establish your product as an effective proposal.
Conclusion
To watch your competitors is important and is a key part of the environmental analysis together with substitute products, potential entrants, and bargaining power of suppliers and buyers according to Porter’s five forces.
I’m convinced that being obsessed with the customers or potential customers is the key. Customers, not competitors, determine who will be successful in the market.
The medical device market is crowded with many competitors going after few customers, like fishermen going after the fish in small ponds. The best fishermen understand the fish better than their competitors do and it’s always evident in their results.
Do you agree with me on this competitive landscape? Let me know your thoughts in the comments below. And subscribe for more medical device sales and marketing insights.