There is a common myth I hear from entrepreneurs.
“I need a unique business idea that no one has done before.”
Here’s the truth:
Facebook wasn’t the first social media network. MySpace, LinkedIn, and hi5 all came before Facebook.
Google wasn’t the first search engine. Remember Ask Jeeves, Lycos, and Dogpile?
Apple wasn’t the first computer company. IBM and Hewlett-Packard came decades before.
Even a company like Uber borrowed its idea from taxis.
How have these companies become so successful in competing in saturated markets?
In a word: positioning.
Yes, some companies which were first-to-market are now quite successful.
But though these companies were first-to-market, they made sure to be first-to-mind by positioning themselves well.
If you’re an early-stage business, you need to learn how to position your product. If you hire a product marketing agency, they will charge between $5,000-$10,000 a month. A cash-strapped startup can do this on their own, as you’ll see in this over-the-shoulder view of my process.
Before you learn my positioning process, let’s define our terms and understand the pros-and-cons of being a first-mover.
The first-mover advantage is the value you gain by being the first product (“first-mover”) in a market.
See also: Positioning strategy
If you ship the first product in a new market, you may get rewarded with higher than normal profit margins. This is because:
The goal of positioning is to have your business be in a niche which is either:
Because of the power law. The power law states “a relative change in one quantity results in a proportional relative change in another.” In other words, if you’re #1 and #2 in the market, you will capture the majority of the market share.
Here’s an example power-law graph:
If you create a new market category as the #1 in the market, by default you also are a first-mover.
What’s the downside of the first-mover advantage?
In a study comparing businesses in over 50 product categories, first-movers had a failure rate of 47%. Improvers who introduced a product different and better had a failure rate of 8%. (Source)
That’s a 5.8x higher failure rate for first-movers!
What are the specific disadvantages of the first-mover advantage?
It’s not all doom-and-gloom if you choose to launch a product in a new category. However, it’s wise to be aware of the potential advantages and disadvantages.
If you choose to create a product in a new category, you’ll want to make sure your product category exists and serves a real client need.
Here’s an outline of our positioning process, step-by-step.
Note: Decibite is a Growth Ramp client. We’re using them to give you a step-by-step process of how to position your product.
Decibite is a web host that helps non-technical entrepreneurs get faster hosting. They’re competing against giants like:
Before I began working with Decibite, they were a cloud hosting company for “everyone.” WordPress hosting. Python hosting. DNS hosting. You name it.
A company that attempts to serve “everyone” becomes the best for no one. So my first step was to talk to customers to learn what they thought differentiated Decibite from the competition.
Main article: Voice of the customer
To differentiate and position Decibite, I began by talking to their customers. I asked questions like:
I took notes of every word customers said (you will want this in step 7).
See also: Product keywords
After talking to customers, a lot of Decibite’s customers loved three things about the company:
Each of those could be a phenomenal opportunity to position Decibite. But I needed to survey the market to make sure these desires were not isolated. So I opened up the tool Pollfish and invested in getting some survey results.
Please note: if you’re positioning your product on a low budget, you will want to talk to more of your customers. Market research is a higher investment. The more customers you talk to, the greater the chance the way you differentiate will fit customer needs (and not make you just look weird).
This market research confirmed a lot of people wanted fast hosting and fast technical support. Some also wanted better security and scalability. But again, I did not want Decibite to attempt to do everything the best. Just one thing.
Main article: Competitive intelligence
I list out every competitor by doing Google searches (“$COMPETITOR alternatives”), browsing Reddit, and looking up articles on the competition in Wikipedia.
Because it was a big market, I separated every competitor into different niches. There are three major niches I put the hosting competitors into:
There are smaller markets too. But this covers the majority of the hosting industry.
Main article: Positioning strategy
Of the three niches, I picked generic web hosts as the best audience for Decibite to serve. Specifically, we would serve non-technical entrepreneurs with fast hosting.
Why did I think Decibite would best serve non-technical entrepreneurs with fast web hosting?
Main article: Unique selling proposition
Since customers want fast hosting, I wanted a specific reason to make the switch. Rather than reinventing the wheel, I took GEICO’s USP and applied it to Decibite.
GEICO’s “15 minutes could save you 15% or more on your car insurance” became “Get 15% or faster web hosting” for Decibite.
Here are some other USP examples you can use:
This step is simple.
Take everything customers told you in step one and put it in some form or fashion on your website. I recommend you start with the USP you created in step 6.
Did a customer say something was missing that you believe is “obvious” about your business? This is a signal you need to communicate this “obvious” element better on your website.
You will also need to create a few web pages or update them with your new differentiation and positioning. I created over 120 pages for Decibite, many of which were comparative landing pages because these pages have a higher chance to convert into sales. You’ll likely need only 7-15 for a bare-bones website that’s “good enough.”
This best copy will come from your customer’s mouth. Every powerful word or phrase from step one became the foundation for Decibite’s website.
Competition is a sign of market demand. Being first-to-market is not the only way to make a profit. Rather it starts by properly positioning your product.
To know how best to differentiate your business or product, start by talking to your customers. Find out from them why they bought from you rather than the competition.
After doing customer interviews, you will get clarity about what makes your business different from the competition.
For more articles like this, click here to check out our articles on positioning.