A competitor’s customer base is a popular source of sales growth for many companies. It can also be a tough and costly avenue of growth to pursue. In this video tutorial, marketing expert, Drew Boyd, discusses specific factors a company must consider to succeed in increasing your sales growth when going after competitive customers.
- One of the most popular sources of new sales growth is going after your competitor's customers. But I have to tell you, in my long career, this has become my least favorite source of new revenue. It's full of traps and pitfalls. If you're not careful, you're going to struggle. Let me explain why. When you go after your competitor's customers, you're going to invite a fight, and when you pick a fight with someone, you better be sure you can defend yourself because they're going to come right back at you.
That can cause problems. Look at the market for batteries. A category we would define as portable power. The two big competitors, Duracell and Energizer, fought tooth and nail to take customers away from each other, and guess what? It worked. Customers switched back and forth with relative ease. In doing so, it taught customers that battery brands just aren't that different from one another. So, they started consider other cheaper brands from companies like Fuji and private label brands.
Bad mistake. This impacted all the companies that sell batteries, especially Duracell and Energizer. Profits sank in the whole category. Now these companies have moved away from attacking each other and instead, they're promoting the value of high-performing batteries. To succeed in this area of growth, you need to consider the level of loyalty that the consumer has to your competitor. In marketing, we define three types of loyalty, heart, head, and hand.
Let's look at each one. Heart loyalty is the emotional connection that consumers have with a brand. The brand essentially helps shape their identity. They consume the brand as a badge to the rest of the world of who they are. The problem with heart loyals is they don't want to switch. Think about Coke versus Pepsi. Their respective customers are quite happy with where they are. If you keep going after your competitor's heart loyals, you run the risk of annoying them forever.
Next is head loyal. These are customers who make decisions based on rational, logical thinking. They look at data, they make comparisons, and they'll switch to your brand only if they see a compelling argument. Most people shop for cars this way. Your brand has to be better period. So, with head loyals, it's essential you have the backing of your R&D team to have products and services that actually perform better than the competition. You also have to communicate it well.
You can use traditional advertising, online and other digital platforms, or sales resources, but the head loyal must see the facts to make the switch. Finally, our hand loyals. These are consumers who buy out of habit. They're not even sure why they buy. They've always done it this way, so they just keep doing it. It's not hard to see why. When you're completely satisfied with a particular brand of toothpaste, for example, you don't want to have to rethink it every time you go to the store. You see the familiar packaging for that toothpaste and you grab it and put it in your shopping cart.
Now, to convert hand loyals, you have to disrupt their pattern of buying. Hand loyals, by definition, don't want to think too much about the purchase, so you have to find a way to get them more involved than they typically want to be. That can be tough, but it's doable. A simple way to do it is with trial pricing. Give them a free or deeply discounted sample to try. Communicate to them that they're missing out on something. Shake them up by suggesting that they do something differently.
Going after competitive customers is tough, risky, and costly. It seems like a great source of business because they're so easy to identify in many categories. That shouldn't be the reason you go after them. You need to understand their loyal state first. Doing that will dramatically increase your odds of success.