Question
You're a product manager and product is set to launch on Tuesday. On Monday a competitor launches a better product at lower price. How do you respond?
Answer
Fascinating question. And I have to admit I mostly disagree with Cindy's answer. I have been in this situation once, and we ended up delaying by several months.
As Jason and Tao Tao note, it depends on the product. The question is truly interesting and difficult only if two things hold:
1. There are clear signs that the media is going to strongly lump the two products together in a positioning category where you do NOT have enough differentiation to be the clear winner, and the battle comes down to who gets to more friendly reporters first. Launching is a PR game, not a marketing (in the sense of advertising) game. You can try your best to get your positioning message across, but ultimately it is the media that will pigeonhole you one way or the other. Read Al Ries' "The Fall of Advertising and the Rise of PR" to understand why this is true. You can scream from the rooftops that you are really better because of X, Y and Z, but if the media start all their pieces with "The blah space is heating up, with two launches, A and B..." and moves on to discuss the trend (which they much prefer to focusing on a single product), you can do nothing about it.
2. There are clear signs that significant early customer acquisition is at stake (this can be hard to gauge, but if you've been keeping your eyes focused on the market, you'll know the readiness level...). If prize early customers are lost to competitors, it is very hard to drive a switch later.
If these 2 are true, you are definitely in trouble. When nothing clearly separates you but 24 hours of time, the media are going to hand the game to the first mover, even if only by mentioning them first in opening sentences that mention you both. 24 hours is a long time in the media. It's called the daily "news cycle" for a reason. Most stories DIE in 24 hours.
What do you need to do in response? One word: repositioning.
And it is almost NEVER the case that you can significantly reposition a product in 24 hours. It's a hard truth to swallow, but your best course of action is to delay the launch if you are able to. You will demoralize your team, look weak and ineffective in the context of any pre-launch PR, possibly lose money (if you've committed money to a launch event that needs to be rescheduled) etc.
So why should you swallow these costs? Because repositioning a product credibly is HARD. You can make up some "heartfelt" BS that you can rationalize to yourself and your team and put on your About page, but you won't convince a skeptical reporter to buy and transmit your BS. You'll need evidence, and generating evidence takes time. See this analysis of Ad.ly and TweetUp on the excellent A Smart Bear blog: http://bit.ly/hiyyq5
Repositioning can occur at two levels: pure marketing, and marketing+product. Paradoxically, the former is MUCH harder. This is because you have to spin a different story around the SAME set of evidence, in the face of a predisposition on the part of market/media to buy the story you are abandoning because a competitor is using it. Uphill work. A teeny bit of differentiation in the product OTOH can save you tons of misery in the marketing/PR.
I won't try to summarize positioning theory here, but will again recommend an Al Ries book: "Positioning."
The point is, positioning is a very hard problem just to THINK through. And once you've thought it through (which includes working out implications on your business model and revenue projections based on which markets you are ceding/tacking on), maybe tested the messaging with a couple of friendly media types etc., you still have to execute on the positioning with some product updates and updates to all your media collateral. And in the age of social media, that means steering a lot of live momentum, not just a fire-and-forget press release and updates to your About page. You may need to rebrand your blog and twitter stream, put in a few weeks worth of relevant content to anchor the new direction, change how you tweet etc. If you've got a beta user base going, you need to manage expectations there, and possibly even try to get some customers in the door who represent your new direction, because they'll be able to provide the testimonials you need (the most credible evidence for a positioning claim is obviously users validating your claim via testimonials). In the worst cases, you may need a new name, identity, domain etc. THEN you can go over the radar with your new position.
In general, if the 2 conditions are true, and you try to do it in 24 hours, you will regret it down the road. Better to swallow the costs and take the time to do it right. This is one of the very rare situations when faster time-to-market is not the right thing to optimize for. Don't try to be brave and launch a desperate do-or-die launch-anyway effort unless there really is no alternative.
Your first alternative is to just go ahead and launch as-is and try to win the battle by overtaking from behind. This may mean deliberate adversarial conflict: playing hardball against your competitor in public, a la Mac vs. PC. Launching with a head-to-head competitive entry strategy is a last-resort thing best avoided. Compete on the basis of differentiation if you can, otherwise you've screwed your entire business model. New product categories generally go to a single winner initially, and only when the category matures do you get serious competition (eg. Coke vs. Pepsi...). This is partly because too-early head-on competition will create crippling price competition that will prevent all parties from growing. Only companies with deep pockets and strategic intent to be in the race for a long time can pull this off. Even in the traffic-first-revenue-later world of certain Internet business models, head-on competition of this sort will cause a meltdown in the sector as competitors aggressively optimize purely for user acquisition without building a base for extracting meaningful LTV (lifetime value) from acquired users. This is how I see what happened to the URL shortener market.
Your second alternative is to reposition your competitor. Poke holes in THEIR story and positioning (hell, you should know all the strengths/weaknesses since you were planning to use it yourself). This is difficult, and not generally appreciated by either media or users after an initial spike of gleeful interest in an open brawl.
Your last alternative is to kill the product entirely. Harsh truth, but sometimes when you work out the balance sheet of the costs of your best repositioning idea, and your reserves with which to do the repositioning, the equation just won't balance out, and the rational thing to do is to quit, swallow the lost sunk costs, and not throw good money after bad money. Stupid persistence is not a virtue.
Unless they actually differentiate fast, Bing is an example... they've gotten as far as they have basically by getting at least as good as Google (which is not good enough to cause most of us to switch), burning big money on marketing, and using all the channel leverage they have.
As Jason and Tao Tao note, it depends on the product. The question is truly interesting and difficult only if two things hold:
1. There are clear signs that the media is going to strongly lump the two products together in a positioning category where you do NOT have enough differentiation to be the clear winner, and the battle comes down to who gets to more friendly reporters first. Launching is a PR game, not a marketing (in the sense of advertising) game. You can try your best to get your positioning message across, but ultimately it is the media that will pigeonhole you one way or the other. Read Al Ries' "The Fall of Advertising and the Rise of PR" to understand why this is true. You can scream from the rooftops that you are really better because of X, Y and Z, but if the media start all their pieces with "The blah space is heating up, with two launches, A and B..." and moves on to discuss the trend (which they much prefer to focusing on a single product), you can do nothing about it.
2. There are clear signs that significant early customer acquisition is at stake (this can be hard to gauge, but if you've been keeping your eyes focused on the market, you'll know the readiness level...). If prize early customers are lost to competitors, it is very hard to drive a switch later.
If these 2 are true, you are definitely in trouble. When nothing clearly separates you but 24 hours of time, the media are going to hand the game to the first mover, even if only by mentioning them first in opening sentences that mention you both. 24 hours is a long time in the media. It's called the daily "news cycle" for a reason. Most stories DIE in 24 hours.
What do you need to do in response? One word: repositioning.
And it is almost NEVER the case that you can significantly reposition a product in 24 hours. It's a hard truth to swallow, but your best course of action is to delay the launch if you are able to. You will demoralize your team, look weak and ineffective in the context of any pre-launch PR, possibly lose money (if you've committed money to a launch event that needs to be rescheduled) etc.
So why should you swallow these costs? Because repositioning a product credibly is HARD. You can make up some "heartfelt" BS that you can rationalize to yourself and your team and put on your About page, but you won't convince a skeptical reporter to buy and transmit your BS. You'll need evidence, and generating evidence takes time. See this analysis of Ad.ly and TweetUp on the excellent A Smart Bear blog: http://bit.ly/hiyyq5
Repositioning can occur at two levels: pure marketing, and marketing+product. Paradoxically, the former is MUCH harder. This is because you have to spin a different story around the SAME set of evidence, in the face of a predisposition on the part of market/media to buy the story you are abandoning because a competitor is using it. Uphill work. A teeny bit of differentiation in the product OTOH can save you tons of misery in the marketing/PR.
I won't try to summarize positioning theory here, but will again recommend an Al Ries book: "Positioning."
The point is, positioning is a very hard problem just to THINK through. And once you've thought it through (which includes working out implications on your business model and revenue projections based on which markets you are ceding/tacking on), maybe tested the messaging with a couple of friendly media types etc., you still have to execute on the positioning with some product updates and updates to all your media collateral. And in the age of social media, that means steering a lot of live momentum, not just a fire-and-forget press release and updates to your About page. You may need to rebrand your blog and twitter stream, put in a few weeks worth of relevant content to anchor the new direction, change how you tweet etc. If you've got a beta user base going, you need to manage expectations there, and possibly even try to get some customers in the door who represent your new direction, because they'll be able to provide the testimonials you need (the most credible evidence for a positioning claim is obviously users validating your claim via testimonials). In the worst cases, you may need a new name, identity, domain etc. THEN you can go over the radar with your new position.
In general, if the 2 conditions are true, and you try to do it in 24 hours, you will regret it down the road. Better to swallow the costs and take the time to do it right. This is one of the very rare situations when faster time-to-market is not the right thing to optimize for. Don't try to be brave and launch a desperate do-or-die launch-anyway effort unless there really is no alternative.
Your first alternative is to just go ahead and launch as-is and try to win the battle by overtaking from behind. This may mean deliberate adversarial conflict: playing hardball against your competitor in public, a la Mac vs. PC. Launching with a head-to-head competitive entry strategy is a last-resort thing best avoided. Compete on the basis of differentiation if you can, otherwise you've screwed your entire business model. New product categories generally go to a single winner initially, and only when the category matures do you get serious competition (eg. Coke vs. Pepsi...). This is partly because too-early head-on competition will create crippling price competition that will prevent all parties from growing. Only companies with deep pockets and strategic intent to be in the race for a long time can pull this off. Even in the traffic-first-revenue-later world of certain Internet business models, head-on competition of this sort will cause a meltdown in the sector as competitors aggressively optimize purely for user acquisition without building a base for extracting meaningful LTV (lifetime value) from acquired users. This is how I see what happened to the URL shortener market.
Your second alternative is to reposition your competitor. Poke holes in THEIR story and positioning (hell, you should know all the strengths/weaknesses since you were planning to use it yourself). This is difficult, and not generally appreciated by either media or users after an initial spike of gleeful interest in an open brawl.
Your last alternative is to kill the product entirely. Harsh truth, but sometimes when you work out the balance sheet of the costs of your best repositioning idea, and your reserves with which to do the repositioning, the equation just won't balance out, and the rational thing to do is to quit, swallow the lost sunk costs, and not throw good money after bad money. Stupid persistence is not a virtue.
Unless they actually differentiate fast, Bing is an example... they've gotten as far as they have basically by getting at least as good as Google (which is not good enough to cause most of us to switch), burning big money on marketing, and using all the channel leverage they have.