Aaron Hoos

I’m renovating my kitchen. I have a company come in and do the cabinets, the countertops, and the floors, but I do the plumbing myself.

The reason? I’m a half-decent plumber (usually — there was one time when that wasn’t the case, but that’s another story) and I don’t mind the work of plumbing. Since I can solve most plumbing problems in less time than it would take for a plumber to even get to my house, I just do it myself. But cabinets and countertops and floors? That’s another issue. I don’t have the skills and tools or time. Therefore, I pay someone else to do it.

THE PICKAXE FACTOR

I call this the “pickaxe factor”. To me, a pickaxe represents work. Hard work. Nearly impossible work that builds up a sweat, breaks your back, and makes you wish that you could just sit on the couch and pay someone else to do the job while you drink something cold and watch American Idol. For me, plumbing has a very low pickaxe factor. I’m happy to knock out a plumbing job in a short time. On the other hand, kitchen cabinets have a high pickaxe factor (for me) so I pay someone else to do it.

There are lots of problems/challenges/needs that have a high “pickaxe factor” because they are difficult to solve/overcome/fulfill. For example, some people may find it hard to…

• Start a business when they’ve worked for someone else all their life
• Meet a potential romantic partner
• Get to work in nasty weather
• Look good
• Do your taxes

These are just a few examples of problems, challenges, and needs that people find hard… they have a high “pickaxe factor”.

Now here’s the exciting part for any business owner: The higher the pickaxe factor, the more value people place on a product or service that solves the problem, overcomes the challenge or fulfills the need. That’s why people pay for the following products or services to help them with the high pickaxe factor the challenges I listed earlier…

• Business consulting services to get help starting a business
• Online match-making services to meet a potential romantic partner
• A vehicle to get from home to work in comfort and style
• Personal trainers, dieticians, and plastic surgery
• An accountant

THE PICKAXE FACTOR AND YOUR SALES FUNNEL

Your products or services help people to solve a problem, overcome a challenge, or fulfill a need. If you want to sell even more products or services, or if you want to charge more money for your products or services, you have to do one thing: Identify and exploit a higher pickaxe factor in your sales funnel. In other words, you need to demonstrate to your sales funnel contacts how the hard task they’re facing can be made easier by you. And, the harder the task seems to them, the easier and faster you’ll sell your products and the more money you can charge for them.

WHAT YOU CAN DO RIGHT NOW

If you are just starting a business and looking for a great product or service (or a point of differentiation on a product or service), then figure out what your target market finds difficult, hard, impossible, or unfathomable, and sell a solution to that.

If you are in business and looking to grow, take a look at that problems your products or services solve and how high the pickaxe factor is. Then, take a look at the marketing messages in your sales funnel and identify whether you are making full use of the pickaxe factor by highlighting the challenges of hard work and explaining how your product or service eliminates the pickaxe factor completely.

Schedule time to return to the pickaxe factor in your sales funnel every 3-6 months. Develop your products or services further to solve even higher-pickaxe-factor problems, and hone your marketing and sales language to keep up with the challenges that your target market faces.

In my recent blog post 99 ways to optimize your sales funnel and grow your business, one of my tips was to do a competitive analysis to see what your competitors are offering that you aren’t. Explore how you might offer similar benefits in a superior way.

In this blog, I want to show you how to do that.

COMPETITION: IT’S GOOD AND BAD

Competitors make us better. But it means that we can’t let down our guard even for an instant. We need to innovate relentlessly and we need to differentiate ourselves from our competitors. (Check out this blog post on the 6 reasons that you WANT to have competitors in your marketplace).

If you provide value to your Customers, and if you have effectively differentiated yourself, there is room in the marketplace for you. Competitive analysis is the in-depth review of your competition (individually and from a big-picture industry perspective) to identify their strengths and weaknesses (and to highlight your own strengths and weaknesses in light of your competitors) and to mitigate threats while you extend opportunities.

HOW TO PERFORM A COMPETITIVE ANALYSIS

You can use a variety of competitive analysis tools and I’ll give you a couple of ways to analyze your competition.

The first thing you need to do is decide who you are going to analyze. You have more competitors than you think:

• There are your direct competitors who sell almost exactly the same thing as you. However, not all of them sell the same product to the same market. You need to decide whether you want to study only those who sell to your current target market or you want to study those who sell to other markets.
• You also might want to study those products or services that are not like yours at all but which your target market uses instead of your product or service. (A simple example might be a car dealership — they could study other car dealerships but they might want to also study public transportation).

Even that list will be pretty big so you might need to cut it down further… perhaps by proximity to you or size or where their company is headed compared to yours.

Now it’s time for some competitive analysis. I like to look at three things during competitive analysis. You can go much deeper, but these three things will be an easy place to start and will allow you to make big, competitive changes in your business:

Step 1: Get a basic handle on your competitor’s company. Get a simple overview of who they are and what they do. You can use my Business Diamond Framework for this or you can use well-known Waterman/Phillips/Peters 7S Model and list elements for each of the seven S’s.

Step 2: Figure out how you and your competitors are positioned in the marketplace. Map out your marketplace to determine how your competitors are positioning themselves. Use a simple 2-axis chart comparing two different aspects of the marketplace or of the product your sell, then place you and your competitors on that chart. For an example of how to do this, check out a blog post about a beer market study that showed how Dos Equis positioned itself in the marketplace).

Step 3: Compare sales funnels to highlight differences in marketing and sales techniques and in Customer relationships. Use the Sales Funnel Worksheet to map out your competitor’s sales funnel to help you identify how they are building relationships with Audiences, Leads, Prospects, Customers, and Evangelists.

By using these three simple steps –a brief business analysis, a marketplace analysis, and a sales funnel analysis, you will end up with a very good idea of how your competition works. You can go much deeper — to the point of being able to write the equivalent of a business plan for your competitor. If you really want to know the competition well and win a lot of marketshare from them then this is necessary. (This is akin to the often-told business story of the photocopy repair person who could take apart and put together the competitor’s photocopiers blindfolded). You can go that deep, and if your competitors are really aggressive, you might have to. However, the three steps I’ve listed above are a good first start.

WHAT NEXT?

After your competitive analysis, you can use the information gleaned from the above steps to make your business better. In general, I would say that the best ways to make your business better are by mitigating weaknesses, leveraging strengths, pursuing new markets, building stronger relationships in current markets, and innovating.

Here are some ideas to do that.

• Blue Ocean Strategy is (in my opinion) one of the three best books on the topic of gaining a advantage over competitors. (The others are Michael Porter’s Competitive Advantage and Competitive Strategy).
• Growing your business doesn’t necessarily mean getting more of your target market to buy your product or service. It can mean: Getting a different target market to buy your product or service, or, getting your existing target market to buy different products.
• Innovate in your sales funnel to change how you sell your product or service.
• If your products are nearly identical to your competition’s products, and you can’t easily change them, then build highly valuable relationships with your Customers.

When I was in high school, my friend’s family owned the very first computer store in town. I was always sort of impressed that they had a lock on that market. I imagined a business without competition to be the highest level of business achievement – a sort of entrepreneurial nirvana.

Then, to my surprise, I learned that they were helping someone else start a computer store in the same town. In other words, they were helping to create their own competition! I didn’t understand it at all. When I asked my friend’s dad about it, he said that competition is good for business. Although he didn’t go into detail, it was a lesson I never forgot (I even remember the exact moment when he told me – it was in the kitchen of their house – it was a watershed moment for me).

It took me years to learn why competition is a good thing, but I now realize that it is essential to a strong, prosperous business. Here are my top 6 reasons why I embrace competition:

REASON #1: COMPETITORS DEFINE YOUR BUSINESS

Competitors help you to figure out what you do. If you are starting a business and you examine how your competitors define themselves, you can identify a point of difference that they are not addressing.

It’s like being lost and using a couple of fixed objects to help you figure out where you are. Your competitors are those fixed objects and you can easily find your way in the marketplace when you compare yourself to your competition.

Creating a business that has too much identical competition (everyone sells exactly the same thing at exactly the same price – real estate agents are a good example) will eventually result in a price war with your competitors. But if you look at your competitors as a starting point and then you define yourself carefully, strategically, and in a different way from the rest of the pack, you’ll help to attract the right people to your business (people who might not be attracted to your competitor). You won’t have to compete on price because your competitors are different from you.

For more information about differentiation and competition, read my blog posts: Equal is not good enough and Mine is bigger than yours — competitiveness and marketing content.

REASON #2: COMPETITORS KEEP YOU HUNGRY

A couple of years ago, I met someone who owned a business that was in-demand and the only kind like it in the entire state. The guy charged insanely high prices and 100% interest on unpaid debts. He could make his own schedule and he didn’t need to provide good customer service. Sounds awesome, at first – you can do what you want and you basically have a licence to print money. But eventually, some other entrepreneur will spot the opportunity in that market and see that he or she could make a financial killing while charging less AND providing exemplary service… and suddenly the first guy’s business is in trouble.

When I was a freelance writer, I would sometimes get frustrated at the low-priced freelancer writers who would charge next-to-nothing, undercutting my prices. On more than one occasion, it caused me to look at my prices and sometimes consider lowering them. (Fortunately, I never did). I realize now that those low-priced competitors kept me hungry and I worked harder to out-work and out-earn those competitors. I’m glad for them now.

REASON #3: COMPETITORS COMPEL INNOVATION

In economics, inflation is kind of like a swarm of termites. You don’t see them but they eat away at the stuff you own. Inflation causes upward pressure on prices so that $1.00 tomorrow is worth less than $1.00 today. In other words, if you’re standing still in your finances, you’re actually going backwards.

It’s the same in business. If you want to create a product or service, build a sales funnel, automate it, and then go sip margaritas on a beach, think again. Your business is “standing still” (not innovating) and your competition will outpace you with newer, faster, shinier products and services. While you’re asking the lifeguard to put sunscreen on the places where you can’t reach, your competitors will be inventing a better mousetrap. Before you know it, your business will sputter and die because no one wants your clumsy old offering.

Your competitors are innovating, so you need to as well. Their very existence forces you to get creative, invest in your business, and reach for more. That’s great for your customers and for your business’ longevity. Read more about innovation at my blog post: My best advice on innovation. And this blog post provides an interesting take on innovation: Want a competitive advantage? Offer the same products as everyone else!

REASON #4: COMPETITORS BECOME CASE STUDIES

In your own business, every interaction in your sales funnel is a piece of data that you can analyze to make your business better. You watch for patterns, for sudden changes, and for opportunities. You put all of these pieces together, you compare it with your metrics, and you can make huge, positive changes in your business.

But if you raise your head out of your sales funnel for a moment and glance across the street at your competition, you’ll learn quite a bit, too. Yes, you won’t have all of the facts or metrics, but you can put together an awful lot just by looking in their windows, browsing their website, mystery shopping them, and listening to both happy and disaffected customers.

Watch for competitors’ marketing campaigns that have a huge impact. Analyze the types of people going through your competitors’ doors. Find patterns among the disaffected customers who decide to switch providers and buy from you instead. By simply watching your competitor, you can learn so much from them to benefit your own business. They become a living, breathing MBA case study to make you a smarter entrepreneur.

Want a place to start? Why not do some really simple competitive research to figure out how to price your products or services. Learn more about it at this blog post: How to easily discover the best price for your product or service.

REASON #5: COMPETITORS RAISE MARKET AWARENESS

Imagine a town in which there are only two companies providing window cleaning services. They both market their services aggressively and have their own point of difference. Simply by advertising the benefit of cleaner windows, they highlight the problem of dirty windows in the market’s mind and the market will search for a window cleaning company – even if it’s not the one whose advertising initially prompted their awareness.

It’s the principle of 1+1=3. Competitors’ marketing will attract new Leads (and sometimes YOUR Leads) to the competitor, but it will also alert the general marketplace to the general problem or need. People from the marketplace will look for a solution or fulfillment and may end up in your sales funnel as a result (all because they became aware of the problem or need from your competitor’s ad). Note: I’m not suggesting that you don’t leave all of the marketing to your competition. However, I think that competitors who advertise in the same market will have a greater cumulative effect than if they each advertised in their own market).

REASON #6: COMPETITORS CAN BECOME COOPERATORS

I love motorsports, especially NASCAR. One of the things that makes the sport great is when two competitors will work together to push ahead of everyone else. Overall, they are still ruthless competitors, but for a brief moment they can put aside their differences to eliminate the rest of the competition.

The same thing can happen in business, too. You can work together with a few carefully chosen competitors to win more customers and outpace other competitors. Now, please note: There are laws about collusion and I’m not suggesting you circumvent those laws – you’re not doing this to raise prices across the board or to destroy a few competitors. There are ways to legally cooperate with your competitors for mutual benefit. For example, you can share the costs of joint advertising to reach different markets through the same channels. Or, you can send each other potential customers who may be a better fit for the other than for you. When I was a freelance writer, I competed against other freelance writers, of course. But when a Prospect wanted to buy from me and I discovered that they were not a good fit (perhaps I didn’t have the bandwidth to help them, or maybe they were in an industry I knew nothing about), I had a few carefully chosen competitors who I felt comfortable recommending them to. And the relationship worked both ways – those competitors knew who I was interested in working with and they would send people to me.

WHAT THIS MEANS FOR YOU

First, welcome competition. If there are no competitors in your marketplace, be wary. Dare to invite competitors to your marketplace! Get to know your competition as individuals, but also get to know their businesses. Use competitive analysis to learn as much as you can about them. Find out how you can help them (and take the first step to do so) and you may see some reciprocation. And always keep an eye on your competition to motivate you to stay hungry and stay innovative!

Hey, this blog post gives another reason to love competitors: 4 ways to insert yourself into your competitor’s sales funnel and steal their customers.

Thanks to my friend Ken Symes for letting me know about this great sales funnel story.

Okay, before I can tell you about this story, I need to give you a bit of context because many of you are from around the world. Here’s something you need to know about Canada:

Tim Hortons is a coffee shop but it might as well be Canada’s religion. There are other coffee shops in Canada, of course (there are at least 3 Starbucks within a five minute drive from my house). There are also regional coffee shops like a company called Country Style, who are building a presence in Ontario and trying to win out against the Canadian’s default choice: Tim Hortons.

Think of it this way: Tim Hortons is the McDonalds of Canadian coffee. And Country Style is like Wisconsin Burger — serving the good people of just one state and battling against the juggernaut.

Now on to my blog post…

On a regular basis (annually? Maybe more frequently), Tim Hortons has a promotion called “Roll Up the Rim to Win”. You buy a coffee, drink it, and then roll up the rim to reveal if you’ve won a prize. You might win a car, a donut, or all kinds of other stuff. Of course there are lots and lots of “try again” rims. Tim Hortons is already INSANELY popular when they’re not running the promotion but they become even crazier during their Roll Up the Rim contest.

So how do smaller companies like Country Style win out against Tim Hortons? They aren’t national so they don’t have the the same reach as Tim Hortons. They don’t have the same fanatical consumer base as Tim Hortons. As a result of those two things, they don’t have nearly the budget to market a similar promotion or offer prizes on the scale of Tim Hortons.

But they don’t have to. Instead, Country Style did something quite clever: They are creating their own buzz and stealing customers from Tim Hortons’ sales funnel.

They’re doing this with a promotion called “Sorry Try Again” and basically it works like this: If you bring a Tim Hortons rim to a Country Style location, you get a free coffee.

This can, at first, sound like a backwards promotion: Customers are paying Tim Hortons and then they’re getting a free coffee at Country Style. However, if Country Style wants to win marketshare away from Tim Hortons, this is a good way to do it: That first free coffee becomes a loss leader with the hopes that the customer will taste it and say “oh, this is as good as Tim Hortons coffee… maybe I’ll avoid the crazy lineups every morning and stop at Country Style instead.”

As well, Country Style knows that few people buy ONLY a coffee. They probably buy a coffee for themselves and their friend. Or they buy a coffee and a donut. Which makes this promotion a good way to increase non-coffee sales or to mitigate losses from their loss leader.

It is a risky move: They could give away tons of free coffee and not gain anything from it. And they currently don’t have a chance of gaining significant marketshare from Tim Hortons. However, they should be able to at least present themselves to some people as a viable alternative… and that could be the foot in the door they need.

WHAT THIS MEANS FOR YOU
If you are the scrappy underdog who is competing against a juggernaut of a competitor (who has a seemingly unending marketing budget), it’s time to steal their customers. If they run a promotion, don’t bother running a similar promotion. Instead, find a way to get into their promotion!

My wife and I eat at restaurants as much as anyone else. But when it comes to talking up a restaurant to friends, the quality of food or the friendliness of the service rarely plays a part.

Rather, we talk up restaurants for the unique experience: We recommend Nando’s because you order your food and then walk over to a wall of sauces and choose what you want to apply to your dinner. We recommend Gasthaus Gutenburger because some dude in authentic German garb walks around playing the accordion.

Adding sauce to your food isn’t a big deal. Neither is an accordion. But these elements are creatively applied to enhance the overall experience.

In this article at Fast Company, Dan and Chip Heath talk about enhancing your customers’ experience with something unique and “talkable”.

Give ‘em Something to Talk About – Voodoo Doughnut – Doubletree – Zipcar | Fast Company.

Add some personality to your business. Find something unique to you (or your product) that you can add as an experience into your sales funnel. Help people talk about you business.