My best enemy: how to best manage the relationship with competitors

by Alice Alessandri and Alberto Aleo

One of the most complex aspects of market strategy is managing competitive relationships. The relationship with “rivals” always feels harsh, especially when the very survival of our business seems to depend on the outcome of this “fight”. But is it really so? Does opening a window to competitors always mean giving up? Is it possible to collaborate instead of competing?

After all, the words competition and collaboration have a common origin. “Con – Petere” literally means moving together towards an objective, whereas “Con – Laborare” means working side by side. In both cases there is a “con” (i.e. with) and an objective that link us to our fiercest rivals. We all aim at increasing our markets and our growth opportunities. In the next paragraphs we will see how to achieve this “thanks to” and “despite” the existence of competitors.

Widening the cake

In an article we published some time ago, we talked about the increasing returns theory by W. Brian Arthur, who compared markets to cakes: we can either fight to get the biggest slice or we can collaborate to make a big enough cake to feed everyone. Who should we collaborate with? With our competitors!

If you are wondering “how is it possible to cooperate with an enemy?”, the answer is complex. Here is a summary of the three main points:

• Compete on value, not on price: study your rivals, try and understand what is different and unique in your respective offers and differentiate, consciously developing separate identities.
• Educate your customers: if the customers are informed and educated, they will be more capable of understanding the differences between competitors, concentrating their choices on the actual value and not on the price. Collaborate with your competitors so that customers receive clear information to help them decide.
• Build consensus: building synergies with your competitors will ensure that more and more people get to know and appreciate the market segment in which you operate, especially if you deal with a particular type of product or service which is still not well known.

Economic history is full of examples of successful synergies among competitors, which had positive effects for them and their customers. We at Passodue, for example, collaborate with several associations which bring together companies and professionals that are apparently competing, and help them cooperate to strengthen their image and support the demand for particular products or services. In recent years we have supported the Home Staging Italian Professional Association  in their work to disseminate information about this new category of services dedicated to the real estate market, which is still not widespread in Italy though it is gaining success.

“Do your best in what only you can do”

Go back to our article dedicated to the Offer System, to remind yourselves that what makes the difference is not one single element of the offer, but in fact it is the original mix of all the elements.

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Educating the customers to look at the whole offer system means focusing their attention on the value of what is being offered, identifying the differences and avoiding the mere comparison of prices.

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Imagine if a chef simply listed the ingredients of his dishes, instead of concentrating his clients’ attention all the different aspects, tangible and intangible, that have contributed to create that particular result. Unfortunately that’s exactly what we often do, cancelling the differences and trivialising the comparison with our competitors. From the mix point of view, we can say that no company competes directly with the others: there will always be at least one different element, and the people and their way of developing relationships will be different anyway. Being able to recognize the diversity of “dishes” requires “gourmet” clients: educating them should be the common goal of all the competitors of a market!

Photo by Albert Chernogorov from Pexels

A clear promise

Once we have realized what makes us different from our competitors, we will be able to make clearer promises to our customers, and attract only those who are really interested in our products or services. As we have mentioned before, the “Law of attraction” exists also in marketing and ensures that companies and customers are attracted to each other by similarity. To make the most of this affinity, promises must be clear to the market: this means telling the customers what we are good at and which precise needs and motivations we can satisfy with our offer, avoiding promising “everything to everyone”. However there are so many companies that advertise themselves as “top quality, excellent service and very low prices”. Can you believe that superior performance can match the lowest prices? It is evident that a promise like this aims at attracting more customers; however, in doing so, it loses its credibility and, worse, it risks disappointing the market.

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The more honest and credible your promise is, the more personal and different from all the others it will prove, therefore helping you manage the relationship with your competitors.

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Economic competition is not a zero-sum game and our success does not depend on someone else’s defeat.

Photo by Lucas George Wendt on Unsplash

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If we master the relationships and strategies with our competitors, we can activate synergies that will allow us to differentiate our offer, educate our customers, make clearer promises and widen the market, making sure that our role in it becomes better recognized.

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Think of your competitors as rivals in love. What is the best strategy to seduce your loved one? Fighting strenuously denigrating your opponents or bringing out your true personality so as to be appreciated and chosen consciously?

Some time ago, at the opening of an IKEA store in Boston, Jordan’s Furniture (another furniture manufacturer) papered the city with posters to welcome the Swedish multinational because it would contribute to raising the level of competition, therefore educating customers to design. What was the result? Both companies’ stores in Boston are among the most successful in the entire United States. Thanks to their strategic collaboration and the organization of events and initiatives aimed at promoting the quality of life and the culture of living, both companies have achieved success (cit. R. Sisodia j. Sheth D.B. Wolfe “Firms of Endearment”).

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And if anybody is thinking “It’s impossible to collaborate with my competitors; they are totally disloyal!” then differentiate from them and become, by contrast, the most honest: remember, ethics is one of the most appealing ingredients in markets that lack virtue!
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