Ask A Good Product Manager

Your product management questions answered

What to do when your main competitor is your best customer?

Posted on January 23, 2008 · No Comments

Question: What are your thoughts on strategies when your main competitor is also your best customer?

We are not in retail, so we use company X as a distribution channel. Company X also has their own “generic” brand which they tend to endorse more and push for a switch sell. Our brand awareness in the commercial segment is strong which leads to to great sales. We are not so strong in the retail segment since our distributors have their own brand. A lot of effort is placed on promotion via the usual channels, but you can’t defend against sales guys with commissions and incentive packages.

Answer from Jeff Lash of How To Be A Good Product Manager: Without knowing the details it’s hard to give any specifics. Here are a few ideas that might help:

  • Can you market direct to your customers without going through your distributors?
  • How is your product different than the “generic” version? Why would a customer buy yours rather than the product from Company X? What benefits do you offer the customer that Company X doesn’t?
  • What are the criteria that are important to your customers? Price, quality, safety, reliability, etc.? How does your product compare to Company X? To other competitors? Where are the areas where you can improve?
  • Are there other distributors who compete with Company X? Do you do business with them? Are you able to? Would it impact your relationship with Company X?
  • How important is the retail segment to your product? Would you be better off focusing on the commercial segment rather than trying to take market share away from Company X in retail? Are there other segments where you should be paying attention to?

Many of these questions get to the overall strategy for your product — defining the product’s distinctive competence, whether you want to try and compete on cost, what distribution channels are most important, etc. Your product strategy should be your guide in determining how you handle this situation.