How to Win Against Larger Vendors

Some special start-up companies create new markets for themselves. Those companies are the exception, not the rule.

Most start-up and expansion stage companies have to compete in established markets with larger, better branded competitors. It’s a little bit of David versus Goliath, as those smaller companies must find creative and cost-efficient ways to consistently win.

Doing that well is particularly challenging at the expansion stage. Those companies must preserve the fast growth momentum of the early stage while developing a profitable go-to market approach to ensure that their expansion capital is well spent.

Add to that the challenge of displacing large, well-resourced incumbent vendors and overcoming buyers’ natural reluctance to buy from small vendors, and beating larger companies can seem insurmountable. Like swimming upstream in Class 5 whitewater rapids.

The truth is, it doesn’t need to be. The little fish can outmaneuver the big fish without breaking the bank. There are plenty of companies with fewer resources, smaller staffs, and less capital that beat out their much larger competitors for new business. In my experience guiding expansion stage businesses, here are a few tried and true strategies for winning in those situations:

Market Your Product Like a Winner

Even though the most common market entry strategy is to offer drastically lower prices to disrupt the market, a 2006 study proved that strategy to be faulty. When going up against established competitors, simply lowering your price isn’t effective. Instead, a combination of attractive pricing and aggressive, value-focused marketing will allow smaller firms to gain more mindshare and advantage in competitive situations.

Your messaging signals to the market that your company offers a credible alternative. As that credibility takes hold, you won’t have to play pricing games to get noticed.

Leverage Your Organizational Agility

A smaller competitor wins by finding underserved niches or angling toward the weaknesses of the larger incumbents. Simply by having a smaller organization, you should be more agile and able to change your strategy on the fly. Take advantage of that by leveraging your ability to move quickly and respond to any opportunity that arises in the market. Your much larger competition won’t be as quick to adapt and react.

As a smaller business, you should be able to reallocate resources and capitalize on changing market conditions. Ideally, the company should remain agile even as it grows. Otherwise, it will fall prey to smaller upstarts in much the same way it used to undermine its larger competitors.

Sell Selectively

A smaller vendor should focus on winning the market segment that they can win, rather than trying to be all things to all people. That focus and selective selling will provide a much more reasonable chance of success.

As Vinnie Marchandani notes in his blog post about Southwest Airlines’ competitive strategy, some buyers will never consider a vendor without a brand name simply because of the brand recognition factor. Additionally, some buyers only consider smaller vendors as a formality in their process. Sales cycles and resources should not be wasted on those two buyer profiles. When a sales team recognizes that a buyer fits into one of them, it needs to be alert enough to pull out as soon as possible, instead focusing its energy on prospects that are more viable.

Build Lasting Relationships

Great marketing, competitive positioning, and effective selling can only take you so far. To win more customers from established vendors, you have to build lasting relationships with your customers and prospects.

That will happen over time as your company builds credibility, displays thought leadership, and proves your product’s value to the market. Thus, smaller market challengers need to look at their customer development as a long term process that results in mutually beneficial partnerships with customers and prospects. Even with lost prospects that ultimately go with existing vendors, you can still develop a relationship based on information exchange. You never know when that persistence will lead to a customer down the line.

You won’t always win.

Big fish are big for a variety of reasons, but it’s not often because they’ve been lucky. Those larger corporations have their own built-in advantages. It’s not impossible to beat them, though. Think critically about your company’s competitive advantages and examine the markets that need you the most. From there, use your size to think strategically and outmaneuver the bigger, clunkier competition.

Photo by: Laszlo Ilyes