Startups should avoid head-on competition and pass a serie of serious tests
We familiarize with the term “saturation market”. It means the supply exceeds the demand in the marketplace. There are too many goods and services that customers can choose, they are even overwhelmed and felt intimidating, unsure of their choice.
In these markets, customers don’t want to see more similar products or services. They want the cheaper products or must better products. Companies compete with each other and reduce price that may lead to price war. This is a zero-sum game, or even worse, no companies benefit from this competition which is costly and waste time and effort.
Since startups have little resources including employees, time and money, they should not target a market where bloody competition already occur and where there are many strong incumbents. Startups must target new markets, whether it is a specific group of customers who have differentiate needs and wants or at a new location where market gap exist. But if startups can offer truly good products that 5x to 10x better than the existing products, fighting for the market is worth it.
Sometimes the incumbents compete with each other but do not know really well what factors have true value to customers. They follow traditional strategic plans, do what other companies do. Many activities are costly, and the profit is reduced consequently. If startups target the same groups of customers as the incumbent do, startups should know well what value those customers appreciate and then focus on offering those values at as lowest cost as possible as customers may need a simple product or service to solve their problems, but companies offer too complicate products and services, raising cost and ask too high a price.
In addition to avoid competition, startups then must test its concept, test its prototype, finally test its real product before investing heavily. Just remind us with a maxim “be cautious and bold”. Exercise caution in laying down a plan, and execute it with boldness. The first part is TESTING – test it seriously.