Most product companies think of competition all wrong.
One of my favorite stories about competition comes from the software company Intuit who makes the product TurboTax.
When telling the story of how TurboTax came to be to a large audience, the team at Intuit first conducts a poll to see who they think their competitors were at the time they were building the product.
Without fail, hands shoot up and people shout out e-file this and e-file that, it’s almost a competition for who can recall the most names from largely now defunct software companies trying to build a product to handle tax filing.
The answer? Pen and paper.
Not what you were expecting? Not what everyone in the audience typically expects either. Intuit knew that the current solution to solving problems for their target market customers was simple pen and paper. At the time, most people were filling out their tax returns by hand.
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Now, why is knowing this so important?
Well if you don’t know who you are really competing against, how can you expect to improve upon that solution for your customer?
Pricing your product well starts out with knowing the current solution VERY well. If you don’t know that, you won’t be able to measure how much MORE value you are able to provide to your customer.
The value in this case is the basis for how much you can charge.