My conclusion last week, in part 1, was that sometimes you have to worry about the competition and adjust your prices down, but this should be the exception. It’s much better to focus on the customers and what is valuable to them.
However, if you do decide to track your competition, here is one way to go about it.
Making a list
Almost 6.000 for Java.
A little over 4.000 for .NET.
Almost 25.000 for mobile development.
Yes, there is some overlap between these lists, as many companies have developed expertise in multiple programming languages and frameworks.
But still, tracking thousands of “competitors” is impossible.
So you have to narrow down the list.
It all starts from your target customer segments.
If you are a team in Poland doing mobile development for fintech scaleups in the US, you are certainly not competing with companies in Asia doing mobile apps for marketing campaigns.
And you are not competing with mobile app developers in Croatia working for large enterprise customers.
If you are positioning yourselves as experts in mobile app development that can work for clients in any industry, then you are competing with the companies that are equally skilled and experienced, not with the ones that offer cheap services delivered by programmers with 3 months of experience.
If your target market is Germany, your competition is in Germany, Austria, Switzerland and all of Central and Eastern Europe. It’s probably not in Asia and certainly not in Latin America.
With a reasonable effort of a few hours of work, you can probably make a list of 10-20 companies that are direct competitors for you, meaning they target the same combination of:
- Type of company
- Type of problems solved for customers
that you are targeting.
Assess quality delivered
The next step is to try and estimate the level of quality delivered by each of these direct competitors.
This means looking at aspects related to technology, process, team and commercial terms.
You might be able to find some information online, for example on reviews websites.
The companies’ online presence (website, social media accounts, etc.) is another obvious place to look at.
You might think that these are irrelevant, since they are very likely to present themselves in a good light and it’s not an objective representation of reality.
Yes, you are right, it’s not an objective representation of reality.
No, it doesn’t matter, because nobody knows what the objective reality is with 100% certainty. Clients who are looking for a services provider will not know what the objective reality is and they will be influenced by what they find online.
The competitors themselves don’t know either. Not about the past, and certainly not about the future.
This is another important aspect: you need to estimate what a direct competitor will do in 2 or 3 months in the future, when you will be competing with them on a new project. Not what they did 6 or 12 months ago.
Another potential source of information is what you can learn from your customers or potential customers during the sales process. Even if they don’t use the vendors’ names, you might still be able to use disparate pieces of information and data to build a realistic image of what some type of company is offering.
Once you have a short list of direct competitors, you know their level of quality, it’s useful to search for data about their pricing.
The sources are the same:
- Online searches
- Platforms that bring together vendors from the industry (Clutch and others)
- Mystery shopping studies
- Information learned from customers and potential customers during the sales process
WHAT THIS MEANS FOR YOU
If you can gather all this data, you have a much higher chance of finding the optimum price for any given project that you are trying to win.
Then you have to repeat the steps every 3 to 6 months, as things evolve, new companies enter the market and others change their strategy, positioning and, of course, pricing.