Small startups in an industry with giants: find a different position

There is a situation that many founders encounter, but few call it by its right name. They enter an industry, the product is not bad, and the team is dedicated. But customers keep asking: "How is it different from Company A?" Company A is the name of the giant that has been in the customer's mind long before you appeared. This is a matter of mindset, not product quality, and the mind has its own rules.

The customer's mind has no vacuum

Ries and Trout wrote in 1981 that positioning is not what you do with the product, but what you do in the mind of the potential customer. The human mind operates like a natural defense system: it rejects new information that does not match what is already stored. Once a brand name occupies a position in a category, every new competitor that comes later is filtered in comparison to that brand. You are not judged by your criteria, but by theirs.

This is why the strategy of "doing better than the big players" rarely works for small startups. Better by what criteria? By the criteria set by the big players who have long since won on that front? That is a battle with a predetermined outcome.

Positioning is what you do to the mind of the prospect, not what you do to a product.

Al Ries & Jack Trout, Positioning: The Battle for Your Mind (1981)

Feasible strategy: narrow down to win

The answer is to redraw the boundaries of that space so that you are the only one fitting within the new boundaries, rather than trying to occupy the entire space held by the big players.

There are three specific ways to do this:

• Narrowing the customer segment: The giant serves the mass market because scale forces them to do so. You can choose to serve a more specific, deeper segment and become the clearest choice for that segment. "Accounting software for dental clinics" is different from "accounting software" not because of features, but because the specialization creates a sense of trust.
• Serve unmet needs: The big players optimize for the largest part of the market. The smaller, more niche needs are often poorly served. Look for customers who are using the big players' products but are actually dissatisfied because they are not designed for them.
• Redefine the category: Instead of competing in the current category, name a new space that you are the first to define. When you name the category, you automatically become its reference.

Differentiation must exist in the mind, not just on paper

A common mistake: startups write a very clear positioning on their slides and website, but when customers interact in reality, they do not perceive that difference. Positioning only exists when it is felt at every touchpoint, not just when it is written down.

This means: how you respond to emails, how the product is packaged, the language on the interface, the response speed of the support team. Wally Olins noted that a brand is expressed through four vectors: product, environment, communication, and behavior. Startups often only invest in communication and overlook the other three. The result is a beautiful positioning on paper but nothing to anchor it in reality.

Avoid the copying competitors trap

When small startups see a giant succeed with a certain aesthetic, a message, or an approach, the natural instinct is to follow suit. This is a trap. Copying competitors does not place you in their position. It puts you in a price war, because when two things look the same, customers choose based on price.

Byron Sharp from the Ehrenberg-Bass Institute points out that brand strength comes from distinctive identity assets. These are the visual and verbal elements that are consistently repeated to the extent that customers recognize you without needing to see the name. That asset is only valuable when it belongs to you, not when it looks like someone else's.

A brand is not a logo. A brand is a person's gut feeling about a product, service, or company.

Marty Neumeier, The Brand Gap (2003)

Early-stage startups: invest appropriately

There is a more practical question: where is the startup in its journey and what should it do with its brand?

In the early stage, before achieving product-market fit, what is essential is not a complete identity system. What is necessary is clarity on three things: who you serve, what problem you solve, and why that customer should choose you over their current option. These three things are the foundation of positioning. If you haven't answered them, no matter how beautiful the design is, it won't help.

After gaining real insights from customers, when you start to see who is choosing you and why, that is the time to invest in a deeper identity system. At that point, you have data to design in the right direction, rather than guessing.

When positioning starts to work

The simplest sign that your positioning is truly working: customers describe you in their own words, and those words align with how you want to be remembered. This does not come from what you tell them, but from what they feel through their actual experience with you.

When that happens, you no longer have to explain how you are different from the giant. Customers will explain it for you. That is a position that no giant can reclaim. Because it is built on the specific experiences of a specific group of people, not by a media budget.