How Effective Is Competitive Displacement?

It’s an old story: A well-recognized vendor gets acquired, shuts down or makes an irreversible gaffe. With open season on the remaining market base, smaller competitors scramble to fill the void. They pounce on opportunity through competitive displacement programs that reward end-user customers for supplanting existing solutions with a smaller/lesser-known alternative.

But are these programs effective at capturing market share? Is this something that can be sustained over the long term?

In the short term, the answer to the first question is yes — but there are a lot of qualifiers that include branding, reputation, customer satisfaction, market and mind share of the targeted vendor. At some level, these programs work. Vendors have consistently found creative ways to edge into the market and generate business with competitive displacement. Recent examples include the following:

  • E-mail security firm Spam Soap Inc. launched a promotion offering Postini customers a three-month free trial and free migration services to move an account away from Google Apps.
  • Barracuda Networks Inc. offered a free six-month e-mail security, spam and virus firewall trial to Postini customers resistant to Google App migration.
  • Backup and archiving firm Unitrends Inc. offered a 50 percent discount and related services around its backup offerings, taking on competitors Symantec Corp., Veeame Software, Dell’s AppAssure and Barracuda Networks Inc.
  • Cloud networking vendor Aerohive Networks is luring customers with a competitive displacement program for Meraki Inc. customers uneasy about falling under the umbrella of Cisco Systems Inc.

It’s fair to say these programs have success, especially smaller vendors. Why? When you don’t have much, you have everything to gain. This holds true when the targeted vendor shuts down or changes its offerings through an acquisition. The resulting void turns into a market-share vacuum.

Many of Postini’s 26 million users, for example, will be divided and dispersed among the competitors that get there first. For smaller competitors, any amount of growth is significant, which makes competitive displacement an investment with guaranteed returns. In that regard, competitive displacement becomes a valuable tool that can be leveraged by up-and-comers occupying negligible market share to get noticed in the market and acquire incremental business.

One of the biggest challenges then becomes competing with other displacement programs, especially those with existing market and mind share. Postini’s anticipated assimilation into Google Apps, which its parent company says will happen next year, paves the way for competitors. But Spam Soap had some stiff competition also scrapping for the territory with their own promotions and displacement programs.

Even still, it’s likely the stage was set for an impending customer migration, whether Google chose to disband the popular e-mail service. Postini ranked low on Gartner’s May 2012 online customer satisfaction survey, and there’s a good chance a significant portion of end users were considering a migration.

Competitive displacement gets a lot trickier when going up against well-established market leaders. Backup firm Unitrends Inc. launched a displacement program earlier this year following a problematic Backup Exec 2012 release that, among other things, replaced the solution’s job monitor with a server-oriented interface and made the tool more complicated and harder to navigate. The release elicited strong backlash from the channel. Symantec took steps to quiet the firestorm, but the incident allowed smaller, lesser-known players such as Unitrends to wedge into the backup and recovery market.

Just how long that window stays open remains to be determined. In the short term, Unitrends’ offer capitalized on the frustration around the Backup Exec release. The firm touted that 20 percent of its third quarter sales came from competitive trade ups.

However, Symantec’s Backup Exec is one of a handful of industry leaders occupying Gartner’s Magic Quadrant — a list that includes EMC Corp. IBM Corp. and CommVault Systems Inc. This well-established industry prowess and loyal customer base goes a long way in rectifying mistakes that could prove disastrous for smaller firms. In the short term, a few customers may cross over. But over the long term, chances are slim Symantec and other major vendors will lose market share to any one niche player.

Promotions, like department store sales, come and go. In most cases, the targeted vendor doesn’t acknowledge them, indicating they have bigger things to worry about.

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2 Responses to “How Effective Is Competitive Displacement?”

  • Having used competitive displacement campaigns many times over the years I can vouch for their success when done right.

    The offer, message and target audience needs to be spot on and you must understand the facts of the situation the existing providing vendor is putting the customers in.

    The commercial offer to move, balanced with the customers effort and benefit of change must be clearly understood and all factored together to make a compelling offer and one that makes the decision an easy one for the customer to choose you! The need to move normally having been caused/prompted by the incumbent, your role is to deliver a message that is clear and beneficial for the customer to choose you at this time!

    It’s all about getting the offer right, the message clear and delivering it to the right audience quickly.

    Ian Moyse

  • craig kensek:

    Of course competitors will gain share. One of the players has disappeared. Companies run the risk of reducing the perceived value of their solution to the existing customer base who may demand, “Show me the discount” at time of renewal.

    Displacement programs are incredibly easy to implement, which is part of the reason they need to be looked at carefully. It’s going to cost margin, obviously. If switching costs are low, these new customers could jump to the next competitor who offers a displacement program.

    These, IMNSHO, need to be structured to tie the newly acquired customer up for a period of time, so that they don’t jump at the end of the program. Bundled, as mentioned above, and clearly explained to the partners as to who is expected to eat the margin. Of course, some firms will say, “we’ll double the ‘something’ during this program”, which can really make the true gain of the program less than economically spectacular.

    People in the sales/marketing program need to pay attention to these and remember to have expiration dates. I was with one company where most of marketing was unaware about the details and size of the program, only knowing that “We want to displace company x”

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