#48 - A Primer on Counter-Positioning & A Takedown of Starbucks

Counter-positioning, dunking on Starbucks, and how this tactic helped me meet my wife

Quick note: my takedown of Starbucks below is for example purposes only :-).

Imagine you just quit your job to go launch a company that plays in a very crowded space. Let’s use dating apps as an example (I’ve had probably five entrepreneurs reach out pitching their dating app startup in the last three months, so this feels like a good, helpful example).

How in the hell are you going to break through and gain any customers, let alone scale to the point where your company is known by most/all of your target potential customers?

The answer is: you need to be differentiated, and that differentiation must flow through every part of your organization, go-to-market messaging, and customer + product experience. By far my favorite tactic to support powerful differentiation is Counter-Positioning.

First, a definition of Counter-Positioning:

"Counter-positioning is finding part of your competitor’s business model that they cannot do without and flipping the script on them. It was popularized in a book called “7 Powers” by Hamilton Helmer. It is especially effective when you are a smaller and/or newer competitor going up against an established giant.

- Source: Leading Agile

Translation: constantly emphasizing how your company and product are different as a means to show consumers that their current experience isn’t the only option. That there is be a better way than whatever is currently known to you…

Here are some examples of counter-positioning that come to mind for me:

• The Zero Proof (non-alcohol beverages): you don’t have to drink alcohol to have an interesting, non-soda beverage. (Full disclosure: this is an Overline company)

• Batdorf & Bronson (coffee): your coffee can be better than Starbucks

• Airtable (databases, forms): building your own tailored processes shouldn’t be so wonky and outdated

• Pepsi: We’re better and cooler than Coca-Cola. Why drink Coke when you could drink something that most people think tastes better? (subtle implication: what you’re doing now — drinking that drink — could be better)

  • Pepsi’s famous Pepsi challenge would be a decent example here. They were literally investing tens of millions of dollars into a marketing strategy that hinged on them constantly pushing a message of “We are different. We aren’t Coke. We are BETTER. And the people around you tend to agree whenever they try our product.)

• Kinto Water bottles: plastic water bottles are bad for the environment, and they look cheap. Don’t you want a water bottle that is as stylish as the rest of your image?

• ChatGPT (via Satya Nadella): Last week during the Bing announcement, Satya Nadella said the following, which was a very clear dig at Google: “We’re going to move fast, and for us, every day we want to bring out new things and most importantly, we want to have a lot of fun innovating again in search, because it’s high time.”

  • Note: “innovation again” in search (because he wants you to think Google hasn’t been)

  • Note: “It’s high time” = it’s about time people! Don’t you want a better search experience?

• Andreessen Horowitz vs Benchmark and Sequoia (VC): when a16z launched, they were the bold upstart investor, rebelling against the ways of working and even attitude of the establish VCs in the Bay Area.

  • One example of how their counter-positioning showed up in their organization was their original requirement that all investment partners had operating experience (read: they were saying, “the only people who will invest in you have actually operated or founded a startup before. We aren’t just ex-bankers and people who’ve only been in finance…Which was quite common at that time). Credit: Acquired podcast who has an entire episode series dedicated to the rise of a16z and their use of couner-positioning

So basically: counter-positioning is placing your competitor on a pedestal, and then yelling about how your company is different and better (or faster…or cheaper without sacrificing value).

How Can My Business Start to Leverage This Strategy? (Let’s takedown Starbucks as an example here)

• First, you need to do a comprehensive analysis on the competition you’re trying to take marketshare away from. Understanding them deeply is how you’ll, point-by-point, brainstorm how you are different

  • Remember: market making is creating a new category. Creating a new need and capturing customers who have that need. Market taking is when you are directly poach customers away from another brand. E.g., Pepsi replacing coca-cola in dat fridge

• Second, you need to document their value proposition to the market and create an “objection” or “counter” to each and every point. Example:

  • Starbucks:

    • 1. They offer a “third place” from home

    • 2. They offer coffee fast

    • 3. They offer a consistent set of products

    • 4. They are everywhere / easy to access

    • 5. They customize your beverages however you want

    • 6. They are the most recognizable coffee brand in the world

  • NewCo Coffee Shop (our new, burgeoning startup coffee “concept” — btw YUCK. Every new restaurant now is a “concept” and it’s becoming the very definition of cliche). Here’s how we will counter-position against the six points above:

    • Counter 1. That third place, Starbucks, doesn’t feel special because it’s everywhere. The designs are all generally the same. There is no feeling of deeper connection to the local communities they’re within

    • Counter 2. Our coffee is extremely carefully made, and takes longer to make. Your patience will be rewarded with a more enjoyable, special cup of coffee

    • Counter 3. We are constantly offering new beans and add-ins as a way for you to discover new products in pursuit of that illusive perfect cup, and we connect you to the local (or growing, small) businesses that make these products

    • Counter 4: We are only located in the trendiest neighborhoods. If you’re going on a roadtrip out of town, you probably will miss us, and we’re OK with that. We look forward to welcoming you back when you’re here!

    • Counter 5: We also customize your beverages, but we do it with far higher-quality ingredients, and are extra thoughtful about ratios of add-ins. If you want a super sweet dessert coffee, we are not the place for you. Go to Starbucks for that

    • Counter 6: Those who know, know. We aren’t for everyone, and we’re not trying to be for everyone.

  • For the dating app entrepreneurs I mentioned above, this would mean: understanding the landscape of dating apps, their value propositions, and finding your “special sauce” for how you’re different

    • Example: there was a Techstars company I got to meet called Whirl that is all about friends setting their friends. Some of their early marketing / decks poked at how existing competitors aren’t the most safe or trustworthy platforms, and they’ve stuck in my memory every time I come across a new dating app founder — what’s your edge? How are you different? How are you not just another dating app that has a different UI on what’s fundamentally the same product?)

    • By the way, I met my wife on The League! While the branding makes me cringe whenever I think about it (because it can be very very exclusionary), I honestly wanted a bit of that in dating! The app positioned itself as for people who were highly educated (which isn’t something I particularly cared about), and I knew I wanted to find someone who would encourage my nonstop nerdiness + preoccupation with business strategy, in addition to — first and foremost — just being an amazing human being. The app worked, and their positioning gave me enough hope that I was actually willing to pay $150 for a membership (hey, seem crazy? YOU try dating in the middle of Manhattan!)

Moving beyond Starbucks tear-downs and how I met my wife on a dating app: counter-positioning is both direct and bold

Business is a competition, and the companies that embrace this are the ones that win. Yes, there’s a place for collaboration / joint ventures (see #34 on joint ventures as a business strategy), but there’s also a place for putting the metaphorical boxing gloves on and jabbing at your competitors. Knocking them off their game. Pissing them off, and getting them distracted…

…All while you focus on executing well with your customers, and slowly creating ambassadors who will tell their friends, “wait, you’re still using X product?? Dude, you need to try this new thing.”

I’ll end on a final example: this newsletter! Although this isn’t a business (you didn’t have to pay anything to be reading this :-)), it is something I take seriously enough to do every week, and I am targeting a certain level of impact on you.

I want for you to find value here that you can’t / haven’t found somewhere else. In my case, I’m counter-positioning against Forbes, Inc. Magazine, Fast Company, and even — to some extent — publications like HBR…These publications sometimes release wonderful content, but increasingly they put out super shallow, not-very-specific content that isn’t engineered for people who are trying to be the best in the world at management.

They cater to the every-day reader of business stuff, but probably not to You. I’ll admit that I’ve seen some wonderful content on “how to thrive in a remote work environment” and “how to make sure your work environment is inclusive”, but deeper, nuanced business strategy? Only HBR does that of the above companies I gave you. If the others did, then Substack wouldn’t exist, and there wouldn’t be thousands of other people doing what I’m doing: offering a deeper level of specificity and personality in their writing.