|
|
|
Keeping an Eye on Your Competitors
Very few businesses have a
monopoly, as almost any product that is worth buying or selling will
generate competition. But you
need to have a detailed understanding of the products and services
offered by your competitors, given that strong competitors could poach
some and perhaps all of your business.
A business usually strives to offer a product or service that is unique.
That is the best defense against competition. Where products are not
unique, they should have features that are at least distinctive or more
attractive in some way.
You need to decide what basis you are competing on. Is your competitors’
packaging more attractive? Are their products better distributed and
easier for consumers to obtain? Does their product do the same job at
less cost? Does it come with extras? Will customers be attracted by
higher service standards?
You can only assess your competitors’ products if you understand who
your customers are and what they want.
For example, are you selling to people on limited incomes who will make
choices based on price? Or are you selling to people with lots of spare
cash and an eye for quality? Many small business owners have a gut
feeling for whom their customers are, but research can come up with some
surprising results.
You can survey your customers, analyze data you collect through sales,
or study publicly available statistics that will give information such
as the average age and income levels of people in your neighborhood.
Having identified who your customers are, you then need to identify your
direct competitors. Direct competitors are businesses that sell a very
similar product to the same customer base.
For example, restaurants located in the same neighborhood are likely to
be in direct competition with each other. Smart restaurant owners will
have a detailed knowledge of what their competitors are offering and how
they could improve to attract customers.
Are their competitors offering a similar menu at a lower price? Is their
service better? Do they accept a wider range of credit cards? Is the
atmosphere in their restaurant more pleasant? Does their competitor have
a location with a beautiful outlook, for example, and do they need to
offer something distinctive to compensate for that?
You also need to consider your indirect competitors. Indirect
competitors do not offer exactly the same product or even sell to
exactly the same kind of customers, but they can nevertheless take
business away from you.
For example, fast food outlets could be indirect competitors to a
restaurant.
Customers who just want a quick meal are likely to use the fast food
outlet, which may have the added advantage of providing toys and gifts
for children. A restaurant could try to win some of this business by
offering a home delivery service, with some distinctive gifts or tokens
of their own.
You need to maintain a detailed knowledge of your competitors. You
should study your competitors’ advertising and analyze which customer
group they are appealing to. It’s good to be aware of forthcoming
marketing campaigns by competitors and to plan a response.
The financial strengths and weaknesses of a competitor are also
important. As a smaller company you are ill advised to try and outspend
a larger company on advertising. But you can gain an advantage by
marketing to a specific niche.
Small companies tend to be more flexible than large companies and they
can bring out new products more quickly or tailor existing products to
suit market changes. Finding a niche market is a useful strategy for a
small company faced with big competition, as smaller companies tend to
carry a larger proportion of overheads and have difficulty undercutting
larger competitors on price.
You can learn a lot by keeping your eyes and ears open, talking to
customers, talking to suppliers, visiting your competitors’ websites and
sampling and analyzing their products and services. You can also gather
information from trade associations, industry publications and
information freely available from the government.
Keeping a close eye on your competition can be a lot of work but it’s a
business necessity. |
