How to Size Up the Competition

Successful business owners should know as much, if not more, about their competition as their customers do. According to Susan Jacksack, J.D., of CCH Business Owner’s Toolkit, here’s what you should know about yours.

Know Both Neighbors and Strangers

Competitors can be grouped into three basic categories:

1. Direct competitors in your geographic area offer a product or service that customers will think is interchangeable with the goods or services of your business.
2. Direct competitors in a far-reaching area, or competitors in different business categories who offer similar goods or services. Here, look to the big discount warehouses, the small shops that do the traveling and shopping for the customers, and online stores. The Internet allows virtually any company, located almost anywhere, to be a direct competitor worthy of placement in the first or second categories, so don’t necessarily limit these groups to businesses in your locale. Base your categories on what make sense for your type of business.
3. Competitors for the “same-occasion” money may be selling goods and services similar to yours but are used to serve a different purpose, like to fulfill a hobby or possibly entertainment purpose. For example, if you’re a home furniture store, you might look to home improvement services or interior design shops as competition.

Dig into the data

Now that you’re familiar with the three main types of competitors, you need to learn as much as you can about their businesses in order to best position yourself to win—or maintain—buyers. In order to convince potential customers your business is better than theirs, you need to have thorough knowledge of what your competitors do and don’t offer.

• Stop to visit. In the case of retail, check out the competition first hand. One technique is to engage the services of a secret or mystery shopper.
• Take time to study. Gather competitors promotional materials and study them. Jacksack recommends using information from your suppliers, sales force and other business contacts to learn about competitors’ market share, financial strength and ability to develop and market new products. If possible, talk to their customers to find out how satisfied they are and what they like and don’t like.
• Differentiate yourself. Identify existing points that separate you from your competitors. You can capitalize on these points and develop a plan to market your strengths.
• Make Improvements. Your business should match or exceed the best elements of your competitors. And there’s nothing wrong with identifying the competition’s useful concepts that your business can borrow or implement.

Predict The Future

It’s not enough to know where the competition is now. To best position your business for future success you need to be able to make reasonably accurate projections about your competition’s future activities. Doing so will enable you to make smart decisions about business moves essential to future growth. For example, if know your competition is set to launch what promises to be a hot new product, it might make sense to ramp up your own product and service development. And if you offer services your direct competitors can’t yet provide, you may want to target those in upcoming marketing campaigns and promotions.

Remember, knowing the competition doesn’t mean chasing the competition. Do your research, make plans accordingly and set the lead now.

The articles, products, businesses and opinions mentioned are for general information purposes only. The information may not apply to all businesses and all situations and is not intended as advice for, or recommendations of, specific businesses.

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