Know Your CompetitionPosted: August 27, 2010
Knowing your competitors is one of the fundamental aspects of building and maintaining your business. In fact, I think it’s probably one of the first activities any entrepreneur should undertake before delving headlong into business. Getting to know your competitors will allow you to:
- become familiar with the marketplace, your adversaries, and potential partners
- understand how your customers and potential customers are being served
- identify customer needs that are not being met
- determine or refine pricing strategies
- recognize potential threats to your business
- capitalize on your competitor’s strengths & weaknesses
- not repeat the mistakes of your competitors
- prepare for collaboration (if you can’t beat ‘em, join ‘em)
The more you know about your competition, what they’re doing now and what they’re planning to do in the future, the better decisions you’ll be able to make for your own business.
Let’s talk strategies for getting to know your competition better.
The first step in gathering “competitive intelligence” is to identify your competitors. How do you determine who your competitors are? There are two categories of competitor: direct competitor and indirect competitor. Your direct competitors are other businesses that sell the same, or similar, products and services you do (online and brick-and-mortar). Indirect competitors are businesses who are meeting the needs of your customers with products and services you don’t sell or haven’t thought about offering, including products and services that may make your business offerings obsolete.
As explained in my previous blog (‘Why Does Your Business Need a Web Site?’), competitors aren’t necessarily limited by geography.
One easy and effective way of finding a list of competitors is to perform a search using an online business listings service. For example, you can conduct a keyword search (i.e., “car wash”) using sites like Canada411, Canpages, Yahoo Business Finder, Yelp, Google Maps. Trade magazines may also prove to be helpful in identifying competitors.
The next step is to get to know your competitors. Visit their web site(s). Use the power of the web to look for information about them in newspapers, trade magazines and other publications. Using the business listings from above, review the customer reviews posted against your customer’s business listing. Use tools like Google Alerts (http://www.google.com/alerts) to track what’s being said about your competitors. Sign up for your competitor’s newsletters and get on their customer list – communications could include upcoming sales events, introduction of new products and services, changes in service delivery. If you can, secretly shop your competitors to become familiar with their business operations in person. I would stop short of digging through their garbage and following them home, though.
Once you’ve become intimately familiar with them, you can begin to build relationships with your competition. Join a trade association, a local chamber of commerce, or business networking groups that your competitors are likely to belong to. Seek out the owners, managers and other influential employees of competing businesses. Getting to know your competitors will help you to determine who you may want to build relationships with and who you should stay away from (those shady characters). Some competitors may not want you around, so be sensitive how they perceive your presence. Getting to know them is not the same as stalking after all. Be honest and up front with who you are, and don’t have an agenda. Simply get to know your competitors on a personal level and let them see who you are. This is a great way to build trust, and perhaps one or more of the relationships you build will lead to collaboration or a joint business venture over time?
As I alluded to in the previous paragraph, there may be significant advantages to be reaped when you work with your competitors. Perhaps it’s more productive if you can collaborate with your competitor when going after the same customer to offer a more complete service or product to meet the customer’s needs. Also, exchanging referrals can benefit both businesses (if you offer something they don’t or if they’re unable to complete a large order, or take on additional customers for whatever reason). It’s relatively common in the commercial aviation business for maintenance issues to unexpectedly ground an aircraft. In this case the airline or aircraft charter company will sub-contract the flight with another company on the airport with a similar aircraft to fulfill the service.
When trying to establish a competitive advantage don’t get caught up on price. You need to be aware of the pricing strategies used by your competition, but engaging in price wars will erode profit margin, and you will never be the absolute cheapest in nearly any market. In fact, customers often associate the price of your products and services with the level of quality of those products and services. Instead, it’s well advised that you focus on adding value to your offerings. You should focus on customer service, product and service quality, availability and reliability, location, skill sets and other differentiators.
Another key advantage to knowing your competition is to let your competitors make you better. This encompasses everything from taking the best ideas from the best web sites and building those into your web site, understanding what makes them successful and using those ideas in your business, learning from their mistakes and avoid making the same mistakes, and also learning about sales events and anticipating other marketing strategies that your competitors employ in order to be able to react appropriately to protect or grow your own business.
The final strategy I’d like to impart is for you to be aware of what your competitors are saying about you. Some competitors will think the best way to build their business is by tearing yours down. Some competitors cheat in ways that will shock you. This is another reason why the advice above will prove to be effective – the better you know your competition (at arms length and on a personal level), and the better you can position your business against the competition, the more prepared you’ll be to weather an attack.
Knowing your competition can take a bit of time, and it’s an activity that must be deliberately carried out. Dinner’s not going to make itself, and you can’t become familiar with your competitors without making a determined effort. Once you’ve established a file on each of your competitors keep it up to date. Don’t let the relationships you’ve built go stale. Make sure you know what your competition is doing right now, and what they are planning to do in the future.