Know Your Competition
Understanding the strengths and weaknesses of your competition is critical to business survival and success. While you don't have to hire an ex-CIA operative to do this, you do need to assess the competition thoroughly, methodically and regularly – even if you run a small business.
Competitive analysis can be incredibly complicated and time-consuming, but it doesn't have to be. Let's look at a basic process for identifying and assessing the strengths and weaknesses of your competition.
Create Basic Profiles
The process starts with developing a basic profile for each of your current competitors. First identify them. For example, if you run a bookstore, you may have three competing bookstores in your town. Major online bookstores are also competitors, but thoroughly analyzing those companies will be less valuable unless you decide you want to sell books online, too. Rather, stick to those companies you directly compete with.
Once you identify your main competition, answer these questions about each company. Be objective. While it's easy to identify weaknesses in your competition, it’s more difficult to recognize where they may currently outperform you:
- What are their strengths? For instance, price, service, convenience, extensive inventory are areas where you may be vulnerable.
- What are their weaknesses – or opportunities –you could take advantage of?
- What are their basic objectives? Do they seek to gain market share? Do they attempt to capture premium clients? See your industry through their eyes. What are they trying to achieve?
- What strategies do they use in marketing, advertising, public relations, etc.?
- How could they take market share away from your business?
- If you change or add products and services, how will they respond?
While the above may seem like a lot of information to compile, in reality the process is fairly easy. You should already have a feel for strengths and weaknesses based on what your customers tell you and why some of your customers take their business elsewhere.
You also have other options:
- Check their websites. Much of the information you need about products, services, prices and objectives should be readily available. If that information isn’t, you’ve just identified a weakness.
- Direct observation. Visit their stores. Check out their brochures and other promotional literature. Have friends call and ask for information.
- Check out marketing and advertising campaigns. You can quickly determine how the company positions itself, who it markets to and what strategies it employs to reach potential customers. You also will learn how they differentiate their business from yours.
Analyze competitor's advertising not only to understand their objectives but also to understand how they perceive you. If they focus on low prices, for instance, they may feel you are vulnerable based on price. Or, if they focus on promoting outstanding service, they may feel your business provides relatively poor service.
- Internet searches. Search for news, public relations and other mentions of your competition. Make sure you search blogs and Twitter feeds as well as review and recommendation sites such as Yelp.com. While most of the information you find will be anecdotal, you may at least get a sense of how some consumers perceive your competition. Plus, the search may give you a heads-up about expansion plans, new markets they intend to enter and changes in management.
Competitive analysis does more than help you understand your competition; it can also help you identify changes you should make to your business strategies. Learn from competitor strengths, take advantage of competitors' weaknesses, and apply the same analysis to your own business.
Identify Potential Competition
It can be tough to predict when and where new competitors may pop up. For starters, do regular Internet searches about your industry, your products, your services and your target market.
There are other ways to predict when competition may enter your space. Turn an analytical eye to your business and your industry. If the following conditions exist, competition is likely to pop up sooner rather than later:
- The industry enjoys high profit margins
- Entering the market is relatively easy and inexpensive
- You serve a growing market – and the more rapidly-growing, the greater the risk of competition
- Supply is low and demand is high
- Very little competition exists; in effect there is "room for everyone" currently in your market
If serving your market seems easy, assume competitors will enter your space in an attempt to siphon off some of your customers and your profits.