There are businesses out there trying to do what yours does, only better. Conduct a competitive analysis in your market so you know where your business stands and can rise above the competition.
By Valerie Van Kooten
Competition is what inspires some businesses to strive for greatness and causes others to falter. “The term competition sometimes scares people; it puts them in an adversarial, negative mindset,” says Marian Banker, president of Prime Strategies, a small business coaching, consulting and training firm in N.Y. “But it shouldn’t be that way. It should put you in a positive mindset.”
Deciding who your competitors are, what they offer and what their niches are will help you to better position your business, experts say. Here are some questions to consider when analyzing your competition.
How In-Depth Do I Want This Analysis To Be?
“Deciding how much effort you’re going to put into this will dictate whether or not you need to hire someone,” says Sherry Shafer, director of the Mid-Iowa Small Business Development Center in Urbandale. “If you’re actually going to go to a competitor and purchase things, you may need to hire someone.” Small Business Development Centers are a good place to start with questions about the process, Shafer says
Who Are My Customers?
“You need to ask, geographically, where are my customers located—six counties? The whole state? An entire region or country?” says Shafer. “And then, how would your customers get the product or service you sell if you weren’t in the picture—by mail? Internet?”
How Does My Pricing Compare?
“The mistake many small businesses make is being the lowest cost provider—that’s a downward spiral,” says Anita Campbell, CEO and editor of Small Business Trends, an online publication based in Cleveland. “You need to know how your competition is pricing, not so you can undercut them, but so you know if you’re trying to compare apples with oranges.”
As the former owner of an art gallery in Ohio, Campbell says she was surprised to find how competitors priced their products compared to how she priced hers. “I discovered that being the lowest priced was not the key thing,” she says. “It was important for me to know there were different levels of pricing, and I had to decide, ‘Am I competing at a high level—really expensive art? Or am I going to compete in the $50 to a couple hundred dollars level?’ Who was my true competition?”
Is My Competition Offering Better Financing?
“Perhaps your competition has a more palatable way of pricing,” Campbell says. They may offer terms that spread out payments, 90 days same as cash, or zero percent financing for a certain period of time. “This is less of a problem with service business, but can be an issue in product-related businesses,” she says.
What Vendors and Suppliers Are My Competitors Using?
“If you’re using a different supplier than your competition is, are the products different? Is the quality different?” asks Shafer. “Talk to these suppliers, because they can give you a lot of tips.”
What Emotional Needs Does My Product or Service Satisfy?
Banker says that rather than focusing solely on the features of your product, you need to push the benefits. “People want something, and they’re looking for benefits or to satisfy emotions when they purchase it,” she says. “Understand the emotions behind your service or product. For example, when people buy insurance, they aren’t buying financial protection—they’re buying peace of mind.” Consider how your own products and services are being sold to see if hey address this mindset and use the appropriate messaging.
Who Are the “Unhappy” People?
Not only should you be talking with customers who’ve left your business, but you need to talk to those customers who have been dissatisfied with a competitor and are now coming to you. “Repeat business, referrals, and word-of-mouth are so important,” Campbell says. “If you can’t afford to advertise so much, then you need to rely on not having to spend a lot on new customer acquisition. When you sell to existing customers, there’s less expense.”
How Does My Web site Compare?
Is it aesthetically pleasing? When you type relevant keywords into a major search engine, does your Web site pop up? If you don’t have a Web site, are your collateral materials—brochures, sales materials—professional and well written?
In the end, doing an analysis of your competition is doing an analysis of your own business, too. “It’s as much finding out good news as it is seeing your own weaknesses,” Banker says. “You may say, ‘I need to do better in some areas, but here’s a great opportunity for me.’”