Every business has ideas about who the competition is, but how much thought has gone into identifying those competitors? And was it just guess work, or analysis of solid facts?
The truth is that choosing who you see as your competition has a really powerful effect on business strategy.
Obviously every business is unique and so there’s no easy tool for identifying the right competitors, but one of the things I do when I work with businesses is to ask them lots of questions. So I would like to share some of them here:
Currently who are your competitors? What is it that makes them competition?
The power of knowing your competition is understanding what they have that you would like to have. Greater market share? Greater recognition? More profit?
Who do these businesses see as their competition? And how do they see your offering?
Is that from your customers’ perspective or from your own?
What’s important to you, probably on the same list as before – market share/ recognition/ profit – is not necessarily what your customer sees as the main difference. They will value quality and service as well as price and it is important to understand whether they see price differences as a key decision maker.
Being clear about what is important to your target customers lets you see which comparisons are valuable in your decision making and what is purely distraction.
Are competitors a distraction? Can customers replace your product/ service with a substitute instead?
It’s not usually as simple as identifying a business in exactly the same location or market and even where there are competitors in the same market the “competition” from substitutes (customers replacing your product with something completely different) can be just as interesting.
Let’s take McDonalds as an example. They list their UK competition as:
Other fast food chains, obviously
Traditional fish and chip outlets
So they are not just interested in the names that we immediately think of, but also other places that get in the way of potential customers choosing McDonalds. What stops your target customer buying from you?
“Measure yourself by the people who measure themselves by you”
Carter Chambers, The Bucket List (2007)
Is your view based on current facts or marketing fluff?
We are all guilty of this. The media (traditional and digital) is full of fabulous headlines about business successes in every sector and the huge sums of money raised in share sales. No-one ever released a press release that said “we made mistakes and lost a crucial customer so our plans have gone awry”!
Recently I read an article in the business press which heaped praise on a growing SME for achieving 11% year on year sales growth. It was only at the end of the article about wonderful ongoing investment and new opportunities the author quietly mentioned the pretty sizeable losses that the business was still making, drawing me to the conclusion that sales growth was requiring big sacrifices from the owners.
What does the future hold? Who are the rising stars in your market place?
We can only ever be certain about the past, but what really matters is the future!
A little more than just 10 years ago the big supermarkets were competing with each other to try to capture market share but then their battles were swept aside by the growth of the likes of Lidl and Aldi.
How do you see your market changing in the future and how can you adapt? (Chances are you’ll be wrong here, but if you plan for something you will be better placed to react to whatever comes your way.)
Most importantly: what are you going to do with this information?
Can you see opportunities that you can exploit? Have you got strengths that the competition haven’t got? Maybe what you need to focus on is doing more of what you do best?
At the end of the day what matters is how you’re doing now compared with how you did last time (last year, last marketing campaign, last product launch, etc) but by having good information you can make good decisions for the future.
If I can help you work through some of these questions I am running free consultancy sessions across Devon over the next few months. Click here for more details.