“You can’t look at the competition and say you’re going to do it better. You have to look at the competition and say you’re going to do it differently.” – STEVE JOBS
will take about 9 minutes to read….
Knowing your competitors is getting to know the framework you are operating in. I assume you are not alone in your game, and even if you introduced something new to the market, it just means you earnt some time before competitors arrive.
In this section we will get to know:
1. Types of competitors
2. Analyse and map your competitors
3. Set yourself apart from your competitors
Why is it important to know your competition?
You must always know who your competition is. This should initially be part of your due diligence. It is not only existing businesses selling the same product or service as you. More dangerously, it could be a new business coming into the market to offer a better version of your product or service, which could see your product no longer required or replaceable.
It’s rough in the business world, where many players don’t play by the book. More likely than not, you will find that people generally copy what you do and spend more time on how to bring you down rather than concentrate on how they will improve their own business. These are known as the copycats in business and there are strategies to deal with them and protect your brand or business.
Take it as a compliment. It means you are doing something right. Never get to their level though, and always know the consumer knows how to differentiate between the leader and the follower in the industry. Let that leader be you and reap the benefits. Because that was us, and we did just that!
So who are your competitors and how do you deal with competitors in business? We take a look below:
1. Understanding different types of competitors:
Direct Competitors
Direct competitors are the ones that are there when you think of a particular product. They often have the same audience as you, offer an identical or similar product to you and are similar in running their business and marketing strategies. Let’s say for example, Macdonalds and Hungry Jacks – both cater for burgers, and their customer is hungry.
Indirect Competitors
Indirect competitors are the ones who don’t solely sell your main product. So there is a pizza shop opposite MacDonalds. They don’t sell the same product, but they cater to the same hungry customer.
Replacement Competitors
Replacement competitors are often the ones that I perceive to be the most dangerous. They can make your product or service redundant simply by offering or providing a new solution to your product. A great example of this is that good old fashioned digital camera that every household had and took with them on outings and holidays. Those devices could no longer compare or compete with the emergence of smartphones in the market. It was not only the constant improvement of their technology but the convenience alone of an all-in-one device that was highly beneficial. Replacement competitors are also known as “phantom competitors”.
Secondary Competitors
Secondary competitors often offer a higher-end or a lower-end version of what you are offering. They usually target a different audience than you do. Think of the no-name brands of running shoes sold for $15 at a store. They target a consumer who is not willing or cannot afford the $150 branded running shoes. This audience is different and targeted differently. They are still your competitor but are known as “secondary”.
Power of Suppliers
The Power of Suppliers is a threat that is most commonly overlooked. Check to see who your suppliers are in the market and if they are competing with you. They may often trade under a different name so that they will not be evident to you initially. They may not yet be in the market but will shortly follow if your success is more significant than theirs or if they wish to take a share of the retail marketplace. As part of risk management it is always advisable to source your product or materials from several suppliers.
2. Competitor Analysis
Analysis – Before you start your business, you should take the time to collect and analyse information about your market which would include competitors. A SWOT analysis is beneficial in this instance, and you could also get an external organisation to do this for you as they would be able to go through and explain their findings in detail.
When we learn about our competition there are many factors that we need to consider and what would set us apart from them.
Some of the things we need to know about our competitors are:
Pricing – beware of price wars. They create illogical reactions where no one comes out a winner. On the contrary, it can result in enormous losses.
The difference in the product and its durability or quality. You don’t have to be cheaper than your competitors. You must be different.
After sale service – Warranties or guarantees offered, refund policies and exchanges.
Target audience – perhaps there is a gap or niche market there for you. This is where you need to do your market research and think outside the box. Understanding your target market is critical. Who else could benefit from your product that your competitor has overlooked? Niche is great.
Different Market Places – If your competitor is advertising only on Google, you should look at advertising on Google, Bing, and Yahoo. If they are selling on eBay, you should be selling on eBay and Amazon. If they are on Facebook, you should be on Facebook and Instagram. Always find marketplaces where your competitors are absent. Going online and becoming part of the digital world is an absolute must for all businesses.
Accessibility / Customer Service (especially in the online world) – phones, emails, physical address. Consider downloading whatsapp for business. If they are offering a high level of customer service, don’t copy it; just find a way of improving yours and exceed theirs.
Location – see their exposure, how much traffic runs through – even check what their parking is like, do they offer accessibility to disabled?
Communication, how long does it takes them to respond, and how courteous are they?
Reputation– look at their branding and how they are viewed. Are they online? Social? What is their reputation as an employer?
Social Media – Look at their social media; how are customers engaging, and what are they saying? Can you see a gap that you can fill? Social Media can be one of the best tools to analyse your competitors.
Established – How long have they been around? What is their expertise like?
Size – How big are they? How many employees do they have? Do they use subcontractors or freelancers in certain areas to reduce their overheads? Do they outsource some of their business tasks? We certainly did, which contributed to our profitability. Consider upskilling your staff. It has great benefits and keeps you one step ahead of competition.
Value – Do they offer more value? If yes, where? In the product or in the service? What kind of selection do they have?
Marketing – Look at their marketing and see how engaging they are.
Success & Errors – Find out what your competitor is doing or has already done and has or has not succeeded. Remember earlier on; I mentioned foresight over hindsight.
Learning from other people’s mistakes is paramount and can save you an absolute fortune. Understanding what makes them successful and what works is equally important.
Managing Economic Downturns – Recession proof your business and stay a step ahead of your competition. Know what to do in tough times without going into a price war which has no winners.
Maintain a good relationship with your competitors – Your competition does not have to be your enemy, so you should not view them as such. Develop your relationships! We had a great channel of communication with our competitors. Some of them assisted us greatly through very challenging Covid lockdowns as we helped them.
When talking to competitors, do less talking and heaps of listening – insight and information are Gold.
Always remember that you never know when you may need to call on someone. Never burn your bridges with anyone – and who knows; similar businesses can often enter into strategic partnerships or joint ventures to strengthen their outreach and audience or scale their business.
3. Set Yourself Apart – Competitive Advantage
Differentiate yourself well when dealing with competition. In addition to the above analysis, you need to be able to close the gap or lead the way as much as possible. This is where your reviews matter, customer experience matters, and word of mouth as it forms part of your “goodwill”. This is an important intangible asset to any business.
Innovation is vital in staying ahead of your competition.
Don’t copy. Learn from your competitors and be different. You are running in the same field, and knowing what works and what doesn’t work, is the smart way.
You should, ideally, create new products or services that keep you a step ahead. Be culturally aware of your markets and communicate to customers in their language and tone. Heck, learn a second language if you have to. It’s a super power!
Consider your carbon footprint and become a leader in your industry by prioritzing sustainable practices.
Attract and retain talent. For example, offering a 4 day work week can be a compelling differentiator for prospective employees.
Create a killer online presence / website. Learn technology and how it can place you at an advantage. Simple things such as having CDN’s in place where your site loads faster and gives the user an enhanced experience can make all the difference.
These sorts of things will give you the competitive advantage you are looking for. Competition makes you better!
Under the category of manage your customers, we touched on customer satisfaction, loyalty, and experience. We also mentioned that customers were happy to pay a higher price if their experience was good. I believe that this was key to the success of our business. We weren’t the cheapest; on the contrary, we were able to charge premium prices because we provided a different & exceptional level of customer service. In addition to this, it was part of our strategy to sell to our customers a solution to their problem, rather than just a product. We did this by showing them how our product could assist them. The fact that it was awesome came secondary! We believed that this was part of their shopping journey/experience, which is why they were paying a premium. This is also one of the main reasons our rate of returning customers was high.
ACCC regulations
Finally, beware of anti-competitive behaviour. The ACCC (accc.gov.au) sets out some guidelines on anti-competitive conduct, unconscionable conduct, misuse of market power, and pricing conduct, to name a few.
Knowing your competition is step four in my 5 basic step guide on how to run a successful business.
Let’s check out the other 4 steps below and see more information on each:
It’s essential to understand these 5 steps and their content as they are the foundation of running a successful business. Practical real-business life information that every business owner needs to know.
I also have a bonus step on how to sell your business. I have included this as this can form part of your exit strategy as it did mine.
