Many small business owners underestimate the advantages of better understanding their competition. Knowing who your competitors are and understanding their strengths and weaknesses can help formulate your own marketing strategies and messages. You’ll also be better equipped to highlight your strengths and target customers who value them.
Three major types of competition can influence your success: Direct Competition, Replacement Competition and Indirect Competition. Today’s online world provides a lot more resources for identifying and researching your competitors, but don’t forget to take a look at what they’re doing offline as well. Here are some ways to identify the different types and get the information you need to compete successfully.
Direct Competition: These are businesses selling the same products or services in your area.
- Study the messaging on their website. How do they show their products or services, and what do they say about themselves? Do they offer coupons or special deals online? Do they include original content and update their site regularly with a blog or other interactive features? Do they have links to their Facebook page, Twitter or other social media platforms?
- Check out your competition’s social media activity. Who do they follow and who follows them? What are they posting and what’s the level of engagement? Facebook and Twitter are today’s top social media platforms, but Pinterest and YouTube are becoming increasingly important so don’t leave them out.
- Do a Google search of a few keyword phrases for your products or services. Is your competition using paid online advertising through Google Adwords?
- Online customer review sites are often the first place potential customers look when researching a purchase decision. Do you know what your customers are saying about you and your competition on these sites?
- Do your competitors use any print advertising? Read their ads to determine their focus, strengths, weaknesses, and target customers.
- If your competitor has a brick and mortar store, visit their business to compare how it is arranged to yours.
- How many employees do they have? Does the signage compete directly with your business? Also be aware of store hours, days open, in-store specials, etc.
- Keep current by signing up for Google Alerts for your competitor’s business name, and you’ll receive emails when they are mentioned in an article or other online publication.
- Be aware of the competition’s pricing strategy and how it differs from yours. Resist the urge to lower prices if it seems the competition is luring customers by doing so. Be aware of your differential advantages and focus on customers who will remain loyal because of them.
Replacement Competition: These companies sell completely different products and services that can be utilized or consumed in the same way as your own.
- Be aware of substitute products or services targeting your customers and remain aware of other choices your customers have. Fast food restaurants are pros at knowing how to differentiate themselves from the many other choices available to customers. Develop a list of substitutes, then focus on your core strengths to differentiate yourself from your competition.
- New technology often surprises even well-established businesses. The growth of online stores took many brick and mortar businesses by surprise, eating into their sales. Similarly, crowd sourcing may be eating into service-based businesses territory. Becoming aware of new channels available to your customers will allow you to market effectively.
Indirect Competition: These businesses have primary products or services that are not the same as your offerings but have secondary products that could satisfy the same consumer need.
- You just opened a new coffee shop. You did your homework and determined there was a lack of coffee shops within a 2-mile radius of your chosen storefront. Your coffee shop opens, however, you realize the gym next door also has a coffee and juice bar. They are your indirect competition and your business may suffer because of it. Be aware of indirect competition as you get ready to set up shop or launch a business.
- Similarly, online indirect competition will vie for your customers. Often these online providers offer lower costs, but may lack other advantages that you provide. Knowing how to compete will establish your position in the market.
Get into the habit of researching your competition periodically. You’ll be able to identify new competitors, and you’ll also learn about changing trends for your industry and changing customer preferences for your products and services. You never know when a new competitor might be right around the corner!
