HOW YOUR BUSINESS CAN BEAT YOUR COMPETITORS
For your small business to succeed, you need to
know almost as much about your competitors as you do about your own company and
customers.
Unfortunately, many small business owners make the mistake of waiting until a competitor has opened up shop across the street and is cutting into profits to find out who and what they're up against.
Unfortunately, many small business owners make the mistake of waiting until a competitor has opened up shop across the street and is cutting into profits to find out who and what they're up against.
A competitive analysis allows you to identify your
competitors and evaluate their respective strengths and weaknesses. By knowing
the actions of your competitors, you will have a better understanding of what
products or services you should offer; how you can market them effectively; and
how you can position your business.
Competitive analysis is an on-going process. You
should always be gathering information about your competitors: look at their
websites, read their product literature and brochures, get your hands on their
products. See how they present themselves at trade shows. Read about them in
your industry's trade publications. Talk to your customers to see how they feel
about competitive products or services.
Below are four easy steps on how to analyze your
competitors:
Every business has competitors, and you need to
take the time to discern who your customers can approach to get a product or
service that fills the same need as yours does. Even if your product or service
is truly innovative, you need to look at what else your customers would
purchase to accomplish this task. For example, you may be opening a Website
that offers online Bingo. Your competition would be other Bingo sites, other Web
gaming sites, the Bingo hall down the street, and any other businesses that are
competing for the same leisure-time currency.
Begin by looking at your primary competitors. These
are the market leaders, the companies who currently dominate your market. They
are probably the ones who you find yourself bumping up against in your search
for new customers. If you're a florist, it would be other florists in your neighbourhood.
If you're a computer consultant, it would be other consultants with the same
specialty.
Next, look for your secondary and indirect
competitors. These are the businesses who may not go head-to-head with you, but
who are targeting the same general market. Sticking with the florist example,
it might be a small local roses-only store, a national floral delivery service,
or the flower/plant department of your local supermarket or discount store.
Finally, look at potential competitors. These are
companies who might be moving into your market and who you need to prepare to
compete against. For example, you might have an independent frozen yogurt
stand; you will need to prepare to compete against national frozen yogurt
franchises, even if they are not yet in your market.
Step 2:
Analyze strengths and weaknesses
After you've figured out who your competitors are,
determine their strengths and find out what their vulnerabilities are. Why do
customers buy from them? Is it price? Value? Service? Convenience? Reputation?
Focus as much on "perceived" strengths and weaknesses as you do on
actual ones. This is because customer perception may actually be more important
than reality.
It's a good idea to do this strengths/weaknesses
analysis in table form. Write down the names of each of your competitors. Then
set up columns listing every important category for your line of business
(price, value, service, location, reputation, expertise, convenience, personnel,
advertising/marketing, or whatever else is appropriate to your type of
company). Once you have this table set, rate your competitors, and be sure to
put in comments as to why you've given them that rating. You might even want to
put strengths in red and weaknesses in blue, so you can tell at a glance where
each competitor stands.
Strengths and weaknesses are often factors that are
under a company's control. But when you're looking at your competition, you
also need to examine how well prepared they are to deal with factors outside
their control. These are called opportunities and threats.
Opportunities and threats fall into a wide range of
categories. It might be technological developments, regulatory or legal action,
economic factors, or even a possible new competitor. For example, a photo
developing store needs to know how well its competitors are prepared to deal
with the advent of digital photography. Or a company that sells over the Web
should analyze how its competitors are prepared to deal with online security
issues.
Again, an effective way to do this is to create a
table listing your competitors and the outside factors that will impact your
industry. You will then be able to tell how they can deal with opportunities
and threats.
Once you figure out what your competitors'
strengths and weaknesses are, you need to determine where to position your
company vis a vis the competition. Some of this may be obvious from the results
of your analysis, but it also pays to take a hard look at how your business
operates.
One of the most effective ways to do this is to
create a strengths/weaknesses opportunities/threats analysis of your business.
Rank your company in the same categories that you ranked your competitors. This
will give you an even clearer picture of where your business fits in the
competitive environment. It will also help you determine what areas you need to
improve, and what characteristics of your business you should take advantage of
to gain more customers.
The bottom line: look for ways to leverage your
strengths and take advantage of your competitors' weaknesses.
In conclusion, a good
competitive analysis will include price points, the mechanism by which a
problem is addressed, cost estimates, distribution and sales channels, and any
strengths or weaknesses of the competitive solution.
It is also important to
keep your competitive analysis updated on a regular basis, as market conditions
are highly dynamic - and larger competitors can change strategy very quickly. Doing
a quick review of conditions once a month and making needed changes should be
sufficient for keeping up to date.
Price points and the price
elasticity of similar products may need to be watched more closely than once a
month, as many companies drop pricing in an effort to gain market share when
results are not what they would have wanted to see. Missing a competitive price
reduction can lead to losing market share unexpectedly.
Be sharp and help your
business to succeed.
You can request for a
competitive analysis worksheet to help you get started. Send a request mail to naijaoptions@gmail.com.
In conclusion, a good
competitive analysis will include price points, the mechanism by which a
problem is addressed, cost estimates, distribution and sales channels, and any
strengths or weaknesses of the competitive solution.
It is also important to
keep your competitive analysis updated on a regular basis, as market conditions
are highly dynamic - and larger competitors can change strategy very quickly. Doing
a quick review of conditions once a month and making needed changes should be
sufficient for keeping up to date.
Price points and the price
elasticity of similar products may need to be watched more closely than once a
month, as many companies drop pricing in an effort to gain market share when
results are not what they would have wanted to see. Missing a competitive price
reduction can lead to losing market share unexpectedly.
Be sharp and help your
business to succeed.
You can request for a
competitive analysis worksheet to help you get started. Send a request mail to naijaoptions@gmail.com.
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