All businesses face competition. But knowing who your competitors are, and what they are offering can help you to make your products, services, and marketing stand out. Having a thorough knowledge of your competitor not only lets you set your prices competitively, but also helps you respond to rival marketing campaigns with your ingenious initiatives.
In this blog, we will be discussing understanding competition in business and learning how to identify key competitors to better position and sell your products or services.
In business, recognizing your competitors is crucial before you finalize your decision about which business category and market segment to compete in. The success of your new venture or existing business depends on this as it reduces risk, time, required resources, and expense. If you wish to compete in the competitive market effectively, you will need to do your homework right. Getting answers to these questions might help.
- Who are your competitors?
- what are your competitor’s strengths and weaknesses?
- What are your competitors planning to do next?
Identify your business competitors:
First things first, there are a lot of things which come into play when identifying your business competition. Start by narrowing your choices and decide which industry, product or service categories, brands, geographic areas, channels of distribution, etc. to compete in. This only helps you in your effective and efficient marketing program, when on a budget.
There are three levels of competitors you will be taking on in the business.
- Direct business competitors: The competitors offering a product and service which is interchangeable with yours in the eyes of the customer.
- Substitute or alternative business competitors: Competitors offering similar products in a different business category or more geographically remote. Here, none of them provide the same mix of products and services as you do, but they tend to pick off the lucrative parts of your business.
- ‘Available spend’ Competitors: In this case, competitors compete for the ‘same-occasion’ dollars.
This analysis is vital to carefully consider all the alternatives that there are to purchasing from you, from the buyer’s point of view.
Identify competitors’ strengths and weaknesses:
Be aware of your direct business competitors. Most of the time, you’ll know them by their names and would also belong to the same business associations as well. It is to your advantage to know as much as you reasonably can about the details of your competitor’s businesses. You could study their business model, ads, brochures, and promotional materials. Learn about them, their clients, location and so on.
The basic information every company should know of its business competitors are:
- Each competitor’s market share, as compared to your own.
- Get information on how your target customers perceive your competitor’s products and services.
- Your competitors’ financial strength, which affects their ability to spend money on marketing activities amongst other things.
- Each competitor’s ability and agility to innovate new products and services.
It is not just the strengths of the competitors that come to play but also the weakness. Your business competitors’ weakness could be an advantage to your company or business.
Anticipate your competitors’ next move:
Once you have identified your primary business competitors, also figure out your second and third-tier competitors as well. It is best to give some thought to which actions your competitors are likely to take shortly. Estimates of competitors’ future activity depend on your knowing and understanding of their objectives, strength in the marketplace and resources. This could be advantageous to your business by
- Annual forecast for spending, sales, and profits
- Promotion and advertising programs or marketing activities
- Introduction, support, and success of new products and services
- Market, product, or service category, and sub-category trends
- The direction of future growth
Gathering competitive intelligence (Data from sales forces, consultants, promotion and ad spend, new product introduction, sales results market share trends, etc) is the difference between realizing your company’s annual plan and losing business that may never be recouped. Understanding each competitor’s behavior in terms of short and long term objectives, strategies, and tactics will be extremely important to the survival and success of any business.
And, we can’t stress strongly enough that you don’t need a huge marketing budget to become knowledgeable about your competition.
Here are some strategies that every small company can consider using:
- Visit your direct competitor’s stores, customers, suppliers, convention booths, and sales personnel.
- Gather secondary data on the competition from trade associations, publications, conventions, customers, and your own sales force.
- Shortlist of possible competitive strategies and tactics for the current year, and your retaliatory strategies and tactics, including situations to which you will not respond.
- Analyze your competitor’s products regularly for improvements, weaknesses, and quality trends.