Every dollar a customer spends is a choice made between you and your competitors. That's why your competitors' weaknesses can translate into opportunities for your business. Likewise, their strengths can be challenges your business will have to defend itself against.
Identifying the competition
If you're unsure about who your business competes with, begin by searching online. If you run an established business, ask your customers who they think your competitors are.
Read trade or industry magazines to learn more about competitors who may enter your market in the future. For example, if you run the only electronics retailer in your area, it's important to consider the possibility of a discount superstore moving into your area.
Beware the temptation of suggesting your company has no competition. Even if you're introducing something completely new to the market, your potential customers are currently satisfying their needs in some other way. Remember, when the automobile was introduced, it competed with the horse and buggy!
Analysing your competitors
It’s vital you analyse your competitors to find out where their strengths and weaknesses lie – and hence, where you might have some opportunities to advance your business.
Provide an analysis of your competition by:
- Listing your main competitors – if you compete with many businesses, consider breaking your competition into categories based on what they offer, and present your main competitors in each category. For instance, a tire retailer might compete with other tire stores, auto dealers, independent mechanics, and large hardware chains.
- Ranking your competitors in terms of market share – from those you think do the most business to those that do the least. Or you might group them as large, medium, and small competitors. Ranking can help you understand how your competitors share the marketplace, and where you might be able to carve out a piece for yourself.
Strengths and weaknesses
One of the best ways to identify your competitors' strengths and weaknesses is to approach them from a customer's perspective. Try finding out as much as you can about each of your competitors businesses:
- In person – to get a feeling for each business and how staff interact with their customers.
- Over the phone – to get an idea of your competitors’ service levels.
- On their website – where there might be new developments like special discounts or offers, or clearance sales.
You’ll want to know what they offer and for how much. If you’re concerned about your competitors recognising you in their stores, ask an unbiased friend do this research for you. Also, pay attention to advertisements, which contain lots of information about how your competitors perceive their own strengths and weaknesses.
Get as much quality information as you can
Ask the person who has visited each business (or their website) to make detailed notes on such areas as:
- Their first impressions of the business.
- How the products were displayed and priced.
- The appearance of the business – outside and inside.
- The initial welcome from salespeople (or virtual salespeople).
- The friendliness and helpfulness of staff – Did they provide useful advice? Did they answer questions well?
- The overall customer experience.
Key opportunities and challenges
Based on the strengths and weaknesses you've identified, outline the key opportunities and challenges for your business. Consider the following questions:
- Which of your competitors' weaknesses can you improve upon?
- How might your competitors use their strengths to try to surpass you in the marketplace, and how can you protect your business against them?
If you're starting up or you operate an established business, understanding your competitors can help you spot the most under-served customers and the greatest opportunities for success.
If you’re winding down your business, identifying competitors may help you find potential buyers for your business.