Whether you are in turnaround mode, wildly profitable operations, or somewhere in between, it is imperative to know as much as you can about your competition. Competitive threats–present or forthcoming–should be well understood and strategies developed to address them.
Assessing the Competition
To assess buyer potential, knowledge of competing products is essential. Any advantage an executive team may hold over the competition needs to be studied with an eye toward exploiting that advantage fully. By developing this competitive advantage, the business creates non-financial barriers can prove difficult for the competition to overcome; financial barriers (for example, price discounts) are often more easily met.
Threats from competitors are a daily occurrence. Therefore, the competition should be monitored and key information compiled and categorized, either manually or electronically, and updated regularly. The most common forms of threat to watch are as follows:
- the unanticipated entry of competition with extensive resources or new product offerings into the local market
- the diversification of existing companies into new product offerings
- the introduction of a technology (such as a software as a service trendsetter) that exceeds currently available prototypes
- efficiency improvements that create cost advantages not easily matched
Any slight advantage in cost savings others can gain presents a viable threat to the operation of every other participant in that niche. For example, if a company can source inputs cheaper, that competitor can control the market through pricing. While price reductions can be matched, cost efficiencies cannot. With reduced cost structures, the business could offer higher quality products for the same or cheaper prices to the same group of buyers another business is trying to attract. Some may strike lucrative deals with their vendors, who are in effect “held captive” by their need for the contract work. Streamlining staff or other reductions in overhead can also contribute directly to the bottom line and clear the way for improved price competition.
Gathering Information on the Competition
Given the possible threats, every company should study and know its competitors inside and out–not just figuratively, but objectively, analyzing competitive products in the field and the team(s) that produce them. If a competitor suddenly pulls out of a channel or wholeheartedly pursues another, the executive team should wonder and try to determine the reason. If you are playing in the same space, detailed information on the features, marketing and expected pricing of the offerings of others can be extremely valuable. More difficult to collect, but perhaps even more valuable, is information on a competitor’s cost structure. Knowledge in these areas prepares your team to position its offering in any given situation. This information can and should shape planning.
Information can be gathered from websites, especially press releases, industry publications and organizations, and word of mouth. Suppliers, services firms, and buyers are valuable sources of competitor information. Of course, such information must be considered in light of the motives of the person providing it. Proactive research in terms of surveys and interviews can also supply good background data. Most important–and easiest to obtain–is information from marketing agencies and sales organizations that serve multiple clients.
Gaining a Competitive Advantage
Companies gain an advantage when a known, unique asset is translated into a more competitive offering. Therefore, the executive team should carefully note opportunities to gain an edge throughout the information-gathering process. Capitalizing on company strengths–and opportunities to serve the market thereby–will instill the confidence necessary to withstand outside threats. Addressing buyer concerns in a positive manner, funneling their input into a constructive, sales-closing process, will enable the business to make the most of both strengths and weaknesses. For example, by offering option packages and upgrades based on buyer demand, the company can secure more contracts. Meeting delivery schedules is also critical to enhancing competitive advantage.
Customer service is another important area to scrutinize. Satisfied customers are a great source of new, repeat, and referral business. By carefully pre-screening potential buyers and collecting selection information, more targeted sales efforts can be made. Teams should expect prospects to respond to customer service before and after the sale as though the sale depended on it.
Regarding “Information can be gathered from websites…”, I would add, using Google and third-party traffic data services like Compete can be very helpful, since traffic can tell what keywords are bringing your competition potential sales and who their strategic partners are along with other relevant information.
This is a great post! As a business owner, I’ve also had to keep an eye out for competition. I have found that you can learn a lot from studying what they do and most times – at least in my experience – you realize how you’re actually very different.