Why Understanding Your Competition Is Important

Know your competition

 

A thorough understanding of your industry competition is one of the biggest key factors to the success of any business, whether it’s an independent startup or a franchise. Regardless of if your service/product satisfies a unique market, there is always another company offering a similar service/product. The fundamental thing to remember when sizing up your competition is that you need to learn what makes your customer choose your company over another, or vice versa.

Janet Muhleman, CFE of Franchising World explains in an article published by International Franchise Association, “Stand Out from the Competition,” that it is important that franchisees understand that “just because they are buying into a proven system today, it doesn’t mean it won’t need to change to meet the needs of the customer tomorrow.” She believes that “the competitive benefit of providing convenient customer access and the ability to collectively analyze customer transaction data, ultimately outweighed the perceived benefits of maintaining their own systems. Focusing the system on meeting the needs of the customer helps overcome barriers to adoption of new innovations.”

In describing competition, there are two types: direct competitors (which is when you are competing with another company who is selling the same service/product) and indirect competitors (which is when you and a competitor are going after the same market). The power of both direct and indirect competitors will undoubtedly affect your business’ potential for success, which is why it’s so important to consider your competition from all angles as you plan your business strategy. You need to make sure you have the upper hand in your market.

Here are a few tips to get you started on researching and ultimately beating your competition:

  • Become a secret shopper.Depending on what industry they’re in, you can most likely call your competitors and/or visit their shops or offices. When you’re secret shopping, you’re on the lookout for a price list, you’re listening to their pitches, and you’re paying attention to the customers going in and out of their shops – customers who are buying and customers who aren’t buying (and try to figure out why they didn’t buy).
  • Talk to your competition’s customers.Find out what your competition’s customers like and dislike about the companies they’re visiting, as well as why and how they decided on the company they did.
  • Purchase mailing lists, email lists, and directories.Mailing lists, email lists, and directories are typically available for most industries. Try a quick online search or visit your county government to see which types of directories are available for companies in your area.
  • Don’t disregard anyone. Regardless of whether the company you’re looking at is small or is out of your territory, you should still study them carefully. Many businesses offer a plethora of information on their websites, so look at where they sell their services/products, or their reach; price lists; and what services/products they emphasize.

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