Your potential competition comes in all kinds of shapes and sizes. Even for professional services businesses there are larger, national companies that are competitive. And there are always existing and potential local competitors looking to be in the same or a very similar niche to the one you are in. So don’t limit your competitive research based on size or location.
First, let’s take a look at WHAT you should be researching when you do competitive research. Remember that the goal of competitive research is not just to find out who your competitors are and what they are doing, but also to find out where there are gaps with few or no competitors and where your competition is doing a bad job. It is also wide open in the sense that you are also looking to figure out what your market opportunities are –where there is a lot of money to be made and how. Once you know the opportunities and gaps you can align them with your choice of business and your business ideas and either shift your business direction slightly to match an opportunity or modify your approach to improve your chances when competing directly with someone else.
Remember to take into account the work and effort and cost of any gap in the market you find. There may be a very practical reason why no competitor is offering lifetime support for example.
Here is a list of the kind of concepts and ideas you need to be researching.
Prices – you need to know what the prevailing market prices are for the products or services you intend to supply. This will inform your decision about what you can and should charge and thus what your potential revenue is likely to be. You can choose whether to undercut current prices to build volume quickly or whether to match or even exceed current prices by providing a better product or service. Do not forget to research local competition,national competition and online competition. In the modern market all of these are competitors in some way.
Finances – ideally you’d like to know something about the finances of your competitors – their supply and materials costs, their labor costs, their overhead, their volume and their revenue. It isn’t always easy to get this information but you can definitely find it for national/public companies and even possibly for local and online businesses if you are smart.Look for press releases and the about section of their company website to see if they ever issued a financial statement. Research news articles – local and national where they may have discussed their success. And if all else fails,consider just asking, especially if you don’t plan to compete directly but instead fill a complementary niche.
Policies – this is a great piece of competitive analysis that is very worthwhile and also easy to do. Your goal is to find out industry standards but more importantly areas where you feel you can easily exceed industry standards or otherwise differentiate your fledgling business. Look at company websites for policies around sales, delivery and support. Anything that could be done better is an opportunity.
Hours – another area for differentiation or alternatively education. You may have second thoughts about that mobile dog grooming service if it becomes obvious that everyone wants it between 6AM and 8AM and 8PM and10PM only. Also easy to discover the information and another opportunity for differentiation. Maybe nobody is offering evening dog grooming and you can do that easily for busy people who are only home in the evening.
Service – this is an interesting one since it can be so subjective. At the same time it is a common and popular area for new businesses to use to differentiate themselves. This isn’t just post-sales service and support but the whole customer service experience from first contact through the lifetime of your product or service. As with all of these ideas consider what you are prepared to do and the cost of doing it along with the opportunities for differentiation.
Marketing/branding – much of your research here is going to be informational – you need to know what your competition is doing and has done around branding and marketing itself but you also should use it as a creative springboard for developing your own, different ideas. You’ll certainly want to know how much effort they are expending because that provides information about how hard it is in this area to get new customers but this is one area where being smart and tactical can give you and edge without having to spend too much money.
Special offers/deals – it is worth knowing what kind of offers and deals your competitors offer – so that you can match them or avoid them. This is one area where you will want to continue keeping an eye on your competition for the rest of the life of your business. Think about exploiting the kind of new tools like LocalWorks that your competition may not yet have explored.
Things to copy – your competition are the best source for good ideas. They have already gone through a cycle of trying to make money in this market and have come up with some great ways to do just that. Apart from copyrighted areas like slogans and specific products you should have no compunction about mining their efforts for good ideas in all the areas above.
Things to avoid – and your competition are also your best source of things NOT to do. You should be prepared to look deeply at all your competitors and figure out what you think they are doing wrong. Then not only avoid those things but also figure out how to do them right.
So where do you look?
First step – list all your competitors that you can find whether they be local, national or online. To find them, search local directories, yellow pages, web search, YahooLocal, and Yelp (see below for more).
Then for each competitor you will want to conduct online,possibly phone and even in-person research.
- Hoovers (note that some Hoovers services are paid but you can still get some useful information for free)
- Yahoo Finance
- Yahoo Local
- Search Engines (Google, Yahoo, Bing)
- Local Paper
- The competitor’s own website
- Industry Associations
- Social media – Twitter, Facebook, Google+, Pinterest, LinkedIn
Phone or in person
- Chamber of Commerce
- Their physical location (look around, walk inside and act like a customers)
- Ask them (in some cases competitors really will be open to talking with you)
There IS a reason for all this research. You are looking for practical answers to the questions we highlighted at the start of this article. You should set up a spreadsheet or just a sheet of paper with a heading for each of the items mentioned and enter the information you learned about your competitors on it. Look for trends and the lack of trends. Mine this information for the opportunities that exist for your business. Your goal coming out of this research is to have a MUCH clearer idea of the details and direction of your business. You should have some ideas about pricing and finances. You should know what you are going to do operationally at a minimum to be successful. You should have some good ideas for marketing.
And besides the gaps and opportunities you should also know how to make your business stand out from your competition. The core single reason for this research is differentiation – a reason why a customer would pay YOU for your products or services rather than a competitor.
Part six of a series– The Yahoo Smart and Simple Guide to Starting a Business.
- Part one: Is it time to start up that startup business? and Part 1- Goals, Values and Ideas and Resources for Goals, Values and Ideas
- Part two: Build a winning business right from the start and Part 2: Defining your business concept and Resources for defining your business concept.
- Part three: Funding, Fraternity and Family and Part 3: Ownership, Funding and Family and Resources for funding and ownership
- Part four: The Name Game and Part 4: Naming Your Business and Resources for naming
- Part five: How to Brand your Business on a Budget and Branding: First Impressions Matter and Resources for Branding.