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Competitors are incredibly useful to you when planning your start-up business. Ignore them at your peril. Use them to your gain.( I particularly love competitors who might have 2-3 years headstart on my start-up. Its just long enough to learn from their mistakes and their successes. Those with decades ahead of me are useful, just not in the same way).
Here are my top tips for using competitors to your advantage.
Understand Who your Competitors Are
If I had a dollar for every start-up who told me their competitor was google, or ebay (back in the day), I would be very wealthy. As well as those statements being untrue, they also place the entrepreneur in the “idiot” category in my mind, which isn’t a good start to a business planning or consultancy session.
So how do you define who is your competitor ? My definition is simply that a competitor is some-one who your target audience might realistically choose to buy from instead of you. It is not someone who produces similar widgets to you.
Your goal is to help potential customers choose you over a competitor. So to do that, you must know your enemy, before you can go to war with them. This is one of my favourite parts of business. It’s like a game of chess, or football. You are not alone in business, you are always competing against others for customer dollars. Welcome to strategy!
Differentiate Don’t Imitate
A well-known phrase when it comes to competitors and strategy is “different don’t imitate”. In other words, it is much easier to stand out from competitors if you are different from them. Apple are known for sleek style and design. If Apple was your competitor, would you try to win market share from them on design ? or would you pick a point where you might have a chance of succeeding ?
Position Against Competitors
You must define a position for your business. Read more about positioning here. By not doing so, you will be “vanilla” to your potential customers, making it almost impossible for them to choose you.
The good news is that your competitors can help you define your positioning. If for example, your main competitors offer high end, expensive products, perhaps there is a gap in the market for lower priced goods ? or vice versa. If your competitors are known for poor customer service, perhaps you could gain customers by excelling in customer service , just like Zappos ? If your competitors have become complacent and out of date with market trends (happens a lot), you might have an opportunity to position your business as the agile, modern newcomer with a new business model, think Dollar Shave Club.
These are very obvious examples purely for illustration purposes. However I promise you that if you study your competitors closely, their positioning will become very clear. Use their positioning to identify opportunities for you.
Price Against Competitors
It’s essential to know how your competitor price, and their pricing model (we will come to that bit later). You need to know how your pricing compares against theirs. Why ? because that is what customers do. Customer don’t just choose to buy from you. They choose to buy from you instead of buying from some-one else.
If your pricing is higher than that of your competitors – and of course that’s ok – it must be easily identifiable to potential customers why that is so. (Sometimes being higher priced is the right strategy. And I would always prefer to sell 5 x $1000 products than 20 X $50 products).
One of my customers sell wigs online. Competitors sell the exact same wig for $250. My client chose to sell the same model at $350, but it included an online consultation, and wig cutting and colouring too. In fact, she also offered that wig at $500 for which she added regular washes and blowdrys too. Read more about bundles here.
However you decide to price is fine. But your pricing must match your positioning. Don’t price high and position low. And it must be justifiable to the customer.
This refers to how competitors ask customers to pay, not the price point. If your competitor sells big ticket items without a SaaS model, this might be your opportunity to price per seat per user. If your competitor – say dog treats – doesn’t offer a subscription model, perhaps you could. Or not.
The point is to understand your competitor’s pricing model as well as their price points. Then check yours for comparison through the customer lens.
Benchmark Against Competitors
I like to pick one relevant competitor to benchmark against in several ways. It’s not a lot of work. Over time you become very familiar with the competitor. And believe it or not, its fun.
Here are some ways you can benchmark against them : sales performance, number of customers, number of customer sectors, trade shows attended, monthly % increases in social performances by platform etc. Read a dedicated article on competitor benchmarking here.
Competitor’s News Section
As stated above, I like to find a key competitor who has a few years ahead of my start-up. I read their news and blog section from the beginning. Even if a company is secretive about their strategy, often times their marketing department can’t resist sharing tit bits. If you are lucky, a speed read of a competitor’s news section is like their mini business plan. For example, if you note in 2017, they attended a leading trade show, but never repeated it, you can deduce that didn’t work out so well for them. Boom – saved yourself a few thousand there. If you read of a new appointee to their board or management team, and then look up that person’s profile, it may reveal a new area of interest or focus for the company. I particularly like to read profiles of salespeople. Their backgrounds or expertise should be a loud giveaway to how your competitor plans to sell.
In the past, the profile of the PR agency my lead competitor chose, (which the PR’ agency’s customer base also confirmed) told me a lot about my competitor’s planned business direction. I didn’t read that on my competitor’s site. I read it on the PR agency’s site.
I could go on and on about how much I love competitors. They are always an essential – and free – part of my business planning.
Book me to help you with your business planning.