The beginning of the fall and winter seasons is a pivotal time for your business to prepare for ramped up sales through the holidays. However, it is important to keep in mind that your competitors will be doing the same. Even if you have your internal business practices down pat, you can’t truly understand your own business until you understand your competition.
By studying your competition and your position in the market, you’ll be better prepared to map out your business’s growth and reach your target audience.
Why Care About the Specifics of Your Competition?
At first glance, competition seems very straightforward, but you’d be surprised how many entrepreneurs fail to convey useful, consistent information about their competition to their team.
Identifying your competition is particularly important for you as an entrepreneur, but it impacts your entire team. It will influence your sales, your marketing strategies, and your regular financial planning.
Understanding who you are competing with allows you to adjust your goals, compare business strategies, and determine if you’re satisfying your audience’s needs. It can also help you determine where your business might be falling behind or losing money.
The Three Types of Competitors
When we talk about competition, you might imagine a business owner doing the same thing as you––selling similar products to a similar audience. But in order to understand how your competitors relate to your target audience, you need to look closer and distinguish between types of competitors.
Direct competitors sell products or services similar to your own––products that fulfill the same demand for the same consumer market. Direct competition is the most iconic kind of competition.
- McDonalds and Burger King both make burgers that fulfill the same needs (affordability and quick turnaround) to the same consumers.
- Instagram and Snapchat both offer direct-messaging and temporary story-sharing services.
- Two local coffee shops in a small town are direct competitors offering coffee to the same community.
Indirect competitors target the same demand as you, but they offer different types of goods or services to fulfill those demands. For example, Burger King is offering to meet the need of hunger. A local vegan restaurant is also addressing hunger. Are they both competing to make affordable burgers? No. Are they both competing to make health-focused, plant-based meals? Also no. But are they both attempting to feed hungry people in their area? Yes.
Sometimes indirect competition takes place between very different kinds of services, especially during the holidays. When gift shopping, the customer’s need (a good gift) could be fulfilled by many different products. Uncle Bob’s Christmas gift could be guitar strings, a new shirt, or a gift card to that restaurant he likes. Now businesses that seem to operate on entirely different planes are indirectly competing for the same consumers.
Replacement or phantom competitors are a little tricky, and you won’t usually focus on them as much. These are businesses which produce different goods or services to fulfill different needs, but which consumers may choose to purchase instead of your goods or services.
Replacement competitors are incredibly difficult to predict and identify, because it’s hard to know exactly where individual consumers will choose to focus their resources. It’s difficult, for example, to predict when someone will start saving money for their expensive dream car and therefore avoid spending money on other purchases.
Replacement competition can become particularly important when entirely new technologies become popular or risk making certain products redundant. Classic examples include smartphones that reduce the sales of personal cameras or Uber services that reduce the use of taxis, limos, and public transportation.
Investigate Your Competition
Identify five direct and five indirect competitors and start to investigate their practices. Ask yourself:
- What are they selling?
- Are the products or services produced differently than yours?
- Are they priced differently?
- What do they emphasize in their marketing?
- How do they interact with their customers?
- Is their business more convenient for certain customers?
Use these questions as a starting point. Then start to think through the strategies and goals your competitors might be pursuing. This isn’t easy to decipher, but you can review press releases, business publications, and even interviews or blogs to get a sense of what they are focusing on.
As you’re exploring your direct and indirect competition, think about some of the developing technologies and trends in your market that may help you predict the threat of replacement competitors. Though this might not always be possible, keeping your eye on your market’s broader development will help you maintain a predictive sense and stay ahead of the game.
When you have a better idea of what your competition is doing, you’ll have a better understanding of what your business is—or should be—doing.
Doing this research can take up valuable time and resources. That’s why our marketing team works to provide thorough analysis and comprehensive strategies to your business, without overloading you with any extra work. Schedule a call today!
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