Whatever your sector, niche or marketplace, there's almost certainly going to be other competitors in that space - but do you know who they are and what threat they pose?
Are you the only provider of your specialism, or are you one of many companies that are all vying for the same customers? Knowing who those companies are, how they compare and what their competitive advantages may be is a vital piece of business intelligence for you.
So, how do you start this process of identifying your competitors and benchmarking your offering against the nearest market competitors? The answer is to do your homework...
1. Researching your competitors
To begin with it's worth understanding the difference between your direct competitors and those companies which are indirect competitors. Knowing who your direct and indirect competitors isn't always easy, but defining the differences is quite straightforward:
- Direct competitors - these companies sit in the same market, produce the same products or services, and aim themselves at the same core customer audience as you. For example, two fizzy drink makers are direct competitors in the cola market because they both want to sell cans of cola to the same customers.
- Indirect competitors - these companies do not sit in the same market, may make related products or services and may be aimed at a slightly different core demographic. They're not directly competing with you, but they may offer a product that appeals to your audience. For example, a healthy juice company is an indirect competitor of the fizzy drink companies, as they offer healthy drinks that could be an alternative to a sugary, unhealthy fizzy drink.
The key point here is to not limit your thinking purely to businesses that do exactly what you do. Think wider than the products that provide the same features and benefits. For example, a motorbike manufacturer competes not just against other makers of petrol motorbikes but against makers of electric bikes, pedal bikes and small car manufacturers - all of which offer a small, handy form of personal transportation.
2. How to understand who your competitors are:
- Research your market to understand your customers' needs - talk to customers in your specific market, chat to the contacts in your business network and do your online research, with the aim of finding out which direct and indirect competitors are a potential threat to your business. If you've got the budget, hire a market research company to do all this for you.
- Know your competitive advantage - once you've identified your competitors, you can then get a much better idea of your own competitive advantage; i.e. the traits that make your product or service stand out in the market, or that give your brand a more dominant edge over your competitors.
- Track your competitors - competition doesn't stand still, so you need to keep your eye on your competitors' activity, be aware of their new product releases and know how well they're performing in the market. The more closely you track your competitors, the easier it will be for you to revisit and evolve your competitive advantage.
- Benchmark yourself against the market - by tracking variables like price, product range, customer satisfaction or brand awareness, you can benchmark these against the available public information for your competitors. If a direct competitor has a 50% sale, think of ways to react to this threat - for example, matching the discount, or offering additional bonus items or benefits with your products to add more value to your price.
- Learn to differentiate your brand - features and price are not the only ways to differentiate your products in the marketplace. Think about areas like your brand personality, your company values or your reputation for great customer service. These are all excellent ways to make your brand stand out and to win loyal customers.