Every business or organism that may get a customer's money instead of you is a competitor. However, many of these competitors aren't significant bullies; you won't have to worry about them stealing your lunch money. Even so, you need to consider who they are and how they impact your business plan.
Want to know how your competitors are enticing your target customers? Become one of your competitor's customers! Get on their mailing or e-mail lists, visit their store or website, make testing purchases, watch for their ads. The more you know about how they market to your customers the easier it will be to keep your customers.
Products and Services
To be competitors, businesses must offer products and or services that offer customers a similar solution to a specific problem. In the example of a tax service, the customer has many options. If your tax service will focus on busy middle-income families within a local geographic area, you can begin analyzing and eliminating some of the businesses on your long list. Few prospective customers in this market will use a book or a free service for senior tax filers.
I operate an online business. How can I identify my direct competitors?
Become a customer. Use a search engine to find sites that rank highest for your company's keywords. What search phrases would your customers use to find you? Then get on competitors’ newsletter and e-mail lists. Believing you to be a potential customer, they will gladly share competitive information with you.
In further analysis, you may discover that some competitors price their products or services significantly higher than your pricing structure. For example, a certified public accountant may charge two or three times what your tax service charges for the same preparation and filing. In addition, most middle-income families won't trust volunteer tax preparers to do the work.
Following is an example of pricing verbiage from the Widgee World Retailers business plan (Appendix A):
We have conducted extensive investigations into the pricing for competitors’ products throughout the metropolitan area. Our pricing is defined as competitive. Some items will be priced slightly higher and others slightly lower. Ultimately, we are very similar to most competitors in pricing. We look to make customer service and loyalty as the most defining distinctions between Widgee World and the competition. And we will work to promote the “made in the USA” recognition.
It is imperative to note these price comparisons serve to establish the range within which each product category is to be found. In most instances, Widgee World will open storefronts where most competitors are not located.
If your business sells internationally using debit and credit cards, your merchant account provider will do the math needed to exchange foreign currencies. However, you should verify that they are doing so accurately. You can find the current exchange rates for currencies worldwide at www.x-rates.com and http://finance.yahoo.com. Your banker can also provide current exchange rates.
Two competitors in the tax example depend on technology for service: the online tax-preparation service and the software program. These can be significant competitors to your business, depending on how comfortable your prospective customers are with using technology to prepare and file their taxes. An advantage that JIT Tax Service has over these competitors is customer service. It will meet with customers and answer questions face to face. Many customers will prefer this approach, especially if you point the advantages out to them.
Make sure that your business plan includes an analysis of significant competitors. By identifying and scrutinizing them, you will not only discover what they are doing to succeed, you will be able to plan ways of beating them in the race for customers.
Don't know what your customers want? Ask them. Rather than develop a market analysis plan, simply ask random customers about their buying experience with you. Encourage honest responses. The results may not be scientific, but they can be informative.