Your competitors are keeping an eye on you, and you need to be keeping an eye on them.
Maybe it’s another story if you’re an inventor. If you own the patent to a new kind of soda can, then you’ve pretty much got your market on lock. Most of us are not selling an exclusive product or service, though. A lot of what we sell can’t be trademarked, or there’s a license-free alternative that’s just as good. You can patent your branding, of course.
Nobody else is allowed to sell hamburgers and call their shop Burger King. But nothing’s stopping from selling a similar product and calling it Jake’s Burger World.
The point is: You have competitors, and you need to take them seriously if you want to hold onto your market share.
You might not be interested in knocking everyone else out of the market and commanding a de facto monopoly, but your competitors might not think the same way. You might not want to dominate the coffee market in your town because you know that Starbucks employs a lot of people, but Starbucks wouldn’t mind it if every other coffee shop on the planet disappeared overnight. So even if you’re not interested in stealing business from your competitors, you have to keep an eye on them because they might want to steal business from you.
So that begs the question: How do you keep an eye on your competition?
What’s the relevant data that you’re supposed to be collecting on them, and how do you collect it?
To some extent it’s just a habit that you develop over time. If you’ve been involved in your industry for awhile then you’ll know the terrain well enough to have an idea of what’s going on, like a cowboy listening for a herd of cattle by putting his ear to the ground in an old western.
If you use cane sugar and your competitor uses corn syrup, then you’ll know that they’re about to pivot or rebrand themselves in some way if corn syrup starts becoming controversial. You have a general idea of how your industry works. A rising tide lifts all boats and a typhoon sinks most of them.
In a general, broad sense, a lot of the work you do tracking your competitors is rooted in habit and experience. But, there’s also more specific detective and analytics work that you need to do, more targeted, pointed analysis.
Start By Identifying Your Competitors
Your competitors, the ones that you really need to be following, might not be the people at the very top of your industry or market. Your closest competitors are the ones who are, well, your closest competitors. You don’t need to worry about who the largest produce distributor in the country is if you’re just focused on your state. You only need to worry about the distributors who also focus on the local market. If you run a small book store, you only need to worry about other book stores in your same town.
Your competitors are not necessarily the biggest brands in your industry, but the people who are after the same customers. That means that knowing your competitors means knowing your customers, or rather, your potential customers. Your competitors are the people who are after the same people that you’re after.
If you’re marketing vacation packages to Baby Boomers in Cincinnati, then your competitors are the people who are also marketing vacation packages to Baby Boomers in Cincinnati. If you’re selling shoes to fashionable millennials in Louisiana, then so are your competitors. No matter how niche your product or service may be, there’s probably at least one other company trying to corner the same market.
Charting Their Online Presence
So how do you figure out who these companies are?
It’s easy to figure out who’s selling the same products and services as you, but it’s not always easy to figure out who these companies are trying to appeal to. Maybe you sell whole bean coffee to hip millennials and Gen-Xers who like all the gadgets that go with the process, the French presses and espresso machines and so on.
You can look up another seller in your area, but are they trying to appeal to the same demographic? If not, then you don’t really need to worry about them.
But how do you know?
One way to figure out whether a company in your market is after the same demographic as yourself is to look at their marketing.
Any successful company’s marketing is probably going to be based on a lot of market research. They’ve spent a lot of time, money and resources crunching the numbers to figure out who it is they should try to sell to, and you can read all of that research yourself right in their advertising. Look them up on Twitter and Facebook and Instagram.
If they run local TV or newspaper ads, keep an eye out for those. Even if it’s not made as explicit as, to use our vacation package example, a couple of retirees sitting on a beach in Jamaica in a half-page newspaper ad, there are usually going to be some dead giveaways as to who they’re trying to reach.
The emotional language they use in the marketing, what does it evoke? What kind of imagery is being presented? The famous musician they have endorsing the product, what year did their hit single come out?
Obviously a TV ad that uses a Tony Bennett song is for a different audience than an ad that uses a John Lennon song or a track by Taylor Swift.
If you take a look at their marketing material and you’re just not sure what they’re after, then either you’re doing a really bad job at running your own market research, or they’re not after the same demographic as you are, and you can move on without giving that company another thought. But if their ads look suspiciously like your own, then it’s probably a safe bet that you and them are occupying the same corner of the same market.
Managing The Competition
There are a few basic approaches to managing competition in your niche.
Each one has its own pros and cons. There’s really no right way to deal with another business going after your corner of the market, there are just different approaches.
The most obvious approach is to try and dominate the niche.
The upside is that if it works, you’ll have the market cornered. This will be your turf, and anyone else trying to break into that market will have an uphill battle trying to take your customers away from you. Even if you don’t knock the other guy out of business, friendly competition can push both of you to do better, and the market overall may grow as a result. The downside is that you might just wind up making an enemy of a business that was content to peacefully co-exist with you, and is now intent on taking you out of the equation. You probably don’t want to pick a fight with a business that has the money or resources to push you out of the market entirely with an aggressive advertising campaign or a friend on the city council.
For many small town businesses the best approach is to just not worry about it too much. Keep showing up for work every day and doing your best work.
If the market can comfortably support the both of you, then why worry about it?
This is great if the other guy has no interest in beating you out of the game. If you and them own diners on opposite sides of town, people will tend to go to whichever is closest. The market is big enough for both of you.
Another approach is to simply pivot your business in order to avoid direct competition. An untapped market can be a gold mine.
Maybe most of the people who like to shop in electronic gadget stores are millennials, but why does it have to be that way?
If you can pivot your business into another demographic, if you can convince an older demographic, or even a younger demographic, that building a custom PC is actually a lot of fun, then you might be able to dominate that market before anyone else has a chance to try and jump in and compete with you.
Sometimes the best way to beat the competition is to just do everything better. The problem is that “better” is a subjective term. Ask a dozen people if Burger King or McDonalds is “better” and half of them will tell you they never eat at either of them because they prefer Hardee’s or a regional burger chain like In’n’Out or White Castle.
But you can do enough of the little things that make a favorite, you can do more of them than the competition is doing. A pipe tobacco shop that puts a box of free matches in every bag, for instance. You never know what little thing is going to be the tiebreaker.
It should be said that when you’re competing directly with another business for the same group of customers, there is a warlike mentality to the game. Like a general, you can’t overextend your forces. Don’t think that building a second location across the street from your competitor is going to be the answer to all your problems.
Most likely you’ll just have to close up shop before your lease is even up because people already like going to the other place. You can’t let another business just roll over you, but you have to be smart in how you manage your time, money and resources.
Now, the absolute worst thing that you can do is try to compete on pricing. Nobody ever bought a Pepsi because it was three cents cheaper than Coke. A price war is a race to the bottom where everybody loses. Squeezing your profit margin thinner and thinner, having to let valued employees go because you can’t afford to pay them anymore, it’s basically forcing downsizing on yourself. You’re going to have to start cutting corners to save money and, chances are, your competitor will too.
The end result is that both coffee shops in town are now using pre-ground Folgers and they’ve moved to cramped locations, so there’s nowhere left to get a good cup of joe, until a third shop moves in and runs you both out of business with better coffee and a nice, homey atmosphere where you can sit down in a plush chair with a book in your hand ceramic mug on the table beside you.
Compete on quality, compete on location, compete on timely delivery, compete on cleaner bathrooms and more comfortable dining rooms and friendlier staff. Don’t compete on pricing.