Learning from your competitors
Find out how to use competitive research to benefit your business.
Regardless of the type of business you run, you stand to gain much from studying your competition. Good competitive intelligence can help you with a number of important business activities that include enhancing your product, changing pricing, adjusting marketing messages, and improving your website or social media strategy.
Once you've gathered some information about your competitors, here are some ways to turn it into successful ideas and strategies for your small business:
Competitive research allows you to see if your prices are generally in line with marketplace expectations. Whether you like it or not, potential customers will be comparing your prices to those of your competitors.
If your price is higher, that's not necessarily bad. A premium product or service not only justifies a higher price, but can be a differentiating go-to-market strategy. Be sure you're effectively conveying that you deliver higher quality and greater value than your competitors – warranting the higher price.
If your price is lower, it may suggest there's room to raise prices. Being the low-cost provider may not be the best option, as razor thin profit margins may not allow you to hire the best people or invest in product development, for example. A price that's too low may also come off as cheap (as in poor quality). In some cases, you may actually increase sales volume by raising prices and changing perceptions.
Payment methods and terms
Look at the kinds of payment options your competitors are offering. Accepting credit cards and mobile payments, for example, can be a competitive advantage when others in the market require cash or check only. Or, if you don't accept credit cards, you may find that you're losing business.
In addition, check to see what trade terms your competitors offer. In some industries it's common to offer a small discount for early payment. If cash flow is a big issue in your business, offering flexible payment plans and schedules may be a customer lure.
Whatever you do, make sure you have the internal systems to support payment terms. If you're not careful, terms can backfire leading to cash flow problems or non-payment losses. Solid financial reports (such as a days sales outstanding report) and an effective accounts receivable process will help you get the most from your payment terms.
Based on your competitive research, you probably have a good idea as to how your competitors are marketing themselves to the public. Determine which areas you may need to change based on the data you've collected. For example, perhaps your competitors have robust websites offering features like registration benefits or online product sales, but you don't even have a website yet. Now is the time to get one.
Also, pay attention to incentives. Do your competitors offer free 30-day trials, or special deals for buying in bulk or signing long-term contracts? What about loyalty programs? See if you can offer enticing incentives emphasizing long-term relationships, because they're more profitable than one-time discounts.
Products and services
Monitor review sites and social media sites to see what people are saying about your competitors' offerings, as well as your own offerings. Then, use that information to strengthen your offerings. Check out what people say they wish they had. It may trigger an idea for a new product and/or service you can offer.
Remember, competitive intelligence is like mining for gold. Be sure to "invest" that gold wisely to grow and improve your business. For more help getting to know your business's competition, explore the Competitive Intelligence Tool.
Anita Campbell, widely regarded as an expert in small business issues, is the founder, CEO and publisher of the online publication Small Business Trends, and is also the co-author of Visual Marketing: 99 Proven Ways for Small Businesses to Market with Images and Design.