Lessons You Can Learn From Your Competitors
Competition is the backbone of American industry, and it can provide the framework for business growth. Learning from the failures and successes of your competitors is a built-in boost for your company, saving you time, resources and money.
Below are some of the top ways you can learn from your competition. You may not have access to all of this information, but you may not need it all, either. These ideas are designed to give you as much of an advantage as possible.
Scan The Horizon
Identify the competitors sharing the same arena as you. Break your competitors into three groups: primary competitors are the direct competitors to your same audience, sharing a similar product or service; secondary competitors offer a high- or low-end version of what you offer, or offer a similar product or service to a different audience than you target; tertiary competitors are those only tangentially related to your business. They could still be useful as potential partners — or potential threats if they pivot.
Play Customer For A Day
If you operate a brick-and-mortar shop, find out who sells the same products you do within a determined radius. Visit these shops and note your first impressions. How were you greeted? What stood out as surprising? What are the store’s setup and flow? Compare your notes to your own methods.
If you mainly rely on online sales, utilize Google Adwords or SEMRush for insight on who could nudge you out of precious digital real estate. Visit your competition’s websites and understand their marketing behavior. Try to locate the customer service section on their site and interact with them. Use their checkout engine and see how they incentivize future purchases or upselling techniques, as well as their methods of accepted payment.
Check Their Bones
Does the business in question have a large staff of relatively unskilled or untrained employees or just a few very efficient team members? If staff members work on commission, how does that appear to affect their performance? Are you aware of independent contractors or third-party vendors being used to reduce overhead? You may not be able to glean this information easily, but it will be useful if you can find it.
Through public records, you can further research the ownership and organizational history of the business. Check if news outlets have run any stories on the business. Set up a simple alert to find where and when this company releases sales letters, campaigns and press statements.
Checking up on the financial health of the competition is an excellent benchmarking strategy. Important numbers to pay attention to include the gross, operating and net profit margins, as well as salaries and compensation. What are your competitors’ sales and profitability trends? And what are their marketing expenses as a percentage of their revenue? Notice the differences in your financials and ask yourself why these discrepancies exist. How is your competition using money more effectively than you are, and how can you turn the tables?
Company financials are often made available through the IRS, the Bureau of Labor Statistics and the U.S. Census Bureau. If you’re still having trouble accessing the data you need from these resources, visit a business library or industry associations. You may also find that a trusted banking connection or management accountant can shed light on how you fare in the industry using their experience and professional insight.
You may be tempted to compare pricing strategies, especially when you find competitors’ prices lower than you believe you could afford. Competitor-based pricing may work in a highly saturated, well-researched market.
Understand that your competitors often overstate their own abilities to price correctly. Studies show that only 8-15% of all businesses use value-based pricing methods that are based on a customer’s willingness to pay. You also face the unenviable position of anticipating all potential competitors. Even the best foresight will miss some competitors for consumers’ money, which is always finite and scarce.
If you base your pricing on others’ prices, also known as strategic pricing, you run the risk of your competitor reacting to your reaction. This can lead to a price war wherein no one wins, and which can indeed result in costly losses. Ultimately, you must maintain your profit margin for your business to succeed, and you should not compromise these goals to chase what someone else in the market has done. If you need pricing help, consider a qualified third-party team.
Understand Your Competition
Perform a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis of your current and future competitors. You are all elbowing for room in the same market; how will you wrest away your share? Consider the companies — even the global ones — you respect and admire, and figure out what practices they use that you have the ability to implement.
Social media can be your best friend in analyzing the competition. Use a private Twitter list to shield your competitors from knowing that you are watching their behavior, and notice which of their posts get the most retweets and likes. Facebook Insights has a slate of tools available for you, including the useful “Pages to Watch” section. Companies like Meltwater, Hootsuite, and Oktopost allow you to compare your social media strategy against others like yours.
To learn from your competitors by seeing what their community says about them, ask for a benchmarking demo.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. This article was written by Forbes Finance Council from Forbes and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to email@example.com.