Your Competition

Your Competition

Before you determine your Market Position, you should first have a look at your competition. For starters, who are they? It sounds like a straightforward enough question. Conventional wisdom would tell us that it's whoever sells the same product or service you do. But think about our marketing discussion so far. Remember, to the consumer, your product or service is not really a product or a service; it's the solution to a set of wants or needs. So, from your customers’ point of view (the only view that really counts in marketing), your competition is not a business that sells the same thing your business does, it's a business that satisfies the same set of wants or needs as your business does.

What's the difference? Suppose you owned an ice cream parlor. Who's your competition? Well, first you'll need to identify the needs or wants of your customers. Then you can look for other businesses in your Trading Area that satisfy those same needs or wants. If your customers want something cold on a hot day, for example, your direct competitors are other ice cream parlors, but they're not the only businesses satisfying this desire. You have indirect competitors as well, such as those selling cold lemonade or popsicles. But what if your customers are looking for something that is just sweet, instead of something that's sweet and cold? That opens up a whole new set of indirect competitors.

You have to know who your competition is, or you can't compete with them. In some instances it may be advantageous to do a joint promotion with a competitor, temporarily turning them into an ally.

One example of this type of joint promotion is industry-specific, discount coupon books. Golf courses, for example, sometimes sell coupon books offering rounds of golf at a number of different courses. Restaurants often do the same. Of course, non-competing businesses with a shared Target Market can do joint promotions as well, but you need a good understanding of their relationship to your Target Market in order to make these kinds of decisions intelligently. Otherwise you’re back to shooting at a blank target.

A Rolls Royce can be defined as a form of transportation, but people do not spend $350,000 on mere transportation. If that was all they wanted they would buy a less expensive and more practical vehicle. Instead, the Rolls competes more closely with other luxury automobiles.

Now that you understand the nature of your competitors, it's time to identify them. You need to know who they are, where they are, and how many of them there are so you can begin to understand the effects they have on your Target Market. If the list is too long to manage, you can list your indirect competitors in more general terms (i.e. industries or categories ,such as grocery stores or drug stores, instead of individual store names).

Complete the Competitor Identification Form. Below is an example for an ice cream parlour.

Competitor Analysis

Consider your main competitors' impact on your Target Market. What do they do very well and what do they not do so well? Why do customers go to them or why don't they? Go and visit their business, call them up…collect their advertisements, buy something from them (or send an employee or a friend). Find out first hand what they're all about. Your business may not live or die based on your competitors, but they do have an impact and it never hurts to be informed.

Knowing where you stand in relation to your competition helps you understand why your prospects make their buying decisions. Your goal is information for the purpose of growth. Outwardly aggressive tactics, such as price wars or advertisements that put your competition down, are risky and sometimes do more harm than good. So if you choose to compare yourself with your competition in a marketing campaign, try to emphasize your good points rather than attack your competition's bad ones.

“Next to knowing all about your own business, the best thing is to know all about the other fellow’s business.”

- John D. Rockefeller - Founder of Standard Oil