How To
Research Your Competition
By Tom Egelhoff
 No matter
what type of business you are in, sooner or later, there is going
to be competition. Most will not be a problem to you but some
can be formidable. Once again, living and working is a small
town gives you a certain advantage over your competition.
If the competitor is a new business, it's hard for them to
do the preliminary studies for starting the business without
someone hearing about it and carrying the message to you.
If it's an established competitor, they too will have trouble
rolling out a new campaign without your knowing it's coming.
Places to find competitive information
Visit your local planning office from time to time to find
out whose building new facilities or remodeling their existing
business. Building plans are public record. The city has a list
of new business licenses issued. Get to know the people in city
and county government who can help you. Get involved in the community.
Your local chamber of commerce is a great source of new business
information. Networking is not just some "buzzword"
of the 90's, it works...use it.
The small town grapevine can be a blessing and a curse at
the same time. Your competitors often will have the same grapevine
from your business to theirs.
Identify the competition
You probably think you know your competitors. In most cases
you only know the obvious ones. First, let's look at the two
ways to identify competitors.
- Price contenders - These are the people who go after
the consumer dollar. Generally low price is their key message.
They are always going to get a certain segment of your customers
base...the price shopper.
- Strategy contenders - This is a much stronger group.
They make a case for doing business with them by the advertising
and marketing strategies they use. These are much stronger competitors
than the price contenders.
Different kinds of competitors
Now, let's look at the categories of competitors and find
the ones you've been missing.
- Direct competitors - McDonalds® and Burger King®
are probably the best examples of direct competitors. Are they
price contenders or strategy contenders. Even though they both
offer low price sandwiches from time to time I would still group
them with the strategy contenders. Most of their advertising
is getting the customer into the store.
The next two categories are often missed by many businesses.
- Secondary competitors - Here you might place upscale
hamburger retailers like Fudruckers®. Most people would place
Wendy's in the direct competitor category above but I put them
here because of their competitive strategy. No kids in their
commercials, no toys, adult menu. They distance themselves from
the two heavyweights but carry the same products.
- Indirect competitors - This is the toughest category
of all. For example, in the video business, it's the time change.
Business slows down as people move outside to enjoy the longer
days. In San Diego, CA, my former home town, the beach was a
very powerful competitor to all kinds of businesses. Other indirect
competitors of McDonalds® would be Pizza Hut®, Dairy
Queen®, Taco Bell® and other local non-hamburger establishments.
For more on this subject (See: Who
Is Your Real Competition?)
What to do next
In a large city, the next step is obvious, start testing various
ideas with your target market. In my opinion this method is a
disaster waiting to happen in a small town. Why? Because of the
position of the business that is already established. (See:
How To Develop Your Position Strategy )
In a small town you have a much smaller customer base than
a large city. In New York, for example, you have an average of
27,000 people per square mile. Test away. By contrast, here in
Montana, we have 5 people per square mile in the whole state.
With a smaller customer base you can't afford many mistakes.
You have developed a perception of your business in the minds
of your customers. They have confidence in what and who you are.
Changing that perception by going in a new direction can be very
dangerous. They may not want to go with you.
Even more critical is not making mistakes your competitors
can capitalize on. If you try a promotion that fails miserably
you have just paid the testing costs for your competitor.
Take a new direction
First of all, resign yourself to the fact that your competitors
are going to get wind of what ever plans you have. They are going
to adjust their future plans in proportion to how strong your
plan is and what kind of threat you are to their business. Here
are my suggestions for keeping them in the dark.
Concentrate your testing internally with employees and customers.
Ask your best customers to fill out questionnaires regarding
their perceptions of your competition. You don't need to mention
your competitors names in the questionnaire but generically describe
their services and procedures and get your customers reaction.
Have them fill out the questionnaire in house. This will prevent
your competition from getting a copy. In addition, they may have
questions that will alert you to problems they have had but didn't
feel comfortable bringing to your attention.
Also, as part of the questionnaire, try to get as much demographic
information as you can. What newspapers do they read? Radio stations?
TV? Magazines? The people filling out this information are your
target market. They are also the target market of your competitor.
Evaluation of competitor research
Evaluate the questionnaires and see if the competition is
advertising where the target market says they are looking. If
they aren't advertising there... why not? Have you missed something
or are they just spending their ad dollars in the wrong place?
Next, try UN-ADVERTISED testing within your business.
If you must test something, do it in-house so you are there to
control any unforeseen negatives that might arise.
Use outside sources carefully
Most businesses rely on outside sources. Suppliers, distributors,
salespeople, accountants, attorneys and customers. These people
are a great source of information on your competitors. Let them
talk about what they are doing. Sometimes they will let information
slip about a competitors' plans or purchases.
Through suppliers you can also find cost pricing for competitive
products. For example, you carry the ABC line of products, your
competitor carries the XYZ line. Even if you have no intention
of carrying XYZ you might call and ask for a catalog and price
list.
This will give you first hand knowledge of what your competitor
is paying for their product, quantity price breaks, shipping
costs and payment options that are available. The catalog will
also contain key selling points of XYZ products that you must
counter in your advertising sales message.
Be careful in your interrogation of sources. They may let
your competitor know of your interest in their activities. Out
of fear, the competitor may respond with increased advertising
and marketing that you are not prepared to combat.
Keep records and evaluate trends
Most business owners are paranoid about their own advertising.
Did it work? How much business was gained? Was it worth the expense?
Don't your competitors ads deserve the same scrutiny?
If you don't have a file of all your competitors ads, start
one today. This will give you a rough idea of their advertising
budget. What products are they advertising? What is their real
message? How often are they advertising? Where are they advertising?
Cut out all print ads, record all radio and TV ads and evaluate
their effect on your business. Did the ads draw business away
from you? Have no effect? Are they messages that you need to
defend against?
The final word on competitive research
As you can see there are many ways to find information about
your competition and where they are going. Don't drive yourself
crazy worrying about your competitor. They are always going to
be there in some form or another. The important thing is to be
aware of what they are doing. Don't change your business vision
and direction based on your competition's direction.
Remember, if they are smart they are going to try to position
themselves away from you, not closer to you. Don't follow them
unless their direction coincides with yours. Generally it won't.
Go your own way and do your own thing. Do what you love and
the money will follow.
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This article may be reproduced for your non-profit
group or organization provided it is not altered in any way and
the following is attached:
©1998 - 2004 Eagle Marketing PO Box 271 Bozeman, MT
59771-0271
http://www.smalltownmarketing.com - (406) 585-0219 - Toll FREE
(888) 550-6100
email: tommail@smalltownmarketing.com
Based in Bozeman, MT, Tom Egelhoff is the author of How To Market, Advertise & Promote Your
Business Or Service In A Small Town, and The
Small Town Advertising Handbook: How To Say More And Spend Less.
He is also a seminar and workshop presenter
and trainer. He may be reached at 888-550-6100 or PO Box
271 Bozeman, MT 59771-0271
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