How To Evaluate Your Small Business Competition
By Tom Egelhoff
 Before we get to your competitors, there
are a couple of things we need to define. You need to understand
the difference between direct
and indirect competition.
Direct competition is a company that offers the same products
and services to the same market you do. Indirect competition
is a company that offers the same products and services to a
different market than you do.
McDonald's, Wendy's, and Burger King are direct competitors
of each other. Dairy Queen, Pizza Hut and Domino's would be examples
of their indirect competitors.
If you are a retail store, your main competition, most likely
is the Wal-Marts and K-Marts of the world who have deep pockets
and buying power. (See The
Robinson-Patman Act . ) If you are in the service business,
your competitors are the ones with the most loyal customers.
Look at all aspects of the competition. Where are they located,
their products and services, how do customers get the product,
how does their pricing compare, can they do things they can't
do? Are they direct or indirect competitors?
Who and Where Are Your Competitors?
The first place to look is in the Yellow Pages. Your serious
competitors should all be there. The ones that aren't probably
won't be around too long. Where are they located in relation
to you? What are the traffic patterns of the area? Do their ads
accurately reflect their image?
Have you ever seen an ad and thought you were going to an
upscale place only to discover, when you arrived, the place was
a dump on some back street? What image comes to mind when you
see your competitors ads? Where do they advertise? Are you in
the same place? (See Place
Your Ads Where The Competition Isn't) What types of promotion
do they do?
Make a list of your competitors and plan to visit each one.
Design a competitive analysis sheet with the principle points
of comparison between you and each competitor. What are the strengths
and weaknesses of each? What must you overcome and what can you
take advantage of?
Do you belong to an association that does competitive analysis
of businesses or industries? Most towns have an Association of
Realtors. Sometimes the industry does comparisons between the
major players.
If your competitors are large companies...buy stock. As a
stock holder you will receive their annual and quarterly reports
as well as updates on the future plans of the company.
How to Evaluate A Competitive Product
In a small town or neighborhood, it's tough to do too much
detective work because everybody knows everybody. You can't go
into a competitor and pretend to be a shopper. See if a friend
from a nearby town would be willing to visit the store and pretend
to be a shopper and do an evaluation on the store and staff.
Some questions to find out are:
- Are the sales staff professional and knowledgeable about
the product?
- What other similar products and services are offered?
- What colors do they use in the store? Reds and yellows, for
example, are "buy" colors. (See McDonalds, Wendy's,
and Burger King)
- How is the product merchandised? Display? Shelf?
- Do they offer promotional materials of the product? Shirts,
hats, etc.
- What was the quality of service?
- What are their strengths? Weaknesses?
How To Evaluate A Competitive Service
Service companies are also tough to evaluate in a small town.
You can't ask the competitive cleaning service to come out and
clean your house. However, people do have a tendency to complain
louder and longer about a service than they do with a product.
A product is usually a small expense or you were trying it out
for evaluation. If it doesn't perform it's not a big deal.
A service however, is another story. You usually negotiate
face-to-face with someone and promises and assurances are made
in advance of the service being performed. A level of trust
is established. With a contract or agreement there is always
a chance for deception. "It's right here in the fine print,
that service costs extra." Sometimes the evaluation of the
work is a gray area. The dry cleaner says it's clean and you
say it isn't. (See
Customer Service: (Customer phrases to watch for)
Speaking of dry cleaners, a friend of mine once parked across
the street from his competitor at six o'clock in the morning.
He noticed several people who came by between 7:30 am and 8:00am
to drop off cleaning. The problem was the competitor didn't open
until 8:30 am. My friend immediately began advertising his new
"convenient early drop off hours." He had found a weakness
in the competition.
The best way to evaluate a service is pay attention to word-of-mouth.
As mentioned above, people tend to complain louder and longer
about a service. Pay attention.
Evaluation Leads to Uniqueness
The lesson we learned from my dry cleaner friend is, capitalizing
on a weakness of your competitor can make your business unique.
(See
How To Make Your Business Unique) Have you ever seen
a peanut butter commercial that just says it tastes good. No.
Our peanut butter tastes more like "fresh roasted peanuts."
"Choosy Mothers Choose Jif." Shampoos don't get hair
clean they get it "cleaner" "more manageable"
"fuller body", the list goes on and on.
The more you know about the strengths and weaknesses of the
competition the more you can use that information to make your
business unique and separate yourself from them.
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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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