Knowing who your competitors are, and what they are offering, can help you to make your products, services and marketing stand out. It will enable you to set your prices competitively and help you to respond to rival marketing campaigns with your own initiatives.
You can use this knowledge to create marketing strategies that take advantage of your competitors' weaknesses, and improve your own business performance. You can also assess any threats posed by both new entrants to your market and current competitors. This knowledge will help you to be realistic about how successful you can be.
This guide explains how to analyse who your competitors are, how to research what they're doing and how to act on the information you gain.
Who are your competitors?
All businesses face competition. Even if you're the only restaurant in town you must compete with cinemas, bars and other businesses where your customers will spend their money instead of with you. With increased use of the Internet to buy goods and services and to find places to go, you are no longer just competing with your immediate neighbours. Indeed, you could find yourself competing with businesses from other countries.
Your competitor could be a new business offering a substitute or similar product that makes your own redundant.
Competition is not just another business that might take money away from you. It can be another product or service that's being developed and which you ought to be selling or looking to license before somebody else takes it up.
And don't just research what's already out there. You also need to be constantly on the lookout for possible new competition.
You can get clues to the existence of competitors from:
- local business directories
- your local Chamber of Commerce
- advertising
- press reports
- exhibitions and trade fairs
- questionnaires
- searching on the Internet for similar products or services
- information provided by customers
- flyers and marketing literature that have been sent to you - quite common if you're on a bought-in marketing list
- searching for existing patented products that are similar to yours
- planning applications and building work in progress
What you need to know about your competitors
Monitor the way your competitors do business. Look at:
- the products or services they provide and how they market them to customers
- the prices they charge
- how they distribute and deliver
- the devices they employ to enhance customer loyalty and what back-up service they offer
- their brand and design values
- whether they innovate - business methods as well as products
- their staff numbers and the calibre of staff that they attract
- how they use IT - for example, if they're technology-aware and offer a website and email
- who owns the business and what sort of person they are
- their annual report - if they're a public company
- their media activities - check their website as well as local newspapers, radio, television and any outdoor advertising
Consult Corporations Canada’s Naming a corporation and the Registraire des entreprises' database in Québec to check the availability of a company name, and the Canadian Trade-marks Database for the availability of a trade mark.
How they treat their customers
Find out as much as possible about your competitors' customers, such as:
- who they are
- what products or services different customers buy from them
- what customers see as your competitors' strengths and weaknesses
- whether there are any long-standing customers
- if they've had an influx of customers recently
What they're planning to do
Try to go beyond what's happening now by investigating your competitors' business strategy, for example:
- what types of customer they're targeting
- what new products they're developing
- what financial resources they have
Learning about your competitors
Read about your competitors. Look for articles or ads in the trade press or mainstream publications. Read their marketing literature. Check their entries in directories and phone books. If they are an online business, ask for a trial of their service.
Are they getting more publicity than you, perhaps through networking or sponsoring events?
If your competitor is a public company, read a copy of their annual report.
Consult Corporations Canada’s Naming a corporation and the Registraire des entreprises' database in Québec to check the availability of a company name, and the Canadian Trade-marks Database for the availability of a trade mark.
Go to exhibitions
At exhibitions and trade fairs check which of your competitors are also exhibiting. Look at their stands and promotional activities. Note how busy they are and who visits them.
Go online
Look at competitors' websites. Find out how they compare to yours. Check any interactive parts of the site to see if you could improve on it for your own website. Is the information free of charge? Is it easy to find?
Business websites often give much information that businesses haven't traditionally revealed - from the history of the company to biographies of the staff.
Use a search engine to track down similar products. Find out who else offers them and how they go about it.
Websites can give you good tips on what businesses around the globe are doing in your industry sector.
Organisations and reference sources
- Your trade or professional association, if applicable.
- The local Chamber of Commerce.
- Directories and survey reports in any business reference library.
- Our Strategic Information Centre
Hearing about your competitors
Speak to your competitors. Phone them to ask for a copy of their brochure or get one of your staff or a friend to drop by and pick up their marketing literature.
You could ask for a price list or enquire what an off-the-shelf item might cost and if there's a discount for volume. This will give you an idea at which point a competitor will discount and at what volume.
Phone and face-to-face contacts will also give you an idea of the style of the company, the quality of their literature and the initial impressions they make on customers.
It's also likely you'll meet competitors at social and business events. Talk to them. Be friendly - they're competitors not enemies. You'll get a better idea of them - and you might need each other one day, for example in collaborating to grow a new market for a new product.
Listen to your customers and suppliers
Make the most of contacts with your customers. Don't just ask how well you're performing - ask which of your competitors they buy from and how you compare.
Use meetings with your suppliers to ask what their other customers are doing. They may not tell you everything you want to know, but it's a useful start.
Use your judgement with any information they volunteer. For instance, when customers say your prices are higher than the competition they may just be trying to negotiate a better deal.
How to act on the competitor information you get
Evaluate the information you find about your competitors. This should tell you whether there are gaps in the market you can exploit. It should also indicate whether there is a saturation of suppliers in certain areas of your market, which might lead you to focus on less competitive areas.
Draw up a list of everything that you've found out about your competitors, however small.
Put the information into three categories:
- what you can learn from and do better
- what they're doing worse than you
- what they're doing the same as you
What you can learn from and do better
If you're sure your competitors are doing something better than you, you need to respond and make some changes. It could be anything from improving customer service, assessing your prices and updating your products, to changing the way you market yourself, redesigning your literature and website and changing your suppliers.
Try to innovate not imitate. Now you've got the idea, can you do it even better, add more value?
Your competitors might not have rights over their actual ideas, but remember the rules on patents, copyright and design rights. For more information, consult Intellectual property as a business tool.
What they're doing worse than you
Exploit the gaps you've identified. These may be in their product range or service, marketing or distribution, even the way they recruit and retain employees.
Customer service reputation can often provide the difference between businesses that operate in a very competitive market. Renew your efforts in these areas to exploit the deficiencies you've discovered in your competitors.
But don't be complacent about your current strengths. Your current offerings may still need improving and your competitors may also be assessing you. They may adopt and enhance your good ideas.
What they're doing the same as you
Why are they doing the same as you, particularly if you're not impressed by other things they do? Perhaps you both need to make some changes.
Analyse these common areas and see whether you've got it right. And even if you have, your competitor may be planning an improvement.
Original document, Understand your competitors, © Crown copyright 2009
Source: Business Link UK (now GOV.UK/Business)
Adapted for Québec by Info entrepreneurs