Successful business owners understand the market they are in and who they are competing against.
Have you taken the time to figure this out for your business? Understanding this and then developing your business to respond are crucial for long-term viability.
Yet research suggests that often the business owner takes too narrow of a view of who are his or her competitors. This restricted view may be in geographical, industry or customer terms.
Customer terms represent a broad look at the psychological and behavioral elements the customer is looking for when entering into a business transaction. A common example of this element is what happens when you want a cup of coffee.
You can make the coffee at home, which makes it a commodity purchase. If you stop at the local diner and get a cup of coffee there, your cup of coffee is a “good” as opposed to a commodity. However, if you take coffee buying to the next step, or the Starbucks approach, the cup of coffee has become an experience.
This set of possibilities reflects customer needs.
You also need to consider your competitors in geographical terms. A common phenomenon in consumer behavior is the tendency to always look at the next bigger town as having better goods and services than what you can buy locally. People living just outside the area who come to the smaller town to shop view the local stores highly. But the locals living in the smaller town think the stores in the bigger community offer better-quality goods.
Another part of the geographic view is to take into account customers’ ability to buy goods and services online. This makes anyone in the world your competitor.
The idea of coffee also brings up the overlooked notion of who my competitor might be when viewed in terms of industry. Coffee is just one part of the overall beverage industry. It is just one way I can quench my thirst.
One final way to consider who your competitor is comes from a basic economic principle. As a consumer, I have only a certain amount of disposable dollars, or money I can spend in a variety of ways. If I spend the money on a cup of coffee, it no longer is available to buy a shirt or maybe put gas in the tank to drive out to the lake to go fishing. It is an economic choice principle.
For business owners, the bottom line is that all of these ways of understanding who your competitor is are valid. You need to understand and then make your offering unique. Understand, however, that being unique is much easier if you are selling the experience as opposed to the commodity.
Finally, remember that the competitive marketplace is dynamic and not static. New competition pops up daily and old ones disappear. Thus, you need to be watching the changing marketplace as well as the trends occurring in the consumer market overall.
Stay on top of who your competition is. Think broadly when defining that set. And understand how your customers are viewing the marketplace.