Just because you’re paranoid doesn’t mean they aren’t out to get you.

Competition is an integral part of the marketplace — it fuels innovation, controls pricing, and creates better products. What’s not to love, right?

Not so fast, Jedi Knights — competition also has a dark side.

Competition can sink a business — particularly if you aren’t prepared for it. Just because the “force” has been with you thus far, don’t automatically assume that will always be the case. Somewhere, in a galaxy far, far away, a would-be nemesis could be plotting your demise right now.

Whether yours is a small, home-based business or an international corporation, it is necessary to perform a competitive analysis to gain a better understanding of your competitors. This, in turn, will help you formulate more effective strategies to strengthen your position among your customer base, as well as defend and increase your market share.

While I’m certainly no Yoda, below you’ll find a few of my recommendations to aid you in conducting your own competitive analysis.

Know Your Customer
It all starts with the customer. Identifying your ideal customer, their buying habits, and purchase influences should have been paramount in your initial business planning. When you set out to conduct your competitive analysis, be sure to refer to this information, and make any necessary updates as needed.

Create a Customer Profile

• What triggers his decision to buy a certain product or service?
• Where will he go to search for a product or service provider?
• How does he search for the product he needs?
• What features does he look for?
• How does he choose the vendor?
• What is important to your customer – pricing, reputation, image, branding, or service?
• How is he influenced by word-of-mouth?
• What will keep him loyal or make him change brands?

Knowing these things will not only help you develop products and services that will meet the requirements and preferences of your customer but will also give you a very good idea of the who, what, how, and why behind your potential customer patronizing the other vendors and not you.

Know Your Competitors
Now, try to identify your competitors. Be specific as to their names, locations, their sizes, and as much as possible, their market share. Describe their product quality, brand name(s), image and reputation, pricing structure, marketing strategy, available technology, etc. It helps if you create a tabular presentation of the information to facilitate comparison and analysis of the competition. Make sure to include any perceived strengths and weaknesses of each competitor (lack of web presence, limited service area, etc.).

The objective of this exercise is to discover more about the nature of competition and assess how your product or service fares against your competitors’. You may decide to lower your price, or offer extended service plans. Perhaps you could provide online video training that customers could access after purchase. You may simply elect to step up your advertising campaign in order to gain greater visibility. Regardless of what path you choose, determine how your competitors affect your business, identify any potential threats, as well as opportunities.

Resources for Competitor Information

• Their company website (about page, press room, etc.)
• Industry associations they belong to
• Publications they have been featured in
• Media coverage
• Marketing materials
• Generalized search (complaints filed with BBB, etc.)

Benefits of Doing a Competitive Analysis
Whether you are planning an upcoming ad campaign or orchestrating a rebellion, knowing your competition is critical to the ultimate success of your strategy. This exercise will also help you anticipate how your competitors will respond to your action, or predict any initiatives they may take. In fact, you may discover there are elements of your competitors’ business tactics that you can improve upon, and adopt as your own.

Competition has much to offer the market in terms of driving quality, affordability and innovation. For business owners both large and small, a bit of research and a modest time investment can help avert potential threats, while leveraging opportunities to gain market share.

Regardless of what corner of the galaxy you are doing business in — that’s always a good thing.

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If we’ve heard it once, we’ve heard it a thousand times – folks do business with people that they like. Before you shrug off this simple truth, allow me to offer a few examples that you may not attribute to this way of thinking:

• Sports teams you cheer for
• Brand names you purchase
• The restaurants you patronize
• Musicians or singers that you listen to

At one point or another, you have been influenced to prefer these brands, groups, or establishments over other choices available to you. Why? Because they appeal to you. You like them.

Of course, having customers that like you is important all of the time – but in times when the economy is sluggish, customer loyalty can be tested. When there is no clear delineation between two choices, the buying decision is often reduced to price alone. Even if you are the lower priced option in this scenario, it’s only a matter of time before someone else comes along that can beat you on price. You need to have more to your brand image than just being the cheapest guy on the block. What can you do to make me like you…I mean really like you?

Show Me the Benefits
The best way to increase customer loyalty and win their support is to meet their needs. Does your product or service meet one or more of their basic needs:

• Profitability – you can make or save them money
• Convenience – you make their life easier, or save them time
• Security – you can offer peace of mind, and/or prevent loss
• Entertainment – you provide fun or enjoyment
• Image – you can make them more attractive or popular

Reinforce your benefits in your product literature, ad imagery, website, and newsletter; repetition will ingrain your message in your customers’ minds. Being unforgettable is great – but being unforgettable and likable is gold.

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Whether we want to admit it or not, we all want to belong to something. It’s only human nature to enthusiastically support being part of a group — whether it’s your family, your favorite sports team, political party, or even the Little Orphan Annie Club. Nobody wants to be on the outside looking in…we all want to be included in the “we.”

Knowing this, we can leverage that power in our marketing plans. If we look for ways to employ the we in our overall marketing plans, the customer feels important and appreciated. They also become vested in the process. Let’s look at a few examples:

• Encourage customer feedback, and employ the feedback on your website. Note it next to the product or service that is being praised. We all love to see our name in print!
• Institute a Product Review Board. When you are considering a new product launch, or expanding your line, send out a sample item to some of your best customers, and solicit their feedback. You might even offer them a spiffy looking graphic that they can place on their websites, designating their status. Ask that the graphic link to your website, and you’ve also just successfully added some inbound links.
• Implement a Customer Rewards Program. Set up a discount or reward program based upon customer’s purchases. Credit card companies do this all the time with great success. This will increase customer loyalty, and increase sales. Frame your program launch based upon the recent headlines of rising prices, pain at the pump, etc. – and you’ll also gain customers’ respect, and gratitude. You simply can’t put a pricetag on that.

With relatively little effort, even these small changes can yield big results. And, in a time when many small businesses are fighting for every dollar, that is a concept we can all get behind.

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