Business owners often believe that having a unique product offering sets them apart from competition and is enough to sustain in today’s fast-paced markets. But, is that really enough? SME Advisor offers top advice…
“Number one, cash is king. Number two, communicate. Number three, buy or bury the competition.” – Jack Welch
No matter how unique, extraordinary and tantalizing your product is, without the correct marketing tactic, it falls short of the greatness it could achieve. There are umpteen companies in the playing field, offering something similar or satisfying the customer’s need in a better way. A clear understanding of your competition is instrumental in the success of any business.
The economic flux of the markets may appear to be dominated by major players with huge promotional budgets. For SMEs, it may seem impossible to penetrate through the surface and make their mark. However, as has been witnessed in the recent times – quality, flexibility, and personalised service are proving to be effective tools for carving out a niche, even in the most competitive of markets.
Who are you up against?
The intensity of competition is what will affect the overall success of the business. So it is important to consider all types of competition to ensure that you have the cutting edge. Here’s an overview of the different kinds of competition:
Direct competitors: Multiple businesses offering similar products and services create direct competition. Customers are spoilt for choice with a variety of price points, locations, service levels and product features. Competition exists because a majority of customers will not choose the same combination of these choices repeatedly. By positioning your business to offer a unique mix of options, you will be able to reach a different type of consumer. Understanding where your competitors are positioned is important to identify the gaps that your business can fill.
Indirect competitors: These are businesses that offer slightly different products and services, but target the same group of customers with the goal of satisfying the same need. You can attempt to make sure that your business provides advantages over your competitors, beginning with those who are in the most directly similar to you.
Customer expectations can change dramatically when economic conditions are unstable. It is imperative that companies revise sales and marketing strategy accordingly. Your product should be worthy in itself that the customer has good reasons to come to you rather than a rival.
“In order to stay ahead of competition, the first thing our brand enforces is product consistency. We are known and have loyal patrons for certain hidden gems in our menu and we strive to make sure this is consistent across our rapidly expanding number of stores. Secondly, we try to keep our employees motivated. Service delivery and customer experience is almost as important as product quality,” says Rohith Muralya, Director of Concept Cuisines,
“The restaurant industry is highly competitive with new brands entering the market on a daily basis. We evaluate every new entrant into our segment as this plays a very important role in understanding changing consumer trends and evolving standards,” he adds.
“Some of the novice entrants provide us opportunities for fresh out-of-the-box thinking. If we find them more effective and evolved than our practices, we try to adopt it into our operations. We are currently in the process at enhancing our brand elements; and evaluation of competition (both successful and unsuccessful) has been our focal learning point.”
The need for market intelligence
Market intelligence more or less dictates every decision a company will have to take. Pragmatic market intelligence can have a huge return on investment and can generate extra customer revenue or the avoidance of a bad investment. The fundamental way to gather market intelligence is to survey the competition – study their ads, brochures and promotional materials. Keep track of what they are doing well and what they are doing poorly.
Another source of vital information about the competition is secondary data. This consists of your sales force or other contacts among your supplier and customer network; key people who can provide information about competitors’ strengths and weaknesses. Basic competitor information that every business should have includes:
- The competitor’s market share
- How target buyers perceive or judge your competitors’ products and services;
- Your competitors’ financial strength
- Competitor’s ability and speed of innovation for new products and services
Every competitor has definitive weaknesses and strengths that may be points of potential advantage for your company and products. In most cases, larger companies cannot make decisions or allocate resources, personnel and materials as fast as a smaller company, under changing market conditions. Smaller companies may have to be content with a limited, but profitable objective of weaning their share from the market before larger competitors catch up.
Gathering competitive intelligence can spell the difference between realising your company’s dream and losing out on business altogether. To be successful in identifying competitor’s strategies and tactics, you must gather every bit of available data from sales forces, outside consultants, market surveys, and trade associations. The data should include pricing, promotions, spending, new product introductions, sales results, market share trends, packaging innovations, key account management, service levels, and other indicators of competitive activity in the marketplace.
Keeping ahead of the race
In the 2014 Global SME survey, one in three SMEs in the UAE said that stiff competition in the market was the biggest risk they faced. The poll was conducted for 3,800 senior executives of SMEs around the world, (including 200 in the UAE) to rank the top three risks faced by their businesses. Obviously, the most important objective as a small business is to survive and make money. Sometimes the competition may seem just too formidable for you to continue as a business.
Some business owners see competition as inherently bad; as they tend to steal your products, ideas, customers and ultimately your revenue. However, if you choose to view your competition as a challenge, they will push you to innovate and grow. Once you know the identity of your most direct competitors and have a good idea as to your second- and third-tier competitors as well, you should give some thought to which actions they are likely to take in the next year or so. Estimates of competitors’ future activity depend on your knowing and understanding of their objectives, strength in the marketplace and resources. This intelligence will reflect in:
- Annual forecast of sales, spending, and profits
- Promotion and advertising programmes
Introduction, support, and success of new products and services
- Market, product, or service category, and sub-category trends’
- Direction for future growth
Understanding each competitor’s behaviour in terms of short-term and long-term objectives, strategies and tactics will be extremely important for survival and success in business. Too many businesses spend their time thinking about what they have been doing when they should instead be thinking about what they need to do tomorrow. Instead of spending hours analysing prior results, put that energy into developing future market scenarios, looking for potential shifts and identifying how you can upend competitors.
In this day and age of innovative thinking, ignoring upstart rivals will prove to be expensive. Upcoming competitors show you how to use new technologies, new solutions and new business models to change the marketplace, and how to reposition yourself for growth.
Rushika Bhatia Editor
Rushika Bhatia is one of the region’s leading commentators on business and current affairs issues. She is the Editor of SME Advisor magazine - the flagship title of CPI Business. She is passionate about infographics – with special emphasis on data, research and statistics. Rushika has a Bachelor’s Degree from Indiana University, USA and is also CIMA qualified.