LESSON 3- Competitive Analysis LESSON 3- Competitive Analysis

"No business opportunity is lost.  If you fumble it, your competitor will find it."          ...Anonymous Objectives: 

Identify primary and secondary competition, and specifically why customers will choose to patronize your business.

Plan how to draw customers, first, away from secondary competitors, and second, away from primary competitors.

Introduction: Identify a personal characteristic that you consider to be what makes you stand-out among other people (efficient, trustworthy, etc.).

Lecture Point One: Lecture Point One:

Once you have targeted a specific market segment, it is

important to also identify who shares your interest in that target.  You will need to clarify not only who competes head-to-head with you in the same venue, you must identify secondary competitors.  Secondary competitors compete for the same portion of your customer's budget from which your product or service is purchased.  For example, if your business is a video rental store, what other types of businesses would compete for the same budget dollars?  You probably identified businesses that share your customer's entertainment budget--movie theaters, live-entertainment theaters, sports stadiums, and even restaurants.  It is important to know where your customers spend those same-budget dollars in order to consider how to lure them into your arena.

Now that you know your general market, the task is to differentiate

your business in order to draw customers away from other primary competitors.  Primary competitors offer very nearly the same product/service as you.  For example, McDonalds competes directly with every other fast-food hamburger store.  To clarify, Red Robin (offers hamburgers--but not fast-food) or KFC (offers fast-food chicken)

would be considered secondary because they don't compete

head-to-head in the same manner.

I hope you noticed what I said in the first sentence of the

previous paragraph.  It is important to determine how you will draw customers away from competitors.  You must have some uniqueness that sets you apart from the crowd.  Think of a business that you patronize regularly.  Why are you loyal to that store?  It is likely that there is at least one factor that merits your loyalty, and that factor isn't evident in other choices.  Mobil intends to draw customers from competitors by offering a speedpass option to save time for their customers.

Now, you can take some time to read chapter 12. It’s a short chapter that focuses on refining your product in order to differentiate it from what your competitors offer. While you are reading, you can do the Study Quiz #3.

Lecture Point Two: Lecture Point Two:

Generally, there are three competitive advantage strategies:

•Cost-advantage strategy•Marketing advantage strategy•Customer service strategy

Unless you have a unique efficiency that significantly reduces your costs, your small business will  be hard-pressed to focus on the cost-advantage strategy.  You will have to be able to pass along your savings to the customer and still make a profit.

Clever marketing efforts (e.g. emphasizing a “flat roof specialty”) that clearly differentiate you from

our competition will draw the first-time customer, but retaining that customer and generating word- of-mouth testimonials will usually be the result of

a solid customer services strategy. 

Did you notice that in each of those examples the service feature was compared to "the competition“? So, in order to know that your competitive advantage is really an advantage at all, you must shop your direct competitors to see what they do.  Beer World is hoping that a drive thru window will lure customers from its competition.

Good customer service will mean different things to different

businesses.  Therefore, it's not good enough to simply state, "I'm going to provide excellent customer service."  How will that excellent customer service be demonstrated--faster delivery than the competition, more personal attention than the competition, or customizing your product better than the competition. 

When you go to your competitor's store, see how long it takes to

get help.  Ask tough questions to see if they know their business.  Evaluate their store image, prices, personnel quality, services, and store appearance.  Prior to this evaluative visit, it would be a good idea to develop amatrix that identifies all the features a full-service business in your category should have—even those features you don't intend to offer. 

I have provided an example that shows the store features on one axis and lists the stores, by name, on the other.  By using the completed matrix, you can more clearly identify features where you are more competitive and areas you should avoid emphasizing.

In most cases, your competitive advantage is going to be part of a

unique customer service strategy.  Here are a few ideas to start your thinking juices:

•Customize your service -- get to know your customer's names, they love it.  Say to them, "I've seen you in here before, I'm Rod, what's your name?", or have them sign a register that enters them into a drawing (if you include their address, you'll also have a mailing list).

•Ask what they want -- take note of it.  Top-notch businesses develop a record of customer's likes and dislikes to help them serve their continuing customers better.  Be like the restaurant waitress that delivers the coffee to a regular patron before he/she asks for it.

•Offer a guarantee -- make it real, straightforward, and no fine-print. 

Because you stand behind your product/service, you will be seen as honest and worth trying.  Yes, you will occasionally have someone take unfair advantage of this, but not excessively.

•Exceed customer expectations -- know what they expect, then do something they don't expect.  It doesn't have to be much, but surprise them with a bonus. You will make an impression they won’t forget, and they’ll tell others about your business.

Several years ago, Ohio State University did a study on customer

service.  They found that a 5% decrease in customer service activities resulted in an overall sales drop of 20%.  The reasons for this focused on lack of awareness of customer needs, lack of empathy for customer problems, lack of training of employees, insufficient people skills, and sometimes just a bad attitude (usually displayed through non-verbal behavior). What do your customers expect? Remember that they are purchasing more than just the central product or service you offer.

You want your customers to buy now, and again, and again, and tell others.  To make this happen, you must develop an unfair

advantage over competing businesses.  Then, emphasize this unfair advantage every chance you get-- personally, or through advertising and

promotion efforts. 

The four Fs of competitiveness are:

Fast,

Focused,

Flexible, and

Friendly. 

Second only to your knowledge of who your customer is, you must understand what attracts that customer to your product or service, and what specific factors create the unique personality of your business. It is very important not to imitate, but to differentiate your business. See how you fare in this lesson's Competitive Analysis assignment.

Sample Competition Checklist

My Business

Competitor A

Competitor B

Competitor C

Competitor D

Etc.

Courteous S

ales Staff

Knowledgeable Staff

Lumber stocked

Lawn Equipment S

tocked

Open Evenings

Phone Quotes

Small Engine Service

Free Delivery

Etc.

X

XX

X

XXXX

X

XX X X

X

XX X XX

For a Hardware Store (partial list)