The owner of a Canadian pizza chain made a practice of climbing in his car on garbage day to survey stacks of discarded pizza boxes. He wanted to find out what was going on in the pizza market.
Toronto management guru Sam Geist uses that story to make the point that assessing competitors “should be like turning on the lights every day.” Most businesses, he says, were built around a niche or advantage that the founder perceived as missing from the marketplace. A mistake many make, he says, is to assume that their competitive advantages will be there forever.
The truth is that competitors have an interest in taking that advantage away. And they can easily do so if you don’t pay attention to what they’re doing. “You have to know who your competitor is,” Geist says. “His strengths and weaknesses. Your business depends on that point of difference and what you’re doing.” By analyzing and evaluating competition, “a business owner is sharpening that point of difference by looking at and understanding the choices consumers have to make when they’re thinking about buying your product or service,” Geist adds. Ignore competitors, he points out, and the smart ones will take business away by knowing what you do and copying it or going one better.
Tool to Manage
Competitive analysis—a management report—provides a comprehensive, ongoing way to assess competitors and your own company’s standing in the market. To prepare a competitive analysis report:
- Find out who you compete with. Make a complete list of companies you go head-to-head with every day. Start by asking salespeople and customers. “When salespeople are in the house, they’re going to find out who else was there,” says St. Louis sales and marketing consultant Rick Menendez. Another way to know is to launch a Google search of your product or service plus location. If you’re an ABC Seamless or a Hardie dealer in Mankato, say, type in “Siding Central Minnesota” and see who comes up. “Look at who’s advertising heavily on television and radio,” Menendez suggests. Also, ask subcontractors who they consider as players in your market. And check listings in your local business journal. Every competitor may not have a website, but that doesn’t mean they’re not taking your business. You can push your competitive analysis deeper by hiring a marketing firm to do a double-blind marketing intelligence survey of area consumers. That kind of survey will give you solid information about competitors and how your company is perceived in the market.
- Build your list as a matrix. Organize it in a spreadsheet indicating competitors, their products, their strengths and weaknesses, and their market strategy. Include companies you’re familiar with as well as those who may be coming into your market. Much of your spreadsheet data will come from online sources such as competitor websites, where information about products and marketing is readily available. Customer feedback will also be helpful. Look for specific instances where you can offer comparisons that can cast your company in a better light. For instance, what brand do competitors carry and why? What’s the quality of their installation? How efficient and timely is their customer service? Where do they excel and where do they fall off? If you have employees who used to work for competitors, they may be an excellent source of information. “Examine their website, their collateral material, and when your guys do a pitch, have them ask who else was here and what do you think about them,” says Jaynie Smith, author of Creating Competitive Advantage. “That’s ethical and manageable.” A mystery shopper service—where someone pretends to be a prospect so as to receive a full sales presentation by a competitor—can provide extremely valuable information. Views are mixed among home improvement contractors, however, as to how ethical that practice is.
Put to Practical Use
A regularly updated matrix of competitors will prove useful in both marketing and selling but especially in selling. It pinpoints, internally, exactly how and why you’re different from the companies that are fighting for the same dollar you’re fighting for. “If you want to create a competitive advantage statement—a statement in which you say ‘We’re 20% faster than X, we have three times as many on-staff technicians as Y’—that’s how you do it,” Smith says. Make that statement part of your company’s story and its sales pitch. You can also use the results of your competitive analysis to shape the copy and message on your company’s website and in other marketing materials.
How often should you do a competitive analysis? Geist suggests doing a “full-blown” report annually, with quarterly meetings and a person on-staff assigned to regularly update the competitive matrix. —Jim Cory is a contributing editor to REMODELING who is based in Philadelphia.