Join Deirdre Breakenridge for an in-depth discussion in this video Define your top competitors, part of Marketing Foundations: Competitive Market Analysis.
- Back in 1994, Barnes and Noble wasn't paying attention to all of its competition. That's when Amazon launched in the market. Instead, they focused on what looked like their biggest competitor, Borders Bookstores. Of course, by the time Borders closed in 2011, Amazon had grown to become a much larger and recognized contender. Barnes and Noble was not prepared for the rise of Amazon. What went wrong? You can't just look at the biggest competitor. You have to keep your eyes on the ones that pose the greatest threat to your competitive position.
Let's walk through how you can identify three top competitors. There are different types you should know about. There's the head to head competitor. These competitors sell very similar products, or exactly the same products as you do. Then, there's the first tier competitor. They sell similar products, but don't have all of the same products as your company. Finally, there's second tier or indirect competitors. These organizations sell a product that can make up a fairly sizable portion of your sales.
Indirect competitors are often substitute products too. Think about butter versus margarine, socks versus nylons, milk versus almond milk, coffee versus tea, and the list goes on and on. Indirect competitors are important to watch because at any time, they can also produce what you're selling too. With limited resources, because not everyone has deep pockets. You have to narrow down the playing field to identify which companies fit the build for your top competitors.
Here's one approach that may help after you understand the competitor types, and expand your thinking to come up with three competitors you will profile. Now, look at your competition in terms of your industry, the market, and the strategic groups. For example, your industry is made up of companies that sell identical or similar products and services. Ask yourself, "What companies in my industry "are the closest to what I sell to our customers?" Imagine you own a bakery.
You would look to other bakeries that sell similar products, from your breads and pies, to your cookies and cakes. You're competing for cakes on special occasions, pies during the holidays, and delicious breads daily. Now ask, "What other companies are in locations "that could possibly cut into our market share?" If you're the local baker in one area of the city, and there are bakeries in the other side of town, or in surrounding towns, customers have many options.
At the same time, there are online cupcake and baking delivery services, too. So if you're a baker in the Chicago area, then I know an online cupcake company that's serving your market. Check the internet. You may have online competition, too. Lastly, a strategic group of companies may compete with you if they have a similar business model or strategy. Ask yourself, "What companies may not be identical, "but they may be just as strategic as your company "in attracting customers?" You can bring in budget conscious customers by offering discount coupons and promotions.
Your bakery may offer a discounted cup of coffee with a danish, the same way that Starbucks pairs with their Frappuccinos. This approach applies to any business, from electronics to hospitality. At this point, you should be aware of the different types of competition, and the ways these companies compete with you. Ask yourself, "Who stands out the most?" Now, jot down the three who will challenge you and pose the greatest threat in your market. Get ready to dive in deeper and to learn more about these competitors.
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- Explain the benefits of a competitive analysis.
- List three elements to include in a competitor profile.
- Recognize the biggest challenge when researching your own strengths and weaknesses.
- Recall the advantage of knowing your competitor’s strategies.
- Identify three elements included in competitor research analysis.
- Define the elements that make up the SOAR framework.