FAQs for Step 22: Research Competitors
Q: What criteria should I be using to determine how important competitors are to me?
Q: How do I determine the indirect competitors for my business?
Q: If I go out there and talk to competitors it’ll show my hand and I might get scooped. It’s it better just to get myself to market and then worry about the competition?
Q: It seems dishonest to pose as a customer to research my competitor. Won’t this kind of underhanded maneuver hurt my business image?
Q: Ack! I can’t do it! It makes me very uncomfortable to think about going out and talking to competitors. Isn’t there another way?
Q: You suggest getting a job and working for the competitor prior to starting my business. How is this ethical?
Q: I’m in the processs of opening a coffee shop. How do I go about researching my competitors customers, am I suppose to stand outside Tim Hortons and accost people or maybe launch a high speed chase out of the drive through?
Q: You’ve listed this step as a “Must Have, ” but I don’t have any competitors. I’m in a small town and I’m the only gift shop. I guess there’s exceptions to everything right?
Q: You say that finding my competitors can be as simple as looking in the phonebook or it might be more difficult. Can you give some examples of situations where it will be more difficult and what to do in those circumstances?
Q: I’m confused, what’s the difference between differentiation and positioning? My university professor always talked about Unique Selling Point (USP) why isn’t it mentioned here?
Q: What criteria should I be using to determine how important competitors are to me?
One way to do this is to rate competitors according to the seriousness of the threat they pose to your business, in which case your competitors could be ranked according to the amount of earnings. You can also consider how closely the competitor matches your business model, your product and service offerings mix (for example, a competitor might be more important if selling exactly the same products and services as you).
Perhaps the most common or useful way to rank your competitors would be according to market share. The larger competitors must be doing a lot of things right to command more of the market share.
The most important thing with assessing your competitors is to look at how they are similar and how they are different from your business. Use the Competitive Analysis Worksheet to do this.
Q: How do I determine the indirect competitors for my business?
Indirect competitors are businesses that target the same monies your business aspires to earn. An entrepreneur planning to operate a business should take into account any significant competition that is after the same monies within the same market. For example, our business offers a business plan training service. Here are a few examples of indirect competition:
- Businesses that sell business planning books.
- Businesses that sell business planning digital products (videos, CD’s, audios).
- Businesses that sell other types of business-related training (marketing, bookkeeping, entrepreneurship, etc.).
- Colleges and Universities (might be direct or indirect competitors).
- Teleseminars, webinars, correspondence courses.
- Government programs geared to increase jobs through self-employment.
- Underground (non-registered) businesses.
- So called ‘free’ services (often funded by government) that mentor or coach entrepreneurs.
- Volunteer entrepreneurship training, mentoring or coaching services.
- In some cases in small communities, sports or community events might be competing for the same customers (football games, hockey games, baseball games).
When it comes to defining direct or indirect competitors, the lines can get blurry. Rather than getting too exacting with deciding whether a business is one or the other, we suggest you take an inclusive approach to examining all significant potential competitors for your business so as not to miss any major threats.
Q: If I go out there and talk to competitors it’ll show my hand and I might get scooped. It’s it better just to get myself to market and then worry about the competition?
On the one hand, there are very few secrets in any given market, on the other hand some situations do call for secrecy and discretion with regard to approaching competitors. Regardless, the reality is that you need to learn about your competition, and for most situations it’s going to be less risky to do so at the planning stage, before you put your investment on the line. Throughout the Business Planners RoadMap are a number of avenues through which you might learn about your competition. If approaching competitors directly makes you nervous or causes you concern, we suggest you try the many other methods first. There’s always a way to get the information you need. Your challenge as one planning a business is to find the methods that work for you and for your situation.
Q: You say that finding my competitors can be as simple as looking in the phonebook or it might be more difficult. Can you give some examples of situations where it will be more difficult and what to do in those circumstances?
If you’re competing only with local competitors, the phonebook avenue may be effective. If your competition might come from non-local sources or indirect sources, you will need to dig deeper than the local yellow pages to learn about them.
Your industry research should be done before researching competitors. Doing the research in this order will enable you to first learn who the major competitors are before drilling down to research businesses.
Here are sources of information on businesses, some of which are free and others which are fee-based:
- Through key word searches for businesses selling the same products or services, then researching through the business websites.
- Industry or business associations.
- Chambers of Commerce.
- Via the Business & Company Resource Center, which can be accessed through public, college and university libraries.
- InfoTrac, through public, college and university libraries.
- ReferenceUSA, through public, college and university libraries.
- U’S. Securities and Exchange Commission: EDGAR Database ( http://www.sec.gov/edgar.shtml )
- Yahoo! Finance. http://finance.yahoo.com
- Business Media Websites.
- Business Week Online at http://www.businessweek.com
- Wall Street Journal at http://www.wsj.com
- MarketWatch.com at http://www.marketwatch.com
- New York Times Online http://www.nytimes.com
- Business Wire at http://www.businesswire.com
- PR Newswire at http://www.prnewswire.com
- US Patent and Trademark Office at http://www.uspto.gov
- EBSCO’s Business Source Complete, available through public, college and university libraries.
- LexisNexis AlaCarte! At http://alacarte.lexisnexis.com
- MultexNet, available through public, college and university libraries.
- OneSource US Business Browser, available through public, college and university libraries.
- Standard & Poor’s NetAdvantage, available through public, college and university libraries.
- Thomson One Banker Analytics, available through public, college and university libraries.
- ABI/INFORM Global (from ProQuest), available through public, college and university libraries.
- Dun & Bradstreet at http://www.dnb.com
- Hoover’s Online at http://www.hoovers.com or available through public, college and university libraries.
- Mergent at http://www.mergentonline.com
Happy Sleuthing!
Q: It seems dishonest to pose as a customer to research my competitor. Won’t this kind of underhanded maneuver hurt my business image?
Posing as a customer isn’t the only way to gather intelligence on your competitors. It can feel a bit strange and in fact it might be completely inappropriate in smaller communities where everyone knows everyone else. If this method seems unethical or even makes you uncomfortable, consider what other means will get the information you need. For example:
- Could you interview the competitor’s customers?
- Can you hire someone else to gather the information for you?
- Could you obtain the information from the competitor’s website or catalogue or marketing materials?
- Are there any articles on the competitor? You might try a few key word searches on the Internet.
Q: Ack! I can’t do it! It makes me very uncomfortable to think about going out and talking to competitors. Isn’t there another way?
There are a few things to consider when you’re faced with interacting with competitors and feeling awkward about it.
1. Secondary market research (information that others have collected) is less costly than primary market research (collecting the information yourself).
a. You can search for articles on the competitor by trying a few key word searches on the Internet.
b. You could obtain the information from the competitor’s website or catalogue or marketing materials.
c. You can source information on competitors through Trade Associations or government agencies.
2. Even after gleaning all the information you can through secondary sources, you may still have to gather some of your data from the competitors, in which case you can consider
a. Interviewing the competitor’s customers.
b. Hiring an agency or a person to gather the information for you.
c. Cutting a deal with your local university or college marketing class to survey competitors for you.
d. Surveying competitors yourself.
We also find that most newbies are pleasantly surprised, once they get out and meet competitors, to learn that they are not as scary as imagined. We suggest you investigate this for yourself and keep an open mind; once you get past the monster competitor image, you might find some competitors to be like-minded, interesting people, entrepreneurs just like yourself. Rather than awakening slumbering ogres, you are far more likely to find yourself learning like crazy, discovering opportunities to collaborate on larger projects, and even making a few friends.
Q: You suggest getting a job and working for the competitor prior to starting my business. How is this ethical?
Very few businesses actually start without the founder working for one, two or even many of their competitors. How does it become unethical just because it’s planned out in advance? While we do not recommend employment as a means to sabotage other business owners, we do advocate for learning all you can from them. They are your richest opportunity to learn the ropes in any business. And it’s how you play the game that will establish whether or not your methods are ethical. In our view, one true measure of success in researching your competitors is whether you can obtain the information you need without burning bridges, and whether or not you emerge from researching your competition with more allies than enemies.
Q: I’m in the processs of opening a coffee shop. How do I go about researching my competitors customers, am I suppose to stand outside Tim Hortons and accost people or maybe launch a high speed chase out of the drive through?
We’re fairly certain that buttonholing customers in your local Tim Horton’s drive through will not only get you dismal results, it’s sure to spook your victims and might get you thrown in jail. In any event, we’re not sure it’s wise for most budding coffee shop owners to attempt to go head-to-head with Tim Horton’s or for that matter, with any giant firm. Assuming you’re starting a coffee shop, we suggest you try surveying folks in locations where you are likely to stumble across coffee drinkers. For example, if you have a mall or street where competitors (Tim Horton’s, Starbuck’s, locally owned shops, etc.) are located, you might locate yourself in a suitable location (and neutral, not on the competitor’s doorsteps or in their drive through lanes) and ask your survey questions of all who want to participate. In your survey, you will naturally design your questions to determine whether the participant drinks coffee and you can also ask where… once you’ve gotten the answers to those questions and determined that you are face to face with a competitor’s customer, you have positioned yourself in a non-threatening way, to ask further questions to assess their likes and dislikes, what’s missing, what they are pleased with and what they might like that’s missing. You see? No high speed chase, no jail, and probably no bad-will either.
Q: You’ve listed this step as a “Must Have, ” but I don’t have any competitors. I’m in a small town and I’m the only gift shop. I guess there’s exceptions to everything right?
In today’s marketplace, assuming there is a market for what you propose to sell, you will have competition. Believe it. And if, after reading the previous statement, you still think you have no competition, please don’t start a business – go find a job. If there is money to be made in selling your products and services, there either is or will be competitors vying for a piece of the pie. With regard to the claim of “no competitors” we have found the following:
• Only newbies ever think or state that they have no competitors.
• If there are no obvious competitors, dig deeper, there will be secondary or less visible competition.
• If you happen to be in a unique situation where there is no competition, and there’s money to be made, competitors will be just around the next corner.
• If in fact no competition exists, perhaps there is no market for what you’re selling.
• In almost all cases where competitors are thought to be absent, on digging deeper, it is discovered that there are competitors vying for the same dollars.
In a broader sense, you are researching threats to the sustainability of your business. We urge you to cast a wide net when looking for threats, to ask the right questions and to dig deep.
And if, after considering all of the above, you still cannot identify any competitors and if you’re certain there’s a market, and if you’ve proved your business case, you may be staring at a great opportunity.
Q: I’m confused, what’s the difference between differentiation and positioning? My university professor always talked about Unique Selling Point (USP) why isn’t it mentioned here?
Differentiation, Positioning and Unique Selling Point are all marketing terms.
1. Differentiation is the process of distinguishing a product or service from others, to make it more attractive to your customers. It is not the process of making products different from others, it is the process of describing the differences between products or services.
2. Positioning is a process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization.
3. Unique Selling Proposition refers to advertising to communicate a product’s differentiation.
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