Identifying the right market and sizing up competition is a critical aspect of turning a great business idea into an entrepreneurial success story. Great products and services attract customers, and those customers attract competition for a share of the profits. While it is easy to focus on your offensive strategy (selling your products or services to your target customers), a strong defensive strategy (knowing where competition for your profits will come from) it is equally important for assessing the opportunities in front of you and shortening your odds for success.
Faced with the realization that our job (as entrepreneurs) is harder in the face of competition, taking inventory of your competitive landscape through in-house research and analytical effort. As a result you’ll maintain a highly-competitive service offering for both your new and recurring clients. If you are either preparing to enter the market or are already in the market and facing intensifying competition, here are some steps and tools that can be used to access the competitiveness of the market and to make the decisions necessary to position your business for success.
There are a number of practical steps that entrepreneurs can take to assess their competition. Here are a few illustrative examples that can prove helpful in getting started:
Talk to your customers:
Gathering feedback from newly acquired customers as well as customers lost to a competitor can go a long way toward gaining insights into your competitors and their value propositions. Just as we are a resource for our clients as they make decisions over their real estate investing decisions, our clients help us to build a clearer view of the value of our offering relative to other providers in the market.
A few illustrative sample questions:
- Where did you hear about us and who else were/are you considering?
- What aspect or feature of our product/service do you find most appealing?
- What aspect of your previous provider were you not happy with?
Participate in industry events:
While many industry events are great sales opportunities, they are also opportunities to meet other industry players and gain first-hand insight into what they do and how they do it. Conference, trade shows and other industry events often give you an opportunity to see direct competitors, potential customers and industry suppliers interact with each other and thus provide an opportunity to asses many of the forces at play all at once.
A few illustrative things to look for:
- Are there any innovations represented in your direct competitors’ or offerings that suggest the need for new strategy?
- What key messages seem to be resonating with potential customers?
- Which suppliers do your competitors seem to be most interested in and vice-versa?
It should be no surprise that entrepreneurs can find a lot of information about their industry and their competitors across many online channels. For industry level information consulting firms and research based companies such as Deloitte, Forrester, and Gartner often provide free publications useful to entrepreneurs looking to stay up to date with their industry. For competitor specific information, entrepreneurs would do well to study their competitor’s webpage, as well as social media channels.
A few illustrative things to search for:
- What are forecasts telling you about what the industry will look like in the short term? In the Long- term?
- What are the key value propositions that competitors are emphasizing on their websites?
- What are customers saying about their experiences with competing products/services?
- How are competitors interacting with customers across social media (tone, frequency, channels)?
A few tools for the job
As the selection of examples above illustrate, there are many sources of information available to entrepreneurs. In order to make best-use of the available information, entrepreneurs will need to make use of a few tools to help organize and generate additional useful insights.
Choosing which tools to use can be as involved as the primary research itself, but here are a few tried and trusted options that we have found particularly helpful:
The Five Forces:
The Five Forces tool/model helps businesses to expand their conceptual understanding of competition from one that pits one competitor against another toward one that views competition as the successful positioning of a business relative to a set of dynamic forces. This model is particularly helpful when an entrepreneur eels that it has a unique offering, as the model helps businesses to consider a broader range of competitive sources instead of a narrow band of one-to-one businesses.
Michael Porter’s five forces model in short, posits that competitiveness determines profitability and competitiveness is the result of five interconnected forces- internal rivalry, threat of new entrants, ease of substitution, customer power and supplier power.
Putting the tool/model to use:
- Identify the factors that intensify competition through each of the forces
- Determine the strength of intensification
- Determine whether the combination of the contributions of the five forces is conducive to profits
Customer Purchasing Criteria (CPC):
The CPC tool is meant to help answer the question why does that customer buy from that company and how can we get them to buy from us (Eg: what do customers value?). Using this tool will help entrepreneurs to take what they have learned about the customers across relevant segments and analyze to what extent their offerings (and that of their competitors) line up with customer needs.
Putting the tool to use:
- List and assign weighting to CPCs (what customers need in relevant segments)
- Develop Key Success Factors (KSF) for satisfying the identified needs
- Assess your businesses competitiveness across KSFs
A well-developed assessment will have the potential to positively inform all aspects of an entrepreneur’s business activity from marketing to product and service design.
These tactics and tools have helped us at Buttonwood Property Management assess the competitive residential property management landscape and we think they can help you too. What tactics and tools have you found most effective for your business?
Written By: Sabine Ghali, Director at Buttonwood Property Management and an entrepreneur at heart who endeavors to help investors create real estate wealth over time in the Greater Toronto Area. Visit her at www.buttonwood.ca