Before new small businesses hang their shingle, owners should not only know a thing or two about their target market, but also a bit about who else is targeting that market.
Mark Cuban, well known for his role on “Shark Tank,” sums up the importance of competitive research. “Make your product easier to buy than your competition, or you will find your customers buying from them, not you.” Understand what your competition is doing and find ways to make your business stand apart.
Identify Your Competitors
See who’s in your space. If you’re focused on competing with local brick-and-mortar businesses, start with a local business directory or your local chamber of commerce. Explore Google Local Guides and see what comes up on Yelp in your area.
A keyword search can quickly identify your top online competitors. Say you make custom suits in Los Angeles, for example. If a potential customer is searching for “custom suit maker in LA” on Google, will your name come up? If not, who will they find? Visit competitor websites to see what marketing tactics they’re using. Google Adwords has an Auction Insights tool which lets you to see who’s bidding on the keywords you want.
Conduct Your Own Competitive Analysis
Gather a basic understanding of what your competitors are doing. You can glean a lot just by visiting their business. Go into their business — online and the physical location — and take notes on the entire experience.
How did you feel?
Consider your first impression. If your first impression was a good one, examine why. If it’s a trendy pet groomer, maybe they had a great window display. If it’s a bakery, maybe their open doors meant the smell of fresh bread invited you in. In a retail space, you may have been greeted at the entrance and immediately told about current sales.
A tea shop might have offered you samples; a mechanic might have provided complimentary coffee and cookies for waiting customers.
An online shop’s first impression has just as much impact.
Examine the flow of the store setup. If there’s a table out front, note if it has discounted items on it or the newest arrivals. In a retail clothing store, markdowns may be toward the back to get customers to walk through the whole store before reaching them. Take a look at how items are displayed. A jewelry store might present necklaces on stand-alone mannequin displays. A specialty bakery might display artisan chocolates in a well-lit glass case.
On a website, consider ease of navigation and if finding what you need follows an intuitive process. If the website is poorly organized or the interface is crisp and clean, explore how these affect your usability and ultimately your experience on the site.
How were you treated?
Analyze the greeting. If you were greeted when you entered the store, delve into how this affected your experience. If you walked into a jeweler and you were treated like you didn’t belong there, that would certainly affect the quality of your visit.
Note the help. If someone helped you as you were shopping, consider how they went about answering any questions you had.
Online, you might find it easy or hard to contact customer service and might be inundated with sales and marketing pop up messages. If this bothers you, make a note so you can implement a different approach.
Consider the checkout experience. When you checked out, note how the cashier handled herself. If she tried to upsell, note her approach. She might have offered you a loyalty or punch card for future purchases.
How are they operating?
Figure out their pricing strategy. If prices are high, evaluate why this might be. They may be tailoring products to an affluent shopper or they’re setting initial pricing high so they can advertise deep discounts without cutting into their profits. If their products or services are priced low, figure out how they can afford this.
Find out what payment methods they accept and what their return policy is. Online, consider their shipping policy.
Take a look at their employee structure. A store might have a large staff or just a few employees doing many jobs. Though it may be behind the scenes, if the business has very few employees, they could be using independent contractors or vendors to cut down on overhead. If employees work on commission, consider whether it affected the quality of your experience and if you felt pressured to purchase.
Examine how they handle their workflow. See if the person at the front door greets you and stays at the front while you move through the store and are helped by someone else, or if the same person who greets you also helps you throughout the store and follows you through to checkout.
If someone is taking inventory or folding clothes while the store is open, they could be doing this so they’re not paying employees to stay after hours.
Examine their branding. The store has positioned themselves somehow. Consider how the marketing materials reflect that brand. Look at images they use in the store, the copy, the colors or logos they use throughout. If they have catalogs, business cards or flyers, note how they’re presented. Online, look at how they showcase products or services and what the website feels like.
Consider their social media and email use. Notice any signs that request Yelp reviews. See if any social media logos — like Twitter or Facebook — are on business cards. If you see they have an email list out for people to add their names to, add that to your notes. Decide whether the same social media channels and email gathering methods would work to amplify your brand’s voice and tell customers about new products or services you’re offering.
Other things to look into
Once you’ve visited their business, see what other information is available via public records. Consider looking into:
- Basic background: ownership, organizational structure and company history
- Offering: product and service lines
- Financials: gross annual revenue, profit-earnings ratios, growth rates
- Staff: number of employees, compensation policies, key personnel profiles
- Production: facilities, suppliers, service vendors, logistics
- Marketing: target market, marketing objectives, strategies, promotional campaigns, competitor pricing
These six are just ideas. You may not know this information — or even have access to it — and you certainly don’t need it to get a good grasp on what your competition is doing.