LESSON 3 Competitive Analysis

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LESSON 3- Competitive Analysis
Introduction Identify a personal characteristic
that you consider to be what makes you stand-out
among other people (efficient, trustworthy,
etc.).
"No business opportunity is lost.  If you
fumble it, your competitor will find
it."          ...Anonymous
Objectives  Identify primary and secondary
competition, and specifically why customers will
choose to patronize your business. Plan how to
draw customers, first, away from secondary
competitors, and second, away from primary
competitors.
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Lecture Point One
Once you have targeted a specific market segment,
it is important to also identify who shares your
interest in that target.  You will need to
clarify not only who competes head-to-head with
you in the same venue, you must identify
secondary competitors.  Secondary competitors
compete for the same portion of your customer's
budget from which your product or service is
purchased.  For example, if your business is a
video rental store, what other types of
businesses would compete for the same budget
dollars?  You probably identified businesses
that share your customer's entertainment
budget--movie theaters, live-entertainment
theaters, sports stadiums, and even
restaurants.  It is important to know where your
customers spend those same-budget dollars in
order to consider how to lure them into your
arena.
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Now that you know your general market, the task
is to differentiate your business in order to
draw customers away from other primary
competitors.  Primary competitors offer very
nearly the same product/service as you.  For
example, McDonalds competes directly with every
other fast-food hamburger store.  To clarify, Red
Robin (offers hamburgers--but not fast-food) or
KFC (offers fast-food chicken) would be
considered secondary because they don't
compete head-to-head in the same
manner.
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I hope you noticed what I said in the first
sentence of the previous paragraph.  It is
important to determine how you will draw
customers away from competitors.  You must have
some uniqueness that sets you apart from the
crowd.  Think of a business that you patronize
regularly.  Why are you loyal to that store?  It
is likely that there is at least one factor
that merits your loyalty, and that factor isn't
evident in other choices.  Mobil intends to
draw customers from competitors by offering a
speedpass option to save time for their
customers. Now, you can take some time to read
chapter 12. Its a short chapter that focuses on
refining your product in order to differentiate
it from what your competitors offer. While you
are reading, you can do the Study Quiz 3.
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Lecture Point Two

• Generally, there are three competitive advantage
  strategies
• Cost-advantage strategy
• Marketing advantage strategy
• Customer service strategy
• Unless you have a unique efficiency that
• significantly reduces your costs, your small
• business will  be hard-pressed to focus on
• the cost-advantage strategy.  You will have to be
  able to pass along your savings to the customer
  and still make a profit.
• Clever marketing efforts (e.g. emphasizing a
  flat roof specialty) that clearly
  differentiate you from our competition will
  draw the first-time customer, but retaining
  that customer and generating word- of-mouth
  testimonials will usually be the result of
• a solid customer services strategy. 

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Good customer service will mean different things
to different businesses.  Therefore, it's not
good enough to simply state, "I'm going to
provide excellent customer service."  How will
that excellent customer service be
demonstrated--faster delivery than the
competition, more personal attention than the
competition, or customizing your product better
than the competition. 
Did you notice that in each of those examples the
service feature was compared to "the
competition? So, in order to know that your
competitive advantage is really an advantage at
all, you must shop your direct competitors to see
what they do.  Beer World is hoping that a drive
thru window will lure customers from its
competition.
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When you go to your competitor's store, see how
long it takes to get help.  Ask tough questions
to see if they know their business.  Evaluate
their store image, prices, personnel quality,
services, and store appearance.  Prior to this
evaluative visit, it would be a good idea to
develop a matrix that identifies all the features
a full-service business in your category should
haveeven those features you don't intend to
offer.  I have provided an example that
shows the store features on one axis and lists
the stores, by name, on the other.  By using
the completed matrix, you can more clearly
identify features where you are more competitive
and areas you should avoid emphasizing.
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• In most cases, your competitive advantage is
  going to be part of a unique customer service
  strategy.  Here are a few ideas to start your
  thinking juices
• Customize your service -- get to know
• your customer's names, they love it.  Say
• to them, "I've seen you in here before, I'm
• Rod, what's your name?", or have them
• sign a register that enters them into a drawing
• (if you include their address, you'll also have
• a mailing list).

• Ask what they want -- take note of it.  Top-notch
  businesses develop a record of customer's likes
  and dislikes to help them serve their continuing
  customers better.  Be like the restaurant
  waitress that delivers the coffee to a regular
  patron before he/she asks for it.

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• Offer a guarantee -- make it real,
• straightforward, and no fine-print. 
• Because you stand behind your
• product/service, you will be seen
• as honest and worth trying.  Yes,
• you will occasionally have some
• one take unfair advantage of this,
• but not excessively.

• Exceed customer expectations -- know what they
  expect, then do something they don't expect.  It
  doesn't have to be much, but surprise them with a
  bonus. You will make an impression they wont
  forget, and theyll tell others about your
  business.

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Several years ago, Ohio State University did a
study on customer service.  They found that a 5
decrease in customer service activities resulted
in an overall sales drop of 20.  The reasons for
this focused on lack of awareness of customer
needs, lack of empathy for customer problems,
lack of training of employees, insufficient
people skills, and sometimes just a bad attitude
(usually displayed through non-verbal
behavior). What do your customers expect?
Remember that they are purchasing more than just
the central product or service you offer. You
want your customers to buy now, and again, and
again, and tell others.  To make this happen,
you must develop an unfair advantage over
competing businesses.  Then, emphasize this
unfair advantage every chance you
get-- personally, or through advertising and
promotion efforts. 
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The four Fs of competitiveness are Fast,
Focused, Flexible, and Friendly. 
Second only to your knowledge of who your
customer is, you must understand what attracts
that customer to your product or service, and
what specific factors create the unique
personality of your business. It is very
important not to imitate, but to differentiate
your business. See how you fare in this lesson's
Competitive Analysis assignment.
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Sample Competition Checklist
For a Hardware Store (partial list)
Lawn Equipment Stocked
Small Engine Service
Courteous Sales Staff
Knowledgeable Staff
Lumber stocked
Phone Quotes
Open Evenings
Free Delivery
Etc.
X
X
X
X
X
My Business Competitor A Competitor
B Competitor C Competitor D Etc.
X
X
X
X
X
X
X
X
X
X
X
X
X
X