Knowing its target market and the other players operating in it gives the company a significant competitive advantage.
It is vital to have a good overview of the environment in which are you operating. This means knowing who your competitors are and why customers are going to them. There are several ways of researching your competitors:
- Visiting their stores
- Buying their goods and using them
- Spending time on their website
- Studying their financial results, which are usually in their annual reports
- Asking professional associations if there are any statistics showing the market shares of the various stakeholders operating in your field
When you research the competition, remember not to confine yourself to the handful of leading names or brands which immediately come to mind. A company selling craft beers is not necessarily competing with the leading international brands like Kronenbourg or Budweiser, but they could be losing customers to bars and restaurants situated in the same region or city.
Types of competitors
A business’s competitors are all companies, people or even public services which a customer might turn to instead of that business. Competition is likely to provide an alternative solution for the customer. An insurance company selling life insurance will therefore be in competition not only with other insurance companies but also with all other solutions which individuals may find to ensure their financial security (savings accounts, a portfolio of investments, real estate, etc.). Here are the different types of competitors:
- Direct competitors. These offer comparable goods and services and target the same audience. To stand out, the company can offer more competitive prices or improve the quality of its existing offering from its competitors.
- Indirect competitors. These are not selling the same products, but are taking money from the customer base of a related sector. A paint store will therefore be in indirect competition with a hardware store that sells paintbrushes. A solution to position yourself favourably against indirect competition is to add your products to your catalogue. The company becomes a one-stop shop for an extensive market.
- Phantom competitors. These are the free alternatives to which the customer may have access. Instead of calling a plumber, they leave their sink to leak or repair it themselves. One way to deal with this phenomenon is to show customers that it is easier, cheaper or more efficient to use their product or services than to do without them.
Sources: Hiam, A., Heilbrunn B. "Le Marketing pour les Nuls", John Wiley & Sons, Inc, 2021; Small Business Marketing Kit For Dummies, Barbara Findlay Schenck, John Wiley & Sons Inc, 2012.
