Few things can doom a small business more effectively than “no competition.” When a prospective small-business owner tells me that one of the reasons he wants to start a certain type of business is because “there’s nothing like that here, so there’s no competition,” he has dismissed a very critical part of the planning process.
While market research may reveal that he is correct in assuming that there is no other business in the area just like the one he plans, this does not mean he has no competition.
Whether you are starting a business or are already in business, you should approach the issue of competition not by asking “Who else has the same kind of business I do?” but instead by asking “What are my customers’ alternatives to buying from me?”
An example would be someone who wants to open a skating rink at a certain location because there is not another one in the area. If he assumes this means he has no competition, he is ignoring the fact that he is offering just one form of recreation.
His potential customers are looking for entertainment and fun, and they can find that in a variety of places, not just at a skating rink. They may decide to go bowling, to an arcade, to a movie or to play miniature golf, or they might even decide to just stay home and play video games or rent a movie.
So his customers need a reason to choose the skating rink over the other possibilities. Thinking of competition in this way will result in a more thorough evaluation of his competitive environment and a more effective marketing plan.
Once you identify your customers’ alternatives, evaluating the competition can begin as simply as shopping there yourself as a potential customer would. The aspects of the competition to be observed should be determined before you make the visit.
Some of these aspects would be product quality, variety of products, hours of operation, pricing, promotional displays, store policies, customer service, store traffic and the number and types of employees.
This information cannot be gathered in one visit. Competition should be observed through several visits over time to determine how and when changes occur.
You could even develop survey forms and ask trusted friends and relatives to assist with these visits.
An evaluation of the competition should reveal their strengths and weaknesses. Learning from the competition’s strengths can improve your product, advertising efforts and overall business management.
The competition’s weaknesses can be opportunities for you to differentiate your product.
Promotional strategies can be devised to highlight your product’s advantages and influence potential customers.
There may be parents in the area that would like to have someone transport their child from school to the center each afternoon for after-school care.
Perhaps there are parents who have work schedules that make it difficult for them to drop off or pick up their child at the center.
The center owner should consider the benefits and costs of offering a transportation service to attract these types of parents.
For example, someone who operates a day care center may discover that none of the centers nearby offer transportation services.
This service could become an important selling tool in the center owner’s efforts to promote the business.
The positive results of planning, operating and promoting your business based on a thorough competitive analysis will be lost to you if you assume there is no competition.
And that can mean the difference between success and having to close your doors.
Connie Edwards is a business consultant with the University of Georgia’s Small Business Development Center. Contact her at 651-3200.