Being Competitor Focused
With few exceptions, any business that is worth doing at all will attract competition. Otherwise, you wouldn't be there in the first place. When you grow, you attract even more competitors. Following are basic competitive strategies:
Competing on Price
This strategy works best with standard products that can be mass-produced and sold in volume. Use better volume to try to wrestle discounts from suppliers, shippers and advertisers.
Don't forget the obvious: To compete on price, you must generate enough volume to justify the price cut.
- Spend resources on promotion: Low prices work only if people know about them.
- Stress same quality: In your ads, hammer this point. Tacky or cheap stuff won't win customer loyalty.
- Don't go too low: Go low enough to beat the competition or lower than people expect to pay.
- Establish price, reduce costs: Reverse the usual pricing recipe. Figure out what the price has to be, then re-invent production, bargain with suppliers, cut waste and so on.
Competing on Quality
Some customers are willing to pay more for value. But that's the key: What do your customers value? Performance? Styling? Exclusivity? "Cool"? Personal service? Customization? Remember, they must value it enough to justify the expense.
- Don't raise prices too severely: Quality differences must match higher prices. Gouging is fatal. Moving existing products up-market, try announcing improvements in stages.
- Get endorsements: Who says your product is superior? Find an expert or celebrity or satisfied customers.
- Sell benefits, not features: Customers care about how you will improve their lives, save them on repairs or impress their neighbours. They don't care about thicker steel or 24-hour call centres.
- Build a consistent image: You can't sell caviar in a flea market. To sell on quality, pay attention to detail: labels, literature, packaging, store name and furnishings, even the grooming of staff.
Competing in Niche Markets
Niches work especially well for small businesses because they are generally too small or too specialized to attract large competitors. The key to this kind of competition, then, is to know your niche better than anyone else.
- Segment carefully: Small is fine, but it's got to be big enough to support you. Do research. How many of these customers are there? How much do they spend? What is distinctive about them?
- Become a niche expert: Follow every trend - personal lifestyle, economic factors, growth, new technology, new regulations. What could wipe out this niche?
- Watch the competition: How do they differ from you? Are their promotional tactics different? Keep watching - in a small market, change can come quickly.
- Re-evaluate often: Again, niches can be volatile. Check your marketing approach periodically: advertising venues and frequency, promotional methods and pricing, for instance.
Competing on Speed
Speed is an issue in product development, service response and delivery. Consumers' expectations are ever-rising, and speed is now a fundamental point of competition, especially in the fields of food, fashion, technology and custom products.
- Use just-in-time systems: Avoid warehousing. Cut waste. Avoid stockouts. Make a product or initiate service only after the order comes in, then move fast to fulfill it.
- Cut out the middlemen: Try to distribute directly to the end user.
- Test market: Develop several prototypes in limited quantity and sell in competition. Manufacture the most successful one in large quantities. This gets product onto shelves quicker.