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Easy and effective ways to size up the competition

Before you launch or expand your business, you better know what you're up against. If you don't size up the competition, you're likely to be sideswiped.

This market research effort doesn't have to be scientific or involve expensive studies (although you can go that route). Often you can get results that will point your growth efforts in the right direction by simply identifying the competition and talking to your customers.

Identify -- and limit -- your market
Sure, the whole world could benefit from your products and services, but how likely is it that you'll be able to sell to everyone? Identify a market niche, either by demographics or geography or both, and try to understand that small slice of customers.

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Find out as much as you can about the companies that are doing what you want to do. Determine how many competitors you have and their size, including how many employees they have. Survey their pricing, hours of operation and find out where they advertise.

Here are five easy tools that will help you pin down your competitors and refine your business:

  • If you're searching based on geography, start with the phone book, newspaper or online. One of the best online sources is Switchboard. Search simultaneously by category and by distance or ZIP code.
  • If you're running a mail order or Internet business, do a thorough online search using any of the major search engines.
  • Examine the competition by North American Industry Classification System (NAICS) code. The Census Bureau uses these codes to report on businesses, including such information as payroll size. You can access the census data yourself at the U.S. Census Bureau Web site.
  • Visit your city or county planning office. Virtually every county has one, which, among other things, compiles information about local business. As a taxpayer, the information there is yours to use free of charge.
  • Check out one of the various business lists produced by InfoUSA, with details on millions of companies in the United States and Canada, including addresses, telephone numbers, employment data, key contact and title, primary Standard Industrial Classification (SIC) code, actual and estimated financial data on companies. Data is compiled through a continuous updating cycle of compilation from print sources (including more than 5,000 yellow-page books) and telephone interviews capturing additional data. This information is pricey but useful. Try your public library before you buy.

Questions for real customers
After you've got the cold, hard statistics, go to the people you expect to buy your product or service. And don't just ask your friends or your mother-in-law or anyone else who has a vested interested in your success.

If you already have customers, talk to them. If you're starting a new business, contact the companies that you found in your initial research, and ask to speak to the person who is responsible for purchasing your product or service.

Ask leading questions. What they are will differ based on your business, but here are some that Jeff Seifried, small-business coordinator for the city of Aurora, Colo., says are almost always important:

  • What need did you have that prompted you to seek out this service or product?
  • When and how often do you purchase this service or product?
  • How may people did you talk to or visit before you bought the service?
  • How far are you willing to travel to purchase this item?
  • What motivated you to choose the company you did?

Make it worth their while
Seifried says getting answers to questions like these may require a bribe.

One good approach is to offer a gift certificate in return for cooperation. It doesn't have to be much. A $5 McDonald's coupon, for instance, can buy you a little time and lots of goodwill and information.

If this is a locally based business, you might consider holding a focus group and feeding people lunch in return for answering your questions. Seifried says this also will help them remember you once you launch your service.

In any case, don't forget to follow-up and send the person you talked to a thank you. That will give them one more reason to remember you.

How many of these conversations with customers are enough? Seifried says you know you're getting there when you begin to hear the same things over and over again.

Play to your strengths
Once you identify the market and survey the competition, look for ways to differentiate yourself.

Ask yourself what your company can provide that will make it essential to key customers. Seifried advises that you do a few things well and don't try to take on the world.

Above all else, be ethical and professional. "Often it comes down to the intangibles," he says. "Do they like you? Do they trust you? Do they think you know what you're doing."

Jennie L. Phipps is a contributing editor based in Michigan.

-- Updated: Dec.15, 2003

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