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Easy and effective ways to size up the competition
By Jennie
L. Phipps • Bankrate.com
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.
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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