Dealing with Competitors

The Concept of Competition

Competitors, as it relates to marketing, are companies that satisfy the same customer need or want. Someone in the market for a car wants a means of transportation - subways, buses, bicycles can meet that need. From a marketing perspecti e, the concept of competition in ol es a broad set of potential and actual competitors. Dealing with competitors is important but don!t lose sight of who!s most important " customers. #e alert and watch for weaknesses $yours and those of your competitors% but goals, rather than competitors, should be the main dri ing force of your business acti ities.

The Importance of Identifying Latent Competitors

&dentifying competitors might sound like a simple task. 'o doubt (oyota reali)es that *onda is a ma+or competitor, and Coca-Cola knows that ,epsi-Cola is a competitor. (he actual range of competition most companies face is much broader than the ob ious. -our company is more likely to be hurt by new technologies or emerging competitors than by known competitors. .e can look to the classic e/ample of how in Canada, #arnes 0 'oble, &ndigo and Chapters were all competing to build the most stores where customers could spend their time reading while sipping coffee. 1t the same time, 2effry #e)os was building 1ma)on.com, e/clusi ely online. (his had the ad antage of pro iding an enormous selection of books without the cost of stocking large in entories and the o erhead of brick-and-mortar megastores. (he incumbents scrambled to play catch up in building online stores yet, at the time of this writing, 1ma)on still dominates &nternet sales. (he traditional bookstores ha e sur i ed in this case, howe er focusing on current competitors instead of the latent ones has been the downfall of many businesses. 1ma)on and #arnes 0 'oble are all big companies, but the same lesson applies to small businesses as well.

Analyzing Competitors
3nce competitors ha e been identified, it!s important to try to identify their ob+ecti es, strengths and weaknesses and their reaction patterns. (his make it easier to anticipate competitor mo es and come up with successful strategies to deal with them.

Objectives: .hat are your competitors looking for in the marketplace4 For e/ample, are they trying to increase market share or ma/imi)e current profits4

Strengths and weaknesses: *ow dominant is each competitor in the marketplace4 Can any gi en competitor control the beha ior of other competitors4 *ow much market share does each main competitor ha e and what are their product 5uality le els4

Reaction patterns: #usinesses deal with competition in different ways but most companies fall into one of four categories. 6. Laid-back competitors: 1re ones that react slowly and weakly to competitor mo es. &t doesn!t necessarily mean the company lacks funds to react, it may be that they feel their customers are loyal or are slow in noticing the mo e. 7. 8. 9. Selective competitors: 1re ones that react only to certain types of attacks, such as to price cuts but not ad ertising increases. Respond to all competitors: 1re ones that react strongly and 5uickly to any attack. Unpredictable competitors: 1re ones that don!t seem to ha e any kind of pattern to their reactions. Small companies are often the unpredictable ones because they tend to compete on a ariety of fronts when they can afford to.

Gathering Information on the Competition

&t!s not always easy to find out about the your competitors, ne ertheless information is often a ailable from a ariety of sources. -our sales force, suppliers, market research firms, trade associations and published data can be e/cellent sources of information. &f you ha e a former employee of a competitor as part of your staff, ha e him or her ser e as the resident e/pert on that competitor. :se competitor websites to find out information on what they are doing to attract customers and partners. ;any post press releases on their websites announcing new products. (rade association websites are also aluable because they often pro ide information about industry players. Stay away from information gathering methods of 5uestionable legality or ethics. Some companies ha e been disco ered buying their competitors! garbage and holding inter iews for non-e/istent +obs to get information from competitor employees.

General Attack Strategies

1ttacking a competitor on se eral fronts or head-on by matching their marketing mi/ $products, pricing, ad ertising and distribution% is often a difficult approach, especially if the competitor en+oys ad antages such as larger market share. *owe er, direct attacks can be effecti e if the competitor commands fewer resources. 1 better approach for smaller firms is to attack indirectly. 3ne way is to spot areas where the competitor is underperforming and to better ser e those areas. (hese areas could be untapped geographic locations or unco ered market needs. &n other words, attacking indirectly means identifying shifts in market segments that cause supply gaps to de elop, and then filling in those gaps while de eloping them into stronger segments. (his is the essence of marketing, disco ering needs and satisfying them. ;ost companies target weaker competitors because it!s less costly, but this usually results in small gains. <emember, e en strong competitors ha e weaknesses that can be e/ploited.

Specific Attack Strategies

Depending on the particular situation, different strategies should be de eloped. Some of these include=

Intensive advertising and promotion: &ncreasing ad ertising and promotion e/penditures makes sense if your product or ad ertising message is superior. rice disco!nts: (o successfully offer a comparable product at a lower price, you ha e to con ince buyers that your product is similar to that of the competitor and that the competitor won!t lower prices in response. #uyers must also be price sensiti e for price discounts to ha e an effect.

"heaper prod!cts: 3ffering a erage or low-5uality products at a much lower price can work, but his strategy is ulnerable to competitors with e en lower prices. restige prod!cts: >aunching a higher 5uality product at a higher price than the market leader can work well if customers can be made aware of the 5uality difference. rod!ct variet#: ?i ing buyers more choice can help build market share. #askin-<obins is an e/ample, it opened stores that ser ed 86 fla ors of ice-cream while most offered +ust a few. rod!ct innovation: ,roduct inno ations or impro ements help differentiate offerings from those of the competition. "ost red!ctions: <educing manufacturing, labor or purchasing costs can create a lot of options when it comes to dealing with competition. Sa ings can be used to fund ad ertising, promotions and other acti ities.

Service improvements: Ser ing customers better than the competition is another differentiator. $istrib!tion changes: :sing different or impro ed distribution channels can gi e an edge. @ictoria Secret became a ma+or women!s wear company by perfecting catalog sales instead of battling other firms in traditional stores.