“I have been up against tough competition all my life. I wouldn’t know how to get along without it.”

– Walt Disney

If you’re running a business, I’m sure you know your competition. So this chapter is just a refresher, with perhaps a reminder or two to give you a fresh viewpoint. And if you’re just starting a business, this will help you organize your approach to competition and positioning. For a business plan event, this chapter will help you cover the bases as you prepare a pitch or a formal plan. As with the previous chapter, I have to almost-repeat my introduction. If you’re like most business owners, you know your competition. You don’t need this chapter to set your strategy and tactics. Still, an annual fresh look at the competition is a good idea, and this chapter might help you with that.

Whether it’s pitch or plan, your target people want to know who competes with you for your customers’ time and money. They will want to know whether they are directly selling competitive products and services, substitutes, or possible substitutes; and their strengths and weaknesses, and their positioning in the market.

Important: Never suggest to an investor that you don’t have competition; not in your formal plan, not in your pitch, and not in any summary. Most investors take that as an indicator of lack of experience. Every good business has competition. If it’s so new that it doesn’t have competition today, if it’s an interesting business, then it will have competition tomorrow. In that case, competitive analysis guesses which big competitors will enter the market. Furthermore, there is also the suspicion that a business has no competition because it’s not really a good business to enter.

The competitive analysis relates to strategy, tactics, product, market, and marketing and product plans. That makes it tricky to place within the summaries, pitch, or formal plan document. When you get to dressing up your plan, I suggest you first decide where to put your competitive analysis, in whatever order works, such as in the market analysis, marketing plan, or product topic. Then you consolidate the discussion in that one place and refer to it, with links in the electronic or online versions, and in the other places it comes up.

This chapter includes two additional topics:

• Nature of Competition
• Competitive Positioning
• Competitive Matrix

If it isn’t obvious, and you have something to gain from explaining, then start with the general nature of competition in your type of business, and how customers seem to choose one provider over another. What might make customers decide? Price, billing rates, reputation, or image and visibility? Are brand names important? How influential is word of mouth in providing long-term satisfied customers?

For example, competition in the restaurant business might depend on reputation and trends in one part of the market, and on location and parking in another. For the Internet and Internet service providers, busy signals for dial-up customers might be important. A purchase decision for an automobile may be based on style, or speed, or reputation for reliability.

For many professional service practices, the nature of competition depends on word of mouth because advertising is not completely accepted and therefore not as influential. Is there price competition between accountants, doctors, and lawyers? How much difference does a website, or social media engagement, make in choosing professionals?

How do people choose travel agencies or wedding florists? Why does someone hire one landscape architect over another? Why would a customer choose Starbucks, a national brand, over the local coffee house? Why select a Dell computer instead of an Apple? What factors make the most difference for your business? Why? This type of information is invaluable in understanding and explaining the nature of competition.

I’ve seen this done well as a single slide in a pitch presentation. It has a title like “Keys to Success in [your industry].”

You can’t plan marketing in a vacuum. You need to know how your business stacks up, in terms of the values it offers to its chosen target market. Key marketing tactics including pricing, messaging, and distribution, while others are about positioning your business against the background of the other offerings. How do you stack up against the others?

The goal is positioning, setting your business up against the background of other offerings; and making that positioning clear to the target market. How are you going to take advantage of your distinctive differences, in your customers’ eyes? What are you doing better? How do you work towards strengths and away from weaknesses? What do you want the world to think and say about you and how you compare to others?

Positioning Map

I included Kotler’s simple strategic positioning map of breakfast in the discussion of Strategic Positioning as part of strategy. You can easily draw your own map with any two factors of competition to see how a market stacks up. Another example is my own rendition of a positioning map related to popular automobiles, which you could fill in as you like.

You’ll also see positioning maps set up with two axes, vertical and horizontal. It’s quite common to see price on one axis and some important qualitative factor on the other, with the assumption that there should be a rough relationship between price and quality. For example:

Looking at the map below, you might say that the hamburger and Restaurants A and B are priced appropriately, while upscale sandwich is a good deal, and Restaurant C is a bad deal. And you might also praise the marketing for Restaurant C, or perhaps predict that Restaurant C is likely to have a declining business. Fooling people, as the chart implies Restaurant C is doing, is rarely good business.

Nowadays many businesses work up a competitive matrix showing how different competitors stack up according to significant factors. Compare your product or service in the light of those factors of competition. How do you stack up against the others? This is a good place to include the competitive matrix showing. Here is an example:

For the record, I’ve seen dozens of competitive matrices in plans and pitches and yet I’ve never seen a single one that didn’t show that this company does more of what the market wants than all others. So maybe that tells you something about credibility and how to increase it. Still, the ones I see are all in the context of seeking investment, so maybe that’s the nature of the game.

As with marketing information, so with competitive information too, these days it’s not a matter of finding a needle in a haystack; it’s figuring out which needles to choose from a mountain of needles. You can find an amazing wealth of information about competitors on the web, and in mobile apps. The hard part, of course, is sorting through it and knowing what to emphasize.

I do suggest here that you stay flexible and pragmatic. Look for available information that will stand for what you want to show. For example, I might use stars and such in reviews, from amazon.com or Yelp, as a surrogate for quality. That would be way more practical than conducting primary research. And it’s credible to the audience.

There was once a problem finding information on smaller privately owned competitors, compared to the wealth of financial information available for companies traded on one of the major stock markets. Nowadays, however, websites, social media, and reviews are widely available on lots of local businesses. Not having some way to rank and evaluate competitors is usually for lack of trying, not for lack of information. Here too, beware of having too much. Spare your readers proof of how good you are at gathering information, and give them only the information they need and will use.

Don’t assume you can get financial information on companies that are privately held. Use a surrogate if you have to, like numbers of employees, rooms, tables, vehicles, or (here too) stars in reviews. If possible, you may want to take on the task of playing the role of potential customer and gain information from that perspective.

Industry associations, industry publications, media coverage, information from the financial community, and their own marketing materials and websites may be good resources to identify these factors and “rate” the performance and position of each competitor.

Industry financial profiles are available on the web. You can find statistics like average annual growth, average number of employees, sales per employee, sales per square foot, average profits from sales, and similar benchmarks for sale from competing providers, for $100 or less for a single profile. Google that on the web. My company’s web app for business planning, LivePlan, bundles these profiles broken by industry type and size of business, as part of the web app license.

When I started working professionally in market research, I usually couldn’t get the information I wanted. Or needed. There was no Internet back then, or at least not anything available to anybody normal. Government statistics were available but cumbersome.

So I built conceptual crossword puzzles. Connected dots. I’d have one source of government information give me an overall growth rate for a related industry, then find a large company whose annual report gave me information on their particular segment, then an analysis somewhere telling me that the industry leader had 60% of the market, and I’d be able, sometimes, to generate an estimate of something I needed to know.

You can do that today. Find available statistics here and there, look for snippets quoting experts in published materials, find the annual report of a publicly traded company, and look for data to mine.

What can your new coffeehouse sell? Think of a first person to ask, and if that person doesn’t know, ask him or her, as you finish the phone call, who else they know who might be able to answer. Encourage people to make an educated guess. Shouldn’t you also be able to find out how much an average Starbucks location sells? How is yours going to be different from Starbucks? Estimate from what you know, and jump from there to what you don’t know.