Dog-eat-dog, cutthroat, killer—does this sound like your workplace? Highly competitive industries can pit small businesses against each other in epic battles to win a tiny edge of market share or a few more customers. To succeed in this climate, small-business owners should keep tabs on their competitors, but they may risk losing themselves in reactionary strategies.
Balance can be the solution. We talked with small-business owners in three particularly competitive industries: beverage, fashion and software/app-building. They shared their tips for gleaning competitive intelligence, but also weigh in on when it’s best to just forget about the other guy and pursue your own strategy.
Pay Attention to Pricing
Common intelligence-gathering tactics include attending trade shows, subscribing to competitor newsletters and ordering their products. David Richards, CEO and founder of Concursive, an app and enterprise software development company in Norfolk, Virginia, regularly downloads competitive products to test during free trial periods and checks pricing online.
When Richards knows his company is in the pricing ballpark for closing a sale, he starts his research. “You can go online and go three-quarters of the way through the buying process and then stop, just to see what they are charging," he says.
Richards frequently changes sales tactics in response to pricing information. “I look at pricing, but I’m not often surprised by what I learn, because there are not that many levers you can pull. A small company will often give product away to get in the door; the pricing will be really aggressive. Bigger companies will [price] significantly higher than the small guy. We know we won’t be undercut by the big guy.”
“I look for a successful competitor that has a price model that works—ideally, someone bigger than us who is in our space," Richards says. "Then we can drop our price by comparison.”
Chat Up Suppliers
At a fashion industry trade show, Sarah Carson spotted one of her company’s fabrics in a competitor’s booth. “That was a wakeup call to me about how I needed to handle my intellectual property moving forward,” says the founder of Leota, a New York-based dressmaker. “I realized I needed to change direction with who was manufacturing our products.” Carson maintains a close relationship with her vendors, and that helps her gather ongoing competitive intelligence.
Carson shops her competitors regularly, but also chats up her manufacturers and suppliers. “I talk to my fabric mills about trending fabrications and price points they are seeing for a particular fabric item,” Carson says.
She is careful to position her questions to ask about the general industry and not specific competitors (who may have required suppliers to sign a nondisclosure agreement). “There is a lot of helpful information that can be shared without violating the trust of vendors,” she says.
Cast a Wide Net
Kara Goldin, founder of San Francisco-based Hint Water, follows general food trends and new products being introduced—and not just in beverages.
“My customer is really moving away from sweeteners and wanting cleaner ingredients,” she says. Goldin can see that trend in energy bars and other foods at trade shows and in groceries. “I try to look for products that might be something outside beverage that would fit that description,” she says. “I start to see more holistically who is my customer, how she is thinking about things and how can I stay close to her.”
Another source for industry trends is following market investments, according to Carson, who has a background in investment banking. “If you look at what the private equity firms are investing in, who is going public, that will tell you where the market is,” she says. “That means some of the smartest people in the industry see growth in that area.”
Listen to Customers
Ultimately, no competitive intelligence practice may be as effective as simply listening to customers. Small-business owners suggest leading with this tactic, staying aligned with your customers’ needs, and your competitive strategy will naturally balance.
“I think the most successful business owners focus on themselves and how to be the best rather than looking over their shoulder,” Carson says. “I don’t spend too much time [on competitive intelligence]. It can be a waste of energy. Of course we want to be industry savvy, and we need to know what’s going on in the market. But the true way to differentiate is by doing your own thing.”
If your industry feels too cutthroat, then it may be up to you to back away. For example, you may choose only a few key competitive elements to monitor for your particular business, like pricing, product materials or market positioning. If you limit the time you spend analyzing your competitors, you can free up more time to focus on building your own brand.
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