How well do you know your competitors?
“Know your competitors” is a phrase frequently uttered by business-gurus – but why is it so important, and what exactly does it mean? It’s not just being aware of them, but knowing the ins and outs of what they do, who their client-base is, where they excel and where there are gaps to capitalise on. This is an ongoing process – looking at past, present and future – and if done strategically, will allow you to resiliently adapt and evolve; to differentiate, stand out, and get ahead.
How a company positions itself relates to its context and target-market – who the product is aimed at and why they may want to buy it. As a business, you differentiate by positioning yourself in relation to subsets of the market. This is true whether selling B2C or B2B. For example, you can buy shoes at a trendy-but-inexpensive store or an ethics-conscious retailer. Each will have customers who overlap, but also differ – the latter may have a target-market who want value-for-money fashion, but also insist their clothes are environmentally friendly. Study these factors and differentiate your positioning accordingly.
Direct or indirect competitor?
Every business has competitors – they just vary in nature. Direct competitors are more obvious – they offer a similar product or service to you. Indirect competitors, on the other hand, sell a different product or service, but have an overlapping target-market. These are nonetheless important to watch because changes in demand or the economic environment might allow them to take over your clients – or vice versa.
Strengths and weaknesses
A related point is understanding your competitors’ strengths and weaknesses – both of direct and indirect competitors.
- Strengths: Assess your competitors’ strengths to see why they are successful. You can then use this insight to emulate certain parts of their business, and decide whether to compete directly with them, or differentiate yourself – through your positioning, for example. It also allows you to identify existing or potential threats, and adapt to them. Does a direct competitor offer something that gives them an edge? Could a change in consumer habits allow indirect competitors to usurp your market? If you supply other businesses, you need to look at the threats they face, too.
- Weaknesses: The above needs to go hand-in-hand with an assessment of weaknesses. A weakness may be straightforward to exploit: perhaps in offering superior customer service, or more effective marketing. Or it may be an untapped subset of the market – such as for trendy clothes that are environmentally friendly. With indirect competitors, look at larger changes in the industry: if vital components of their products or services have made them more expensive, for example, position yours as an alternative.
Your pricing should always take positioning into account. Cheaper is not always better. In many cases, it will be, but think for example of how mid-range (rather than cheap) products are often placed next to the most expensive ones in stores, which increases their sales. If your product or service is cheaper than those of competitors, you need to demonstrate that its quality is acceptable to your target-market – if it is more expensive, then the added value is worthwhile.
The success of SMEs is heavily reliant on resilience: understanding who your competitors are, what they are doing, and how changes in the market effect these things. From positioning to pricing, you need the capability to adapt and evolve. One good way to analyse this is to ask what emerging trend could topple your business. This can be anything from changing materials costs to new technologies. This should not be seen just a threat, however, but an opportunity. If you can adapt to changes that your competitors cannot, or leverage gaps created in new markets, you can not only weather the storm, but sail to success.
Surpass competitors with durable financing
Even for savvy business owners, staying competitive in a rapidly shifting economy is a difficult feat. It’s all well and good to understand the changes and how you should respond, but do you handle the practicalities? How do you manage cash flow with new customers on credit terms of up to 120 days, or the expenses of expanding into a new market?
With factoring, you sell your accounts receivable to a third-party organisation, giving you cash on-hand to finance your business costs. Merchant Factors recognises that a changing market creates new opportunities, and rather than focusing on your credit history, assesses the clients you are able to bring in. With the flexibility to expand and adapt to a transforming environment, you can build a resilient business that stands the test of time.
For fast, flexible business finance – contact Merchant Factors today
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