Who is your competition? That seems like a simple question—and most business owners will have a quick answer. It will normally be other similar businesses in the same geographic area, offering similar products and services. Although that is a good start, if you stop there you may be missing some very powerful competitors that may not even be in the same business as you.
Perhaps a better way to ask the question is, who else is competing with you for your customer’s business? The answer to that question may not be so cut and dry, and it would include all alternatives that the customer is considering when deciding whether or not to purchase your product or services. If you accept that as a definition of a competitor, you may have more competitors—or completely different competitors—than you initially thought.
For example, a lawn maintenance service. Of course, the first thought for competitors will be other lawn maintenance services in the same area. They are likely to be some of the alternatives the customer may be considering. But what if the real alternative the customer is considering is whether to purchase a lawn mower to cut the lawn themselves? In this scenario, retailers selling lawn mowers may be stronger competitors than other lawn maintenance businesses.
A restaurant owner would definitely list other restaurants in the same area as competitors. But depending on the type of restaurant, it could also be competing with the movie theater for the evening entertainment experience, or with a sandwich brought from home for lunch.
A financial planner is undoubtedly competing with other financial planners in the geographic area for business. But what about banks? Or online alternatives?
Although expanding the range and knowledge of potential competitors is certainly helpful in attracting new business, it may be even more important in retaining your existing business. Who is trying to steal your current customers, and what are you doing to prevent these actions?
In the end, it really comes down to how well you understand your customer. By understanding all the alternatives your customer is considering, you can ensure that you are addressing the competitive advantages that your business has over all of them—from your customer’s point of view.
Being aware can help you win new business from traditional customers, and be mindful of areas that are a potential vulnerability to your existing business. If you discover that you have a competitor from an unexpected area, this may open up additional opportunities for your business to compete in its traditional market as well.