How to counteract competitive threats

Don’t underestimate the value of a good defence. You need to protect your business market share and profit. Whenever consumer spending is slowing down, you need to defend your market position and maintain your competitive edge. Your defence plan can minimise a new competitor's gains. Push the pain of losing market share onto other players in your industry.

Defensive business thinking works over long term as well as short term. Limit the chances that a competitor business will succeed and you will limit the likelihood that their business will provide a serious threat in the future.

One of the strongest reasons business owners shy away from defending is a "bias towards growth". If you want to be able to afford an effective defence you may have to cut back on areas involving growth. People get excited about growth initiatives but they don’t defend. There’s a perception that if you’re defending, it’s a bad sign. That same thinking emerges in business owner's misjudgment of both the risk that competitors present and the value of their own business. You can get so confident about your own efforts that you miss what your competitors are doing. Don’t underestimate competitive threats.

Whenever a new competitor comes along you face a critical decision. Should you defend your position or rely on market realities to take care of the newcomer? The decision is a complicated one. You can’t defend everything but businesses defend far too infrequently. You can get into trouble when you don’t defend. You can trace a lot of business problems back to inadequate defensive efforts.

There are several typical strategies used to defend against new competitors that apply to all types and sizes of businesses. Here are some ideas from my business notebook.

SWOT Analysis

Your well run business has several strengths that a newcomer can’t leverage. The Business Minder can help you to identify your business' Strengths, Opportunities, Weaknesses and Threats. Lets focus here on some of your strengths

• Customers

• Database

• Suppliers (as partners with mutual interests)

• Trained staff that are liked by your customers

• History - you know already what works and what doesn’t

Promotions

Make more effort to tell people who you are, what you sell and why they should buy from you. It doesn't have to be expensive; marketing can range from posters in your window and leaflet drops through to advertising campaigns in local media.

• Bundling more products, beyond what the competitor has to work with

• Leveraging existing suppliers

• Tourism shows

• Loyalty Programmes

• Coupons

• Demonstrations

• Special products/services

If you are selling a frequently purchased product or service for example a hotel or a restaurant, then it’s best to assume that many of your customers will try the competitor, and you’ll need to work to regain their business.

Improvements

This is a great excuse to do what you’ve been putting off. What related products or services might your customers be interested in? You might even consider diversifying into another area

• Updating facilities like furniture and air conditioning

• Wi-Fi access

• Improving products

• Adding services

• Expanding marketing and customer service (such as meaningful social media and web improvements)

• Uniforms

• Branded Packaging

• Repainting or Refitting your premises

Pricing

If you have “deeper pockets,” you can out spend your new competitor and keeping them from getting established. You can lower your prices on the directly competitive products/services. If possible, you should increase prices on less competitive items that are less competitively shopped to retain some of the lost margin. This is dangerous because you risk setting a new lower price point expectation that cheapens your brand while killing your ongoing profitability.

Unique Value Proposition

Find out who your competitors are, what they are offering and what their unique value proposition (UVP) or selling point is. This will identify the areas you need to compete in, as well as giving you a platform for differentiating yourself. It's essential to give your customers good reasons to come to you rather than a rival. Your UVP should tap into what customers want and it should be clear and obvious. No one should have to ask what makes you different.

Customers

Your existing customers will be your competitors' target market. Provide better customer service by being more responsive to their needs and expectations. Develop a deep understanding of your current core customers and determine what makes them enthusiasts. These are the repeat customers that enjoy both buying from you and recommending you to others. If possible, consider offering low cost extras such as improved credit terms, discounts or loyalty schemes. It's cheaper and easier to keep customers than to find new ones. Add new customers. You always have to replenish your customer base since even the best business loses customers.

A strategy that should be followed, even in tandem with other tactics, is to restate and even improve on what makes your business successful.

• Communicate your message more often to more people in more ways

• Continue promotional efforts that have proven successful

• Strengthen consumer touch points

• Eliminate customer irritations

• Retrain everyone to listen to and interact with the customers positively and personably.

Service

Better service is expensive but can pay off. This could be a case where the new feared competitor forces an expensive business improvement which payouts out. Consider this

• Longer hours

• More staff

• Better staff

• Better training

Leadership

Be the best employer. Skilled and motivated staff underpin vibrant, growing businesses.Attracting the right staff means more than paying a competitive wage. People are often more impressed by a good working atmosphere and benefits such as flexible working hours and structured career development. Businesses that plan for growth are more successful than those that are happy to stay still. Keep up with developments in your industry, follow consumer trends, invest in new technology and have a clear idea of where you want to be in one, three and five years' time.

To survive against a strong new competitor it’s necessary to upgrade your entire business continually. If your business is solidly established, many competitors will decide to move elsewhere to tackle easier prey. The Business Minder is available to assist your business with all aspects of business analysis and management.