Some time ago I was having dinner with friends and the conversation ran to the topic of competitors. According to them, they aren’t competitors. I think they are. One runs a B&B and the other one operates a vacation house rental business in the town in the South of Spain where we live. They both target the Dutch market.
They figure that one of them serves “the people looking for vacation houses in our neck of the woods here in Spain” and that the other serves “the people looking for a B&B in our neck of the woods here in Spain”.
Another example. A couple of years ago I read a business plan for a small lunch café in the center of Amsterdam. The competitor’s names were listed and they were similar establishments in the same street or around the corner.
I am pretty sure that these business owners were partially correct. This way of reasoning – that I encounter quite often among business owners – is however, flawed.
Business owners tend to think that only those businesses that do exactly the same thing, are their competitors.
How Competitors Influence Your Business Definition
Nothing is further from the truth. The lunchroom café for instance, is in one of the busiest parts of Amsterdam and there are a lot of cafés were you can have lunch, but on one end of the short street on the canal there is also a McDonalds. In addition, on the other side of the short street is a supermarket that sells sandwiches, as does the stall on the bridge.
If you define your business as a lunchroom café you tend to compare your business with other lunchroom cafés. If you define your business – in this example – as a place where people come to eat, every place where people can eat becomes your competitor; even the McDonalds. If you go even further and define your business as a place that fulfills peoples’ need for lunch, you have to include the supermarket and the stall on the bridge that sell sandwiches, and of course the McDonalds, as your competitors.
Of course, you may not want to know about all these competitors, but that is closing yourself off from reality as well as from commercial opportunities. If you see your lunch room café as a place that fulfills peoples’ need for lunch, you can set up a sandwich service for the offices in the vicinity and spend those morning hours when no one is there, preparing sandwiches, or packed picnic city lunches. If you position yourself as a place to eat, you could consider extending your opening hours and opening early, making it a breakfast café as well.
The key is viewing your business through the eyes of your potential customers. Do they see a lunch café, a place to eat, a place to get lunch, or maybe something else entirely. The same goes for the vacation house rental business and the B&B. There will be groups of customers that will see them like they see themselves, but there are also groups of potential customers that want an affordable place to stay in our part of paradise. They do not care if they go to a house or a B&B or a hotel for that matter. They just want to get away and are flexible in the type of accommodation.
Another example to illustrate the point, is a story told to me by a former strategy professor. Apparently, at one point Parker Pen did research as to who their competitors were.
At this point in the story – when I tell it – I usually let people guess what the outcome of the research was. So go ahead and guess and write your guess down. No cheating! By the way, no one ever gets it right!
The outcome was that their biggest competitor was the Swiss Army Knife. Those things are pretty nifty, but even if there is a pen in that whole getup, I am pretty sure that most people prefer to write with a Parker Pen and not a Swiss Army Knife. So, it being able to write is not the benefit the customers buying it were looking for.
The research showed that the Swiss Army Knife was an alternative to a Parker Pen as a gift. Writing or cutting were not the benefits the buyers were buying these products for. The benefit of these products to them, was it being able to be given away as a gift.
Competitor Mind Shift
Can you imagine the mind shift you go through if you go from seeing the product you sell as a writing tool to seeing it as a gift? It has an impact on the look of your pens – when I was 17 I received a girly pink Parker Pen (and pencil) set for Christmas – and the way you present them; as a set with a pencil in a special box.
It also has an impact on the channels you sell your products through. If you sold your pens in office supplies store before, you all of a sudden can add gift stores to your distribution network. Try to imagine the commercial opportunities this other way of thinking offers.
In order to avoid the “thinking that you are competing on your product” trap, try to think which problem you are solving for your customer. Are you solving a writing tool or a gift problem? Are you solving a B&B, a vacation house, or an accommodation problem? Are you solving a lunch café, a place to eat, or I want to eat something right now problem?
You will all of a sudden have more or different competitors but also more opportunities to market your products solutions.
So who are your competitors? Which problem are you solving? Do you know?
By Pepita Bos