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Competition Stealing Your Profits?

Owner/ Managers of Small and Medium Enterprises start their companies, typically, because they excel in one particular area. Be that in the making of a product, the selling of a product or the management of the processes that ensure that business is done most efficiently. Very few, if any, start with the end in mind, as Stephen Covey suggests, and know what their company will look like in time. Even fewer start with a focus on what their potential Client looks like or what other company is operating in ‘their’ market.

The consequences of not planning for these things are dire and deep rooted so that companies can ail for a very long time whilst never achieving what they should achieve given the continual struggle with competition. In these circumstances it is often the case that the companies will ‘follow’ the established or assumed leader in a field and will be forever branded as the follower in its market. This should not necessarily be the case and focus on the company’s long term strategy, its ‘real’ Client set and it’s ‘real’( as opposed to perceived)  product will result in ‘real’ benefits.



When I have asked my Clients in the past – ‘How many Competitors have you got?’ and ‘Is there enough business for all’? The answers are varied but, typically, tend to the ‘three or four’ and ‘there is enough business for everyone’. This is quickly followed by ‘they force the prices down’ and ‘bidding takes so much time’. Similarly, to the ‘Who is your Client?’ comes the ‘everyone can be my Client’.

In the environment where multiple suppliers bid for the same job then the main item that goes down is price. This is quickly followed by quality. There are situations where a winning bid will lose the suppliers money and many times this is not obvious. It’s only when costing of all the processes is taken into account (the selling, the bidding, the delivery etc.) that it becomes so.

Recently I heard of an Independent Financial Advisor who is taking all the business that he can handle. He has been on the marketplace for a very long time and like most others would have seen ‘anyone’ as his potential Client. However, as the father of an autistic child for whom he has done all the financial planning that you can imagine, he had been to a Support meeting for Parents of Autistic children. He was approached by the father of another autistic child for advice. His focus now is totally in support of those parents at a national level.  

It is counter-intuitive but, the smaller the marketplace that is the real focus, the higher the returns. This is, obviously, on the basis that the chosen market must be big enough to sustain the required strategic plan and revenues.

In my experience once this Client set has been identified then all manner of things change within the company. The ‘testimonials’ mirror the new Client set and its requirements, the product set develops in a particular way, website design slowly changes, the lexicon changes and, ultimately, the organisation eats and breathes its Clients.

Of course, deciding which sector is the right one needs careful analysis and implementation. An example: any number of companies can provide electrical services to the residential sector but how many can provide electrics for Home Cinemas? Note how the Client set has changed dramatically? In this new sector is quality and finish not more prized? What has just happened to the price of the service? But how many High Net Worth individuals live in the area?


Commodity versus Added Value

The more competition there is in any sector the more difficulty any buyer will have to tell the difference between one supplier and another. At this point the only difference is price. Simple as.

These days most of us buy books from the internet. Some will buy e-books and the choice of suppliers becomes more interesting (and this will be dealt with later) and some will buy the ‘real’ stuff. Where do we gravitate to? The vast majority of us? To Amazon. But we also buy from Alibris, eBay, Waterstones and others. Since the book we seek is the same in all the sources what differentiates? The answer is simple: the price is the great differentiator (including postage) and that is the way it should be, after all, the book is a commodity. But does having the lowest price always automatically win? Research and experience dictates otherwise.

The fact is that we do not just want to buy books at the cheapest prices over the internet. We want to buy the books that arrive as soon as possible or, at least, as required and safely. We want to potentially browse through the biggest catalogues possible and not just confine ourselves to books but also browse other items. We want the buying experience to be as satisfying as possible.

At this point we want a value-added product, not just a commodity. Is the buying decision as price sensitive now? In most cases, the sensitivity has disappeared, within bounds.

Yet most business owners will focus on supplying their products at the ‘best’, most competitive price as a commodity and not focus their buyers and potential clients real needs. If you know, really know, who your Clients are can you not add value to the basic products to make the offerings exactly what they need?

If you bring real differentiation to your product offerings specifically for a really well defined Client set, where will you Competitors be? Well, the probability is that they will not ‘see’ you and, if anything will be following in your wake.

How many business managers and owners realise the ‘value’ of value add? Well obviously Gucci, Prada, Bollinger and others have done. Have you?


What differentiates your Company?

In a marketplace where everyone can claim to be everything in their field to every potential Client the ‘me too’ syndrome can destroy companies.

Simple example: My gardener was in the garden and looked a bit concerned. With two cups of tea in my hand (essential!), I asked him what was concerning him. ‘Competition’, he replied, ‘You don’t understand, in our area every unemployed person with a pickaxe and a shovel is a gardener! The fact is that the gardens will go to pot in the next three years but, in the meantime, my prices are forced down and there is not enough for everyone’. That he has gone to college and has many years of experience and many satisfied Clients has just been swiped away by competitors that claim the ‘me too’.

This situation exists at every level in business from the ‘start-up’ to the multinational.

But how to differentiate? After all the people who do the differentiating are the potential Clients.

In some sectors technology dictates whether the Company Owners or Managers have made the right choices. If you are going to buy an e-book, what are you going to read it on? From Kindle to Sony to Android to I-Pad every software platform now has a compatible reader.

But has the reader got a camera? Can it download films? Has it got a calendar function? The buyer has to be really discerning in the acquisition. So has the supplier.

The clichéd ‘Unique Selling Proposition’ (USP) is a must in most scenarios. Why should any potential Client buy your product when most suppliers will ‘me too’?

Ultimately, the supplier must have a very clear idea of who their ideal buyer is. What age  is their Client in the target market? How affluent are they? How much do they travel? What is the purpose of the e-book reader?  Only in this analysis will the right product or service develop.


Competitive Strategy

Commodity or added value services? Business to Client or Business to Business? Short term or long term Client relationships?

The answers to the above could be right or wrong in any given circumstance but they are decisions that must be made, preferably as early as possible in the life of a company. Then they must be kept to.

Sometimes, under the pressure of non-achievement companies defocus from their target market into other areas and, in my experience, always pay the price.

The service may be Security systems and the target market may be businesses but if the competition is high then the temptation is to move to the residential market in an effort to maintain revenue streams. Unfortunately, with the easier cashflow also comes lower revenues per engagement, lower profits per job and the end is potentially nigh because the business model has been compromised.

The marketing and competitive strategy has to be firmly set from the outset. This should be an essential part of the strategic business plan.

The planned business revenues must be underpinned by reasonable analysis of the market sector – specific client acquisition, target pricing, target volumes per Client in determined timescale with a specific product set. Once this has been done the competitive positioning becomes clear.

But how many competitors lie within the marketplace and how are they meeting the ‘real’ needs of the prospective Clients? What opportunities are there to define a unique position? What needs to happen to the product set, the marketing plan and the entire company focus to make the appreciable difference?

If the necessary efforts in management are not made then the company will potentially be on the back foot from inception. In this case, it is worth reworking the current situation to the future by redefining the focus marketplace (the niche), by adding as much value to the basic product as the potential Clients will be looking for and by defining the differentiating factors.



So how many Competitors have you got? Do you really know and should you care?


How many of your Clients are talking to your competitors right now? Do you know why? Or shouldn’t it matter? 


What does your typical Client look like? What do they do? Where do they live? Do you know or are you guessing?


How remarkable is your product or service?  Do your Clients care? What do they care about?


Why is anyone buying from your competitors and not you? Have you made any time to think about it? Or are you simply selling to the ‘wrong’ set of Clients?


Price, price, price? Or value, value, value?  What are you and your competitors aiming at?


Most people buy within budget but is it always about price? How do you buy?


If the prospect clients have not got the budget, are you interested in the business or do you leave it to your competitors? 


Why do your clients buy from you rather than you competition? Have you ever analysed that? What have you done about it?


If you have analysed your competitors and you are doing things exactly like them, how long will your business last?


When prospect clients look at your marketplace do they ‘see’ you or are you just one of the bunch?


Is it always down to SEO and social media or is your product the ‘right’ one for the target market? Or both?


How is your product differentiated in the marketplace or is there any point in doing so?


How do you demonstrate the difference in your product or company? Or should it speak for itself? To whom?


Product or company – which is the great differentiator?


Are you leading your competitive field or following? By choice or circumstance?


Are you competitors eating your profit or are you eating theirs? How?


Some have business plans, fewer have the competitive strategies that should form part of that plan. Which group are you in?


Does a company need to always be at the top of prospects lists to be successful? Where is yours placed?


How much analysis of the target market is it worth doing? How much has your company done?