Challenge No. 9: Knowing How to Compete

“My best advice for competing successfully is to find your own distinctive niche in the marketplace. It could be price, or variety, or service . . . whatever it is, stick to it.”

 

To keep customers and add new ones, owners stress the value of knowing how to compete. They have learned through experience that there is a difference between “just plain competing” – for example, relying on low prices – and knowing how to compete effectively. Owners believe that competitive savvy means being true to what made them successful in the first place – keeping the integrity of their original vision, growing strategically, and above all, using their strengths as leverage in the marketplace. All this is achieved while keeping an ever-vigilant eye on what the “other guys” are doing.

 

Again and again, owners stress the value of adhering to their original plan. “My goal is to make my business profitable without compromising our values,” stated one toy retailer.

 

To achieve his goal, the retailer concentrates on his distinctive niche. “People come to us because they like our personal service,” he explained, “but sometimes they only have so much money to spend. We have overcome this by becoming more of a specialty store.”

 

Owners sometimes struggle to uphold their commitment in the face of stiff competition – but they find that maintaining the integrity of their idea and focusing on their strengths are the best long-term competitive strategy:

 

“I’ve seen our industry going through price-cutting that is absolutely staggering,” noted a construction equipment lessor, “but I have not participated in it. Yet I have grown and prospered and make a nice profit, and we are consistently the highest-priced people in the marketplace. In the long run our quality shows our customers that we are the cheapest to do business with. You spend an awful lot of agonizing evenings and days trying to decide whether to participate in the price-cutting game – do you try to just gain market share and kill the competitors? If you have a quality product, you probably will kill your business at the same time. It takes guts and commitment to withstand that, to rally your sales staff around you and say, ‘we are not the cheapest, but we are going to be the best.'”

 

To keep capitalizing on their strengths while sales increase, most owners set a goal for controlled growth.

 

“You can grow too fast,” noted a contractor. “You don’t want to take on more projects that you can complete. And, you don’t want to take on more than you can finance.”

 

How do owners expand their customer base? Most rely on a variety of methods. Eventually, they develop a mix of keeping their sales staff motivated and marketing effectively.

 

“You learn better sales and motivational techniques,” said one wholesaler. “Make sure your people continue to learn new ways of selling.” Effective marketing involves communicating the benefits of your product or service to obtain new customers. Owners rely on a variety of methods, usually tailored to what works best for their particular business.

 

“Word of mouth is big,” said one retailer. “We live in a community that is pretty good about passing on the good word.” This owner also used advertising and the yellow pages to keep his name out in front of the market. In general, he advised to “find what works and stay with that.” Those who could afford it found value in tapping the expertise of outside marketing consultants.

 

Of course, effective marketing inevitably includes being aware of your competitors’ activities. “You have to be very cognitive of the competition and what they’re doing,” noted an automotive glass replacement shop owner. A businesswoman explained that “knowing where you stand relative to your competition allows you to position your own product in relation to the market” – referring back to the theme of knowing where your strengths are and capitalizing on them.

 

It is at this point that pricing does become an issue for small business owners. Inherent in the concept of small business is that you cannot discount on low volume – so to make a profit while being price-competitive, owners advise that you establish an identity, stick to it, and communicate it.

 

“What do you give your customers that your competitors do not,” asked one successful owner, “and what is that extra something worth to your customers? That’s the whole concept of value-added services, and that’s how you establish your prices.”

 

“To get higher prices,” advised another entrepreneur, “do something different that no one else is doing.”