Every business, no matter what product or service they offer, has direct and/or indirect competition. Competition gives consumers choices and larger purchasing power. It is vital to understand your competition for a number of reasons.
The first question you must ask yourself is how much competition is in your industry and location. By analyzing who your competition is and how many of them are out there you can determine the best method of differentiating yourself from them.
Large companies tend to be aggressive and have the capital reserves to lower their prices below cost to drive out smaller competitors. If you are not aware of the large competitors in your industry and their habits towards smaller competitors, you may lose your business before you have the chance to really start.
Researching your competition can help you determine the social and business norms for your particular product/service. One of the most valuable lessons you can learn from your competition is how they became successful or which mistakes they have made that you should not repeat.
By analyzing competitors’ marketing strategies, you can determine an already proven method for your business. While you still need to experiment with different marketing tactics, by analyzing what your competitors do that is either successful or not successful, you can save time and money by following in their footsteps or staying away from specific tactics.
Pricing your product correctly from the start of the business is important to the success of the company as it will determine revenues, profits and will also influence consumer traffic. In order to calculate the perfect price, you can analyze what your competitors are charging and how much consumer traffic they receive.