Volume 3; Issue 3

I Don’t Know if I Still Have a Strategy – Part 2 of 3
Formulating a New or Improved Competitive Strategy

In Part 1 of this newsletter series, we suggested having a meeting amongst key company personnel to brainstorm answers to the six questions below. In this issue, we will discuss questions 1, 2 and 3.

1. How many different reasons are there to explain why customers buy from me?
2. How many of my customers also buy from my competitors? How much do they buy and why?
3. What makes my company different than my competitors? (Include the good things and the bad.)
4. Is my goal to keep up with, stay ahead of, or be different from my competitors?
5. Do I have the right mix of products and services or am I trying to be too many things to too many people?
6. Are my customers in growing, mature or declining industries?

Consider your staff’s answers to the questions 1, 2 and 3. All three questions relate to why customers buy from you and why others buy from your competition. Customers typically buy for one or more reasons, but those reasons normally fall into five categories.

1. Price
2. Quality
3. Convenience
4. Service
5. Relationship

The next step involves a comparison of the reasons why people buy from your competitors. This might include your own customers if they sometimes use competitive sources. How do these reasons compare to those listed for your own company? There must be differences, no matter how subtle. List these reasons in a second column using the same colors as before. Make a column for each competitor.

The key to this exercise is to understand what motivates people to buy from you versus your competitors and what separates your competitors from each other. You are now better prepared to adjust your marketing to reflect your value differentiators – those attributes that separate you from the competition.

Suppose your price is a little higher than the competition but your customers remain loyal because they prefer your service. You might run a short-term sale to attract customers from the competition and then “wow” them with your service.

You may find you need to be more like the competition in some ways and remain different in others. What if your service department was open until 7 PM versus closing at 5 PM? You may find many of the competitors’ customers would switch to buying from you because they require later service hours. Do your competitors carry complimentary products that make it easier for customers to get what they need in one stop? Perhaps you need to reconsider your inventory mix.

Remember, price is the last thing you want to change to drive new traffic. Pricing represents a tactic that every competitor can easily match. Within six months, everybody will be exactly where they are today but making less per sale. Playing with price corrupts the market for all participants.

Sometimes differences between you and the competition are so subtle they don’t provide any basis of competitive comparison. This isn’t necessarily a bad thing. It may mean that an opportunity exists to create a “value differentiator” and catch the competition flatfooted.

For example, a local, in-town gardening center was competing for the same customer as larger competitors in the country having acres of product at lower, volume-based prices. After performing a similar competitor analysis with a trained consultant, they decided to no longer compete head-to-head with these larger competitors. They began reducing inventory in low margin areas and expanding inventory in higher margin, specialty items including unique gifts and seasonal home decorations. They also leased 1,200 feet of space to Starbucks and repositioned themselves as a gift and gardening “boutique” and improved profit margins and created an enhanced shopping experience for their customer.