When I read business plans and talk to business leaders, I see that their daily routine is to create more competition. People spend a lot of time and energy worrying about competing against other businesses that offer the same services as them. Often, it’s not worth your time and concern.
Who are your direct competitors? Do you have a plan to beat them? What makes you better than them? What are your differentiators? Have you asked these questions to your potential customers, current customers, and employees? I don’t think you should try to answer these questions.
When I read business plans and talk to business leaders, I see that their daily routine is to create more competition. People spend a lot of time and energy worrying about competing against other businesses that offer the same services as them. Often, it’s not worth your time and concern.
I present four common mistakes business leaders make and five tips that can save them time, money, and headaches about competitors.
Mistake #1: Researching ways to drown your opponents
Many businesses have pages and pages of information about their competitors. “We’ve identified 77 consultants in the last three months. Here’s a breakdown of how we’re different from them…”
In my opinion: That’s three months of wasted time. People would laugh at an accountant who boasted, “I’ve found 142 accounting firms in the state and can confirm that 131 of them offer the same services as we do.” Even though this information is an integral part of any marketing plan, it would be a shame to say so.
Mistake #2: Providing Services Reluctantly in the Market
Many businesses launch a new service that complements their existing service simply because their competitors already have it. “Look, I can’t get into this property law practice. There are at least five other businesses in the market, and I learned in business school that first movers have an advantage. If you’re not first or second, you shouldn’t be launching a product.”
In my opinion: Legal firms, consulting firms, IT firms, financial services firms, and other professional service firms – they are not Coke and Pepsi. The dynamic market does not work that way.
Mistake #3: Differentiating from competitors
“We are ABC Tax Consulting, we are the number one provider in the market. Our biggest differentiator is our people, who always have a strategic view of your business. We have a team that can combine people, processes and technology to create effective and efficient solutions that fit your most strategic needs. We are more than just tax services, we are the most experienced business strategy consultants you can ask for.”
My opinion: Copy the above paragraph and say nothing more, except “I really have nothing to say, so I'll just use this meaningless marketing release.”
Mistake #4: Using a Single Method
“We have a unique methodology that helps us deliver projects that are more efficient and more likely to be successful. And here are the five steps in the methodology: discover, design, develop, execute, and measure.”
My opinion: Of course, this is unique – there is only one such process in the world – but everyone uses it or something similar to it.
Misunderstanding such concepts will limit the success and development of businesses, because they limit the thinking of those who are operating and executing the business's activities.
What do you need to do to compete with these types of misleading guides?
Tip 1: Forget the Marketing Book
Marketing Books Teach You That…
·Be the market leader. You will have an advantage over latecomers.
·Be first or second in the market. There is no profit for third.
·There must be a unique business logic that no other business can copy.
·Differentiate yourself from your competitors. Differentiation is the key to success.
I ask you, who was first, and who is now, the best investment advisor in Boston?
John Hancock • Citigroup • Brown Brothers Harriman • Fidelity Investments • Charles Schwab • TD Waterhouse • Salomon Smith Barney • Banknorth • TD Waterhouse • Charles Schwab • Citizens Bank • RBC Dain Rauscher Tucker Anthony • Wainright Bank • Eastern Bank • Sovereign Bank • Prudential Financial • Legg Mason Walker Wood • Merrill Lynch • Morgan Stanley • Paine Webber • Bank of America • Boston Private • Fiduciary Trust • Edward Jones • AG Edwards • Bear Stearns • Dozens of other small banks • Hundreds of CFPs, CPAs, and insurance firms • Hundreds of other businesses.
Does it really matter who was first?
You think a business with six people can't make much profit? They can, and they can even compete in a market with businesses with 200 people, providing the same services as them and having similar customers as them.
Do they offer services that are different from others? Do you need a “different” dentist to fix your teeth, or do you need a good dentist?
Marketing books (and many books about business and consulting) focus on Proctor & Gamble, Whole Foods, US Steel, Coke, and Pepsi. We know those companies, they’re interesting. But the strategies they pursue don’t grow a 35-person consulting firm to 50 people. They usually go their own way.
Tip 2: Don't worry too much about a crowded market.
I can’t count how many Italian restaurants there are in New York’s Little Italy, or how many barbecue villages there are in Chicago; there are just too many. But I can confidently say how many bistros there are on French Row in Maine, Peru.
If you are a human resources consultant, there are a lot of people like you doing the same thing, simply because there is a market for human resources consultants. If you are looking to “create a market” and “be the first”, there is a good chance that no one will enter that market because no one will buy your services.
In microeconomics terms, a dynamic market like Coke and Pepsi is “free competition,” while a service market is “monopolistic competition.” In a free competition market, there are only a few leading competitors with strong competitiveness, large market shares, and large profits, and other competitors have difficulty surviving. This is not the case with monopolistic competition. In the Yellow Pages, there are 88 pizza restaurants in Miami, FL. There will be an 89th, if they make good pizza.
Entering a crowded market, there will be many businesses, and there will be many customers with many needs. So, this is an opportunity for you to overcome. Open a French bistro in Peru, Maine. Good luck with your business.
Tip 3: Stop worrying about your competitors and focus on your customers
Say you were interviewing employees for your company. It would be perfectly reasonable for them to ask you, “What makes your company different from your competitors?” The same goes for your customers and prospects. You might feel compelled to answer – by comparing yourself to your competitors on a piecemeal basis. And so on.
You don't want the conversation to revolve around your competitors. The more you talk about them, the more you acknowledge to your customers, prospects, or employees that they're worth comparing to you.
If you are a good salesperson, you should be able to control the questions and control the conversation. For example, if you answer: “Well, we have a research department that does practical research, which helps us stay on top of the needs in the ABC industry. As far as I know, our competitors don’t do that. They evaluate our research in their own way, but in the end, we are the leader, not them.”
“Importantly, I don’t know what they do with our research. I know exactly what we do, but it’s to help our customers. This is a good example of your industry… How would this help you?”
Tip 4: Be less stereotypical
When you do the job of answering the question: “What makes you different?”, don’t answer with “it’s the people… the people the process and technology… the productivity and efficiency… we’re the best… we’re unique… the sharpest… pushing the envelope… going the extra mile… the customer service center… etc.”
If you do that, it's the easiest way you can help people win at word bingo (Don't believe me, Google "buzzword bingo" and see what comes up)
Have something real to say.
Tip of the Year: Outsmart Your Biggest Competitors – Differentiate for Your Customers
The last, and perhaps most important, thing to realize is that a product business’s competition will be another product business. In most service businesses, your biggest competition is your lack of differentiation for each customer, as if you were just a “source house.”
In How Customers Buy: Prospective Customer Sales and Marketing Tracking Report, 40% of 200 professional consulting service customers said that service providers did not understand their needs, 32% said that providers did not convince customers to believe in the value they bring to customers.
You need to convince buyers of the value you bring to them, regardless of who you’re up against. Because you’re so worried about who your competition is, you’re even more worried about the value you bring to your customers. If you win this round, you’ll be punching your competition in the face.
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