When your customer is your competitor

Dr_M_Beedles__RGB_cropIn this month's blog Dr Monique Beedles stresses the importance of understanding who your competitors are and how you can differentiate yourself from them and come out a winner.


I’m still surprised by how many business people say that they ‘don’t have any competitors’, or that they ‘don’t worry about them’.

For all businesses, it’s important to understand who your competitors are and how you compete in your industry. What choices do your customers have, and why do they choose you? While there are risks in every strategy, there are also opportunities to differentiate and come out a winner.

Dr Monique Beedles

For example, you may be the only bookstore in your town and that may lead you to believe that you have no competitors. However, who are you really competing against? If you think that you are in the book business, you still have to compete against suppliers outside your geography, including online alternatives. More so, though, you are competing for discretionary spending with other forms of entertainment. Your real competitors may be the local video store, cinema or live music venue.

Understanding your competitive environment

Ignoring your competitors is a dangerous approach. You need to know where you fit in your competitive environment:

Are you a dominant market leader? If so, how will you maintain that position?

Are you a new entrant? If so, how will you position yourself within the industry?

Do you aim to displace the market leader, or do you want to carve your own niche?

A key step in defining your strategy is to look beyond your own company to the competitors in your industry, as well as to the wider economic environment in your local area, nationally and globally.

Advances in technology can rapidly affect your competitive environment. How will changing technologies influence your business?  Likewise, government regulation or changes to it can shape your competitive environment and may not affect all competitors uniformly. Can you foresee how proposed changes may impact on you?

Sometimes it all seems to hard and so it's easier to ignore the issue of competition. However, it's not all out of your control. While, you can’t control the actions of your competitors, you can choose how you compete.

Customers as competitors

Although it's probably more prevalent in service based industries, it's important to be aware of situations where you may be competing directly against your customers. For example, if you provide outsourced services, the customer can in many cases make a choice to take these services in-house. They may do this to reduce costs, even though the initial decision to outsource was probably made for the same reason. In a difficult economic climate, your customers may have excess capacity within their internal resources and therefore make a change against outsourcing.

In all cases, the onus is on you to remain competitive, not only against other potential service providers, but against your customers' own internal resources. It's important to know why the customer chooses you.

Do you provide a competitive price?

Do you provide a wider range of products or services?

Do you provide skills or specialty equipment that they don't they don't have in-house?

Do you help them spread their risk? If so, are the risks you take on worth the profits you are likely to earn?

Vertical integration, in which companies extend their reach along the value chain is another situation that may bring you into competition with your customers. While the increased control can have value in some industries, the impact on your competitive environment needs to be considered. Will you lose customers if you encroach on their territory? Do you have or can you develop the required expertise to compete in a different part of the value chain?

Whatever industry you are in and whatever stage your business is at, it's important to consider you competitive environment and to think carefully about how you choose to compete.

Dr Monique Beedles This email address is being protected from spambots. You need JavaScript enabled to view it.; www.teakyew.com; Twitter: @mbeedles; ph: 0417 521 842

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