Competition is Good
Estimated Lesson Time: 5 minutes
Back in 1996 when the commercialized Internet was still relatively new, our business was booming. There was a high demand for web hosting, and we were one of the few web hosting providers at the time. We did not have to seek business, business found us. Life was grand. When we reentered the industry in 2002, we discovered that the market was a very different place. The competition had become so fierce that we were forced to change our strategy if we were to thrive, or even survive, in the industry. We ended up creating a product and a service that made us unique in the industry, as well as allowing us to operate a much smoother business model than we had in the past, setting us up for phenomenal growth. Once again, life is grand. This is all thanks to our competition.
Let’s take a minute to go over Capitalism 101. In a capitalist society, ideally speaking, competition drives prices down while increasing quality and service levels. If you have conducted business in any roller-coaster economy, such as during the turn of this last century, you have witnessed this first hand. Competition obviously is beneficial for the consumer, but what about the entrepreneur or business person?
What is your attitude toward your competition? Do you feel as if your competition is responsible for taking money out of your pocket? How about taking food from your kids’ mouths? Believe it or not, I have heard people in business use that analogy before. If you have an attitude like this, you are unlikely to gain any benefit from your competition. In fact, the chances are it will eventually destroy your business. If you want your business to benefit from your competition, begin by following these three rules:
- Never bad-mouth your competition publicly. Saying bad things about your competition to your customers or prospects is business suicide. Sales people are often tempted to build up their own product by putting the competition’s product down. This “dirty politics” technique may work sometimes, but almost without question does more harm than good in the long run. Try something such as, “The XYZ Company makes an excellent product and offers it for a fair price. However, our customers prefer our product because of...”
- Never bad-mouth your competition in front of your staff. Business owners and managers who talk trash about their competition in front of their staff are only setting a poor example for their people to follow. You cannot insist your people follow rule #1 when you break rule #2.
- Never blame your competition for your lack of success. The market is what it is. You can choose how you respond to competition, and the right choices can lead you to greater success.
So how does a business benefit from competition? We have already seen that increased competition tends to increase product quality and service. However, some business people may see this as more of an added expense rather than a benefit. Here are some ways that your business can use competition to its financial benefit.
- Create a new market. 7up™ created a new market as a result of the extremely fierce cola industry. 7up™ created a new market by being positioned as the “un-cola.” They were then the first in that market and continue today to enjoy the benefits of being first in the market.
- Benefit from your competitor’s advertising and marketing. Have you ever seen a great commercial but had no idea who the company was behind it? Or seen a billboard with delicious food that caused you to eat at your favorite restaurant that night? I know for a fact that as a result of our competitor’s marketing dollars, most of our customers are very well educated in the hosting industry and come to us because they know we can give them exactly what they require. Think about thanking your competitors rather than bashing them.
- Use as a selling opportunity. If your prospects are already aware of your competitor’s product, then all you need to do is show them why going with your product is a better choice. Remember, if the prospect was convinced the competitor’s product was so great, he would not be speaking to you in the first place.
- Form alliances. Competitors can make great sources of information and new business if you create an amiable relationship with them. Most businesses in the same market are not identical, that is, their products or services may be different. Take the time to research these differences between you and your competitors and you may find opportunity for shared referrals. For example, a trendy hair salon may refer the guy looking for a bowl cut (if you are not sure what a bowl cut is, picture Moe from the Three Stooges) to “Vinny’s Barber” down the street, even though they could have given the guy a stylin’ $40 haircut. In exchange, Vinny sends over the teenyboppers who want to look just like a boy band member.
Competition is good for consumers, good for the economy, and can certainly be good for business, with the right attitude and action plans. Do not adopt the belief that your competition is the enemy. Instead, use your competition as an opportunity to grow your business and succeed.
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Some discussion questions (some may not apply to this lesson):
- Have you implemented this idea in your life? How has it been working for you?
- Do you have any interesting stories related to this lesson? Do tell!
- What do you admire most about this person? (success biography days)