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with this Guide toBeating the Competition

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97 per cent of respondents

[SBOs] feel that competition

agreed that great customer service

forces them to be more

is the best competitive edge a

innovative (79%), keeps them

business can have.

on top of their game (77%), and makes them work hard for their

customers (75%).

79% 77% 75%

A Small Business Owner’s Guide toBeating the CompetitionIt’s no secret that some of the most competitive industries are also the most

innovative. It takes awareness, planning, and execution to make the most of

your unique competitive situation, but with a few important tools, you can

move from viewing competition as a burden to viewing it as a source of learn-

ings to factor into your own business strategy.

According to our survey of more than 650 Canadian small business owners

(SBOs), 98 per cent realize that competition is an integral part of their

business and something they must focus on to succeed. They feel that com-

petition forces them to be more innovative (79%), keeps them on top of

their game (77%), and makes them work hard for their customers (75%).

Healthy competition is important for several reasons:

• It encourages innovation and growth

• It identifies strengths and weaknesses

• It teaches you about your customers

• It motivates you and your employees

According to our survey, 97 per cent of respondents agreed that great

customer service is the best competitive edge a business can have. However,

while business owners are prioritizing customer service, they’re failing to

address other key aspects of competition. Just over half (58%) check out

their competition on a monthly basis, and only 11 per cent do it daily.

Another 16 per cent claim they don’t monitor competition at all. These

businesses are missing opportunities.

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If you understand the true value of competition and what makes it so beneficial

to business, you’ll find that it’s worth the time and effort it takes to understand

your competitors.

The aim of this guide is to help you identify key opportunities that your busi-

ness can address and turn into a competitive edge. This guide will highlight:

• Why competition is valuable

• How to evaluate your situation

• How to come up with a competitive plan

• How to execute your plan

• How to measure success

Navigating the Competition Competition in business is not about coming out ahead of your competitors;

it’s about identifying opportunities to improve your business, as well as

recognizing and reacting to threats before they become an issue.

This distinction is important, because if you focus too much on how well

your competitors might be doing, it’s easy to lose sight of the strengths you

yourself have as a small business owner.

Large corporations, for example, have a hard time regulating their own cus-

tomer service because of the volume of requests they get. Small businesses,

on the other hand, are usually structured in a way that allows them to be

more personable with each and every customer and, as a result, have a better

opportunity to make a good impression.

A competitive business plan, for small and large businesses alike, recognizes

and incorporates these strengths and weaknesses into its considerations.

By observing the competition and looking for opportunities made available

to your business because of their shortcomings, you will run a better business.

If you focus too much on how well your competitors

might be doing, it’s easy to lose sight of the strengths you

yourself have as a small business owner.

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As mentioned earlier, almost all of the SBOs we polled agreed that competition

is an integral part of business and that, regardless of the competition they’re

up against, they always try to provide their clients with the best service possible.

In most cases, your main competition will be other businesses that offer

similar products and services, as opposed to businesses that are simply

located in the same geographic area. Our survey found this is the case for

79 per cent of Canadian SBOs, while only 6 per cent found their

main source of competition in local businesses and 4 per cent in similar

businesses that offer e-commerce.

We’ve briefly mentioned some of the reasons that understanding your com-

petition is important. The points we’ll be covering in more detail are:

• How competition encourages innovation

• How competition motivates businesses to improve

• How competition can result in growth

InnovationInnovation is often the result of necessity, but for businesses it can be risky

to invest time or money into new ideas. However, it’s a great way to get to an

edge on the industry, and even a small idea can have a huge impact on your

position. The best ideas stimulate long-term growth and keep you ahead of

the competition for years to come. This also encourages other businesses to

seek innovative new ideas in order to keep up, and as a result the industry as

a whole may become more profitable.

When Wilkinson Sword started producing stainless steel razor blades in the

1960s, Gillette and Schick followed suit.

79% of SBOS say their competition is other businesses

that offer similar products and services.

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In fact, Gillette had already patented the idea and was criticized for not acting

on it sooner. Today, just about every razor you see on the shelves is stainless

steel, and many of them include recent innovations that may or may not

stick — flexing handles, quintuple blades, integrated combs. Competition

thrives on new ideas.

You can see the same type of thing happening constantly in every market,

from toothbrushes to insurance policies to security software. Some busi-

nesses are built on a single innovation that challenges an entire market, such

as Halifax-based Imbiber Beads, which adapted a polymer used in disposable

diapers into the development of a product that cleans up oil spills.

But innovation isn’t limited to product design. It also impacts marketing and

social initiatives, as in the case of TenTree, a small clothing manufacturer in

Saskatchewan that promises to plant ten trees for every item purchased.

TenTree won the Canada Post’s E-Commerce Innovation Award for small

businesses last year.

Ultimately, competition pushes businesses to go the extra mile to stand out and

connect with customers in a way that no other company in the market does.

MotivationIn the same way that competition motivates athletes to run, jump, shoot,

and play harder, competition motivates businesses to work harder and

evolve quicker. It helps you to set concrete goals for your business, spurs

you to take action to increase morale and improve productivity, and can

establish a basic form of measured success.

Keep in mind that we’re still talking about inter-business competition, not

intra-business. While competition among employees through commission or

a reward system can benefit some businesses, we’re focusing on motivation

that comes from one business competing with another.

Ultimately, competition pushes businesses to go the extra mile to stand out and

connect with customers in a way that no other company in the

market does.

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When competing for customers, businesses have to bring their very best

to the table or risk losing sales. Every business wants to thrive, and to do so

it must take its competition seriously. Competition motivates growth and

improvement by establishing risk and reward.

There are even official competitions held by government or third-party orga-

nizations that want to see businesses succeed. Many of these competitions

are designed to help small businesses with grants, funds, and media atten-

tion, such as Innovation.ca and the CME Group.

GrowthOf course, none of this would matter if competition didn’t ultimately yield

results — higher customer retention and greater profits.

Our survey showed that there is some correlation between businesses

that monitor their competition and businesses that have the highest

revenue. On average, 81 per cent of small businesses bringing in more

than $5M a year report that they closely monitor their competition, while

only 61 per cent of businesses bringing in less than $500K did the

same.

There was also an industry trend: businesses in the utilities and transportation

industry are about 10 per cent more likely to monitor their competition

than businesses in the retail and sales industry, and 25 per cent more

likely to do so than businesses in high-tech industries.

Competitive businesses tend to do better because they’re compelled to be

more innovative. Their products and services are more likely to meet customer

needs, and they’re more motivated, so they’re constantly on their toes and

working hard.

But understanding why competition is important for business is only the first

step. Next, you’ve got to understand your business and your competitive

situation.

When competing for customers,

There is some correlation

businesses have to bring their

between businesses that monitor

very best to the table or risk

competition and businesses

losing sales.

that have the highest revenue.

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Understanding Your BusinessCompetition is an excellent way to improve your business, and there are

many different ways you can use competition to get an edge. Before you

start developing new ideas, there are a few important steps your business

should take:

• Get to know your customers

• Identify strengths and weaknesses

• Assess available resources

Get to know your customersUnderstanding what your customers need and want is essential to developing

a competitive business model. Although you are competing against other

businesses, your focus should be on your customers. Your customers will

help you to understand which elements of your business are already

working and which could use some improvement.

You have a couple of options in approaching your customers. Your simplest

option is to find them online. Loyal customers are often vocal on social

media or in online reviews, so keep an eye out for any candid feedback you

can find. Some third-party networks, such as Twitter or Yelp, provide excellent

opportunities for you to see what your customers are saying. Both positive

and negative reviews are valuable.

Your second option is to ask for feedback yourself. This can be done in

person or online. If you choose to reach out to your customers in person, be

tactful. Rather than treating them like case studies, simply engage them in

friendly conversation and use simple questions to direct the conversation.

You can also make surveys or questionnaires available to be filled out at

will. If you have a website, it is best to provide a section dedicated to leaving

private feedback. This section should be simple and easy to find.

Loyal customers are often vocal on social media or in online reviews, so keep an

eye out for any candid feedback you can find.

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By engaging your customers and putting them first, you are in fact setting

yourself up to have a major competitive edge. It will make your life a lot easier

when you start identifying your own strengths and weaknesses, and may

even give you some direct insight into your competition.

Identify key issues and assess resourcesOnce you’ve indentified your customers’ primary wants and needs, start

focusing on one or two things you can feasibly do to improve your business.

Part of this process is recognizing which tactics you have the capacity to

carry out. Taking steps to improve your product can require a lot of time and

money that may not be available at the moment, so make sure you’re making

the right move for your business before you start anything.

To identify strengths and weaknesses, look at each person, process, relationship,

asset, and resource, and ask yourself a few questions:

• Is it rare?

• Is it valuable?

• Is it unique or interesting?

If your answer to all of these questions is “yes,” then you have found an

important strength and potential source of competitive advantage. Likewise,

you can identify weaknesses by asking similar questions: Does it impede

progress? Does it cause complaints?

When you’ve picked several strengths or weaknesses that you would like to

address, ask yourself if focusing on them would really benefit your business:

• Do customers care about it?

• Is it a viable or affordable option?

• What advantage do they offer?

Answering these questions will help you to narrow your focus, making the

process simpler and more manageable.

By engaging your customers and putting them first, you are in fact setting yourself up to have a major

competitive edge.

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Understanding Your CompetitionWhile the focus should be on you and what you can do to improve your

own business, a part of that process involves learning about what you’re up

against. When your business is competing, it is reacting to other busi-

nesses. In order to react, you have to know what you’re reacting to.

The point of monitoring your competition is to find out what works and what

doesn’t. This helps you to make wise, informed decisions when identifying

your key issues/opportunities and developing your own initiatives.

As we mentioned earlier, most SBOs (58%) told us they check up on their

competition at least once a month, with about 11 per cent claiming to

do it daily and 16 per cent saying to never monitor their competitors.

But keeping an eye on your competition is actually quite easy to do, and it’s

something every employee can be involved in.

Monitoring your competitors is vital in order to understand your potential

avenues of improvement. It allows you to identify opportunities and threats

that may not have been obvious, while you also assess your strengths and

weaknesses internally. Identifying gaps in your competitor’s business ulti-

mately provides you with an enormous advantage.

It isn’t difficult to start monitoring your competitors. These are just a few

ways you can quickly and easily keep an eye on the competition so that you

can start thinking critically about how to take advantage of their strengths

and weaknesses:

• Listening to word of mouth

• Monitoring competitors’ ads

• Tracking social media

• Attending conferences

• Consulting industry sources

Monitoring your competitors is vital in order to

been obvious.

understand your potential

avenues of improvement. It allows you to identify opportunities and

threats that may not have

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Some of these tactics may require you to set aside time in the day, week,

or month. But most of them are processes that you probably go through

already, and even the ones you don’t do can be easily integrated into your

workplace.

Listening to word of mouth, for instance, takes no time at all. It only

requires you to pay attention to what is being said about your competitors.

Since you’re already gathering feedback about your own business through

online reviews and customer feedback, there’s a good chance you’ve come

across information related to your competition. Perhaps customers have

mentioned a reason they prefer your business over another, or they have

complained that your business does not offer something that they have seen

elsewhere.

Monitoring ads can be easily done as well. You can subscribe to your

competitors’ newsletters, use services like moat.com to seek out campaigns

from specific businesses, or you can simply follow your competitors on social

media. If your customers can find them, so can you.

You can also monitor your competition by becoming more active in

your industry. By attending industry conferences or subscribing to industry

publications, you will become acquainted with similar businesses that you

may not have even been aware of.

Getting CompetitiveYou’ve identified key opportunities and weaknesses, communicated with

customers, and looked into possible solutions. Now that you’ve got a better

understanding about your specific situation, your competitors, and what you

might be able to do to stay ahead, it’s time to execute.. Part of this process

is recognizing which tactics you have the capacity to carry out. For instance,

improving your product can require a lot of time and money, so make sure

you can afford to pursue it before you start.

Listening to word of mouth takes no time at all. It only

requires you to pay attention to

what is being said.

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You’ll want to pick something that not only fits into your business plan and

budget, but also something that you know you can do better than your com-

petitors; or at least something that you know you can improve substantially.

Here are a few of the most popular ways of getting competitive:

• Improving your product

• Improving customer service

• Boosting public image

• Advertising

As we go over each of these in more detail, think about your business and

your competitors, and consider each one carefully. Is it something you can

afford to do? Is it something your customers care about? Is it something that

makes sense in your market? All of the preparation you did in the previous

steps will come into play as you settle on a tactic to put into motion.

Improving your productsProduct development is probably the most noticeable way of getting

competitive, but it also has the potential to be very expensive. It’s all too easy

to think about big, game-changing improvements — stainless steel razor

blades, disposable contacts, energy-efficient machines. If you’re able to

innovate on that level, great, but don’t bite off more than you can chew.

As an alternative, you might try to come up with small things you can do to

improve your product or service to plug the gaps your competitors have left.

This could be as simple as introducing a premium line or seasonal product. It

could also mean getting innovative and adapting a product you already offer

for a new purpose.

Try to come up with small things you can do to improve your product or service to plug the gaps

your competitors have left.

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Digital services do this constantly — tweaking code, adding features, fixing

bugs, reducing latency, and the like. When Dropbox launched in 2008, it was

simply a user-friendly cloud service. Now it’s in competition with Google

Drive and SkyDrive, and the company has to actively be on its toes to stay in

business. They recently introduced a feature that enables users to automatically

upload pictures straight from their phone or camera without taking up any

of their allocated space — because their competitors hadn’t done it yet.

For these reasons, Dropbox continues to thrive among major players in an

extremely competitive market.

Product development is not right for every business, but if it’s something

that fits your business model and pushes you ahead of the competition, it’s

something you should definitely consider.

Improving customer serviceIf you’ve discovered that your competitor’s customer service is poorly

received, you’re in a prime position to establish yourself as a better option.

Nearly half of Canadian small business owners report that they con-

sider customers their top priority, and nearly three-fourths agree that

offering great customer service is the best tactic to stay on top of

their competition. This is a policy that most small businesses can and

should look into. The competitive landscape can be rough, but customer

service is one of a small business’s greatest assets.

Customer service is also one of the best ways to increase customer satisfac-

tion, and Canadian businesses rank high in customer satisfaction. There are

a couple of general ways to improve customer service, but you’ll need to

assess your own situation to determine which route to take.

3/4 of SBOs agree that great customer service is the best

tactic to staying ahead.

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The first is to entirely change or improve something about the way

your business provides customer service. This could mean equipping

your employees with additional tools. For example, home improvement retailer

Lowe’s made smartphones and Wi-Fi available to some of its employees so

that they could be more helpful to customers who had in-depth questions

about their projects.

Another way to improve customer service is to look for opportunities

to go above and beyond the call of duty and connect with individual

customers on a personal level, both online or offline. There are tons of

heartwarming examples of this online, such as the time Trader Joe’s delivered

groceries to an 89-year-old man who was snowed in.

Boosting public imageIf you struggle to gain the notoriety or attention that a competitor has, you

might consider making this a top priority. Likewise, if you’ve determined your

public image is a major strength, make sure you keep that edge sharp and

emphasize it where you can.

Boosting public image means finding something (or many things) your

business can do to improve the visibility of and way people perceive

your business. Specifically, we’re referring to social responsibility — going

green, holding events for charity, providing employment within your com-

munity.

TenTrees, whom we mentioned earlier, is a great example of a socially

responsible company. In addition to planting trees for every purchase, they

have taken steps to make their manufacturing and shipping processes fair,

efficient, and sustainable.

Beyond green initiatives, you could host paid workshops and gift the proceeds

to charity, use local employment agencies to hire within the community, or

just make sure that your policies for recycling and waste reduction meet or

exceed public expectations.

Look for opportunities to go above and beyond the call of duty

and connect with individual

customers.

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Advertising and promotionYou can also get competitive with advertising. We don’t mean that you need

to spend thousands of dollars on a TV spot or placing ads on Google. We simply

mean that you should find ways to tell potential customers about your newfound

strengths and bolster your competitive edge by making this known.

There are many ways you can do this. A few ideas to consider:

• Get involved in communities that are looking to support businesses

with similar mind-sets. For instance, FoodiePages is a Canadian

blog that helps local and regional food producers sell their prod-

ucts to customers who have similar tastes.

• Send out opt-in newsletters. Email marketing is still extremely

effective, especially when those emails include coupons or deals.

• Speaking of coupons and deals, these are a great way to get cus-

tomers in the door. Giveaways, samples, and trial periods are

also effective.

• Establish a loyalty program that incentivizes repeat business

with rewards. Be very careful, though: This can have negative

effects if the customer feels obligated to return many times for a

petty reward. Don’t keep them waiting; win them over.

Social media is a complex phenomenon providing many different options for

many different purposes. It takes some experimentation to determine which

network is best, what kind of content works, and how often you should post

it. Depending on your business, use of social media is not absolutely essential,

but it does improve visibility and offer a flexible platform.

Think carefully about what it is you want to tell people. You’ve put in the

effort to identify your strengths and turn them into a compelling and valuable

competitive edge, so don’t keep this information to yourself. Get it out there.

Competitive business models constantly evolve to match the

situation, and the best way to determine your next course of

action is by measuring your progress.

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Measuring successYou’ve executed your plan, but you’re not done yet. Competitive business

models constantly evolve to match the situation, and the best way to de-

termine your next course of action is by measuring your progress. In order to

gauge the success of your own competitive tactics, you will of course have to

continue to monitor your competitors as well. And to effectively analyze your

success, you have to keep track of any available metrics and their growth or

lack thereof.

Helpful metrics include:

• Profit margin

• Revenue

• Public accolades (e.g., awards, media mentions)

• Return on investment

• Social media engagement

By being competitive, you’re already making qualitative improvements, but

when determining how successful your competitive tactics actually are,

measurement should focus on quantitative metrics. This includes raw sales,

how many customers are walking through the door, profit margin —

things you’re probably measuring already. Take into account the changes

you’ve made, and keep track of the impact. Continually measuring your

success with quantitative data is the best way to find out what works and what

doesn’t.

Of course, you shouldn’t ignore qualitative improvements either. Customer

feedback is immensely important in this stage and will help you tweak

your tactics as you move forward. You can do this in the same way you con-

sulted customers in the planning phase — through online feedback, surveys,

or in-person conversations.

Continually measuring your success with quantitative data is

the best way to find out what works and what doesn’t.

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Ask your customers about:

• Customer service effectiveness

• Quality of products or services

• Any changes you’ve made

• Suggested improvements

If you keep up this process, follow up on your decisions, and measure success,

your competitors will be looking to you for bright ideas before you know it.

ConclusionCompetition is an immensely important part of business. Making an effort to

keep up and get an edge by using some of the competitive tactics outlined

in this guide is an excellent way to foster innovation, motivate growth, and

improve your business overall.

Take charge of the competition and your business.

Visit smallbusiness.americanexpress.com.