Step #3 in our Site Selection Checklist for making smart site selection decisions is study your competition.
Too often, we see companies do lots of homework on their customers and trade area and launch right into an expansion plan. Understanding your customer is indeed vital to your success as you grow. But there’s another side of the equation that is extremely important: understanding who you’re going up against.
Where are your potential customers buying/shopping/dining?
A mistake companies often make is assuming that if they build it, they will come…or in other words, that nobody does what they do.
You might have a unique offering and you might be lucky enough to stand out for it. But it is dangerous to assume that your future customers aren’t shopping, buying or dining anywhere else right now and are just waiting for a business like yours to come along.
“This isn’t me,” you might be saying to yourself right now. But, do any of the below sound a little like you?
- You’re not sure who your competitors are or why buyers might choose them over you.
- You aren’t quite sure how to go about assessing who your competitors are and how strong they are.
- You assume that a great location and great product/service mean you don’t need to worry about competition. You’ve hired a great operations team and you’re doing an excellent job with site selection, so you figure that’s what matters most.
Reality check: everyone has competition
The reality is this: no matter how great your business concept is, you have competition. It is essential that you research that competition. If you don’t, you risk overestimatin
g your potential. There might be plenty of supply for your business concept in a trade area as far as the types of customers you’re seeking as well as plenty of demand. But what business(es) in your space are currently meeting that demand?
Four steps for smart competitor research
What should you do to get a good handle on your customers? This four-step process is a great way to start:
Step 1: Define your customer.
Here’s a detailed blog post on how to get to know your customer before choosing a location, but the gist is this: you need to know who is likely to shop at your store or buy your services or products (and how they find you). Generally, the best ways to start are to…
- Run surveys to gather qualitative data (if you have other locations already).
- Develop a loyalty program (again, if you’re an existing business).
- Collect third-party data: demographic data, consumer mobile activity data, cross shopping data, employment data, etc.
- Study businesses like yours, including those in other areas of the country, to determine who you aspire to be like, to be different from, and where your customers might also be shopping or buying.
All of this will help you create a customer profile for your competitors. You can use that information to draw trade areas around some of their locations and gather intel on the trade area’s characteristics. Then, you can answer the question of who their best customers are and why.
Step 2: Do some field work.
Get boots on the ground! Field work should involve the following:
- Drive around the area that is close to the site you’re considering and/or do some internet, Google Maps and site selection research. Pay attention to which parking lots in the area are busy at different times of the day (e.g. during lunch hours at various restaurants). You will want to capture these “elsewhere” trips and drive them to your business.
- Attempt to understand trip patterns. If many of your customers are traveling down a busy street to reach your location, do they encounter you or your competitors first? If your competitors, you’ll need to give them a compelling reason to drive by the competitor to reach your location. Restaurants typically perform better when located near other restaurants, but if you are in the middle of the pack and customers from all directions need to drive by 15 different options to reach you, this will likely to hurt your performance.
- Start to build a competitor profile. In your competitor field work research, you should attempt to answer questions like…
- What businesses are most similar to yours in the area?
- What businesses are most similar to yours but in other markets?
- In the area you’re considering opening a store or location, what other retail and shopping centers are nearby?
- In the area you’re considering opening a store or location, where might your potential customers shop today?
- What are those businesses where your potential customer shops today like? How are they similar to your concept and how are they different?
- What are they doing right and what are they doing wrong?
- How does their offering compare to yours?
- How does their atmosphere compare to yours?
- What are their prices compared to yours?
Step 3: Rate the competitors by strength.
The challenge with studying your competition is that you don’t always consider certain businesses your competition until you discover that they are! For example, if you’re a fast-casual pizza restaurant chain, you might expect that other pizza chains are who you’ll compete with, but what about casual dining pizza or Italian restaurants? Other fast casual restaurants? Take and bake pizza chains? Fast food? If you are considering an area where you can capture a large dinner crowd, you can’t overlook the fact that some might choose cooking at home or takeout instead. Be sure to check published sources for information about consumer dining and shopping habits and market share. It’s not available for every industry, but while you’re ranking your competitors by strength, it is worth checking.
Step 4: Pay attention to what your competitors are planning.
Step 4: Pay attention to what your competitors are planning. Unfortunately, you can do a whole lot of homework on a competitor but inadvertently ignore the fact that like you, they’re reacting to the marketplace and their competitors--and might zig when you zag. There are always going to be unknowns about what your competitors are up to, and while you can’t predict them, it is essential that you’re aware of them.
Make sure that you keep an eye on the news sections of your competitors' websites and industry articles and press releases that might give you information about their upcoming plans. Perhaps a competitor is known for dropping their prices or advertising heavily in reaction to a new competitive opening. If you are that new competitive opening, you'll want to be prepared to weather the impending price war.
Putting competitive intelligence to work
You’ve done some homework to gather a whole lot of competitive intelligence—then what? Ideally, all this information will help you in a few key ways:
- You’ll know where you need to make improvements to be more competitive.
- You’ll be better able to make decisions about advertising/marketing or pricing.
- You’ll have lots of information to help you decide whether you’re zeroing in on the right location or should look elsewhere.
SiteSeer can help
It is not easy to study your competition! You have to work hard to do it and it seems like the time would be better spent studying potential customer demand. However, if you want to achieve accurate sales forecasts and open high-performing stores, it is important that you study both supply and demand. Anticipating the competitive threats to your business can mean the difference between an underperformer and a winning location.
SiteSeer is a great tool to use to...
- Study your competitors
- Assign strength values to their various locations based on how stores typically perform around competitor brands and types.
- Create models.
- ...And much more!
Want a demo? Contact us!