Small Business: Small-business owners can't forget to study market

I see it all the time.

Owners of small businesses who are so focused on day-to-day operations that they never take time to come out of the trees and study the entire forest that is their marketplace. This single-minded focus is common with start-up businesses also. Often important decisions are made on perceptions of the business environment that have not been substantiated in any meaningful way.

The fact is, you must thoroughly know the environment in which your business operates in order to successfully promote and sell your product or service. You understand that you must fulfill a need for your buyers and must do so in a way that's somehow superior to the offerings of others. But to do so you must know as much as possible about your marketing environment, especially your competition. Simply put, you have to do your homework.

The Competition you must know who they are, their strengths and weaknesses, and what they're planning to do next.

You may think you know who your competitors are, but do you really? Yes, you're familiar with your first level competitors, those that offer products or services like yours within your immediate geographic area. But what do you know about the second level competitors who offer similar products or services in a different business category from a more distant locality? Have you considered third level competitors, who are after the "same occasion" dollar?

Consider this example, a jewelry store. The owner probably can identify her first-level competition, the other jewelry stores in town. However, she should also be familiar with the jewelry trade among her second level competitors such as department stores, discount chains that sell jewelry, antique stores, pawn shops, and dot-com jewelry retailers. In that buying jewelry is often tied to a gift-giving occasion, third level competitors might be companies that provide other types of gifts that may substitute for jewelry.

The point here is to consider carefully, from the buyer's point of view, all the alternatives that there are to purchasing from you. Knowing that, you can work to make sure that your business provides advantages over your competitors, beginning with those enterprises that are most similar to yours.

You should be very aware of your first level competition. Know as much as is reasonably possible about the details of their business. Study their ads and promotional materials. Be familiar with their location. Talk to their customers and examine their pricing. It's elementary that you should know each competitor's market share, how target buyers judge your competition, the competitors' financial strength, and their ability and speed of innovation for new products and services. Having this information enables you to identify strengths and weaknesses of the competition that may be leveraged to your advantage.

To help you in your planning efforts (financial forecasting, promotions, new products/services to introduce, direction for future growth) you must have a good idea of what the competition will do next. Don't neglect this part of your homework. Gather every bit of available data from sales forces, outside consultants, market surveys, and trade associations. Accumulating competitive intelligence can be the difference between realizing your annual plan and permanently losing business.

Achieving success in business is like doing battle. To win you must be well armed with information so that you'll be equipped to formulate winning strategies. The smart business owner will make study of the competition part of his daily focus.

(Sonja Chasteen is the business assitance manager for the Springfield Area Chamber of Commerce.)