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Two Types of Business Competitors and How to Beat Them Both

Close your eyes. Think of your business. Imagine you operate in a world without competitors. Imagine you’re the only one that customers can hire to install decorative concrete. Visualize yourself winning bid after bid without anything or anyone to stand in your way. Now, open your eyes. Welcome back to reality.

Business is war, and your long-term survival requires constant vigilance in defending your castle and conquering your enemies. Your decorative concrete business is no different from any other as you seek to better understand, survive and eventually overcome your competition.

Your competitors generally come in two types: 1) imitators and 2) substitutes. Both are aggressively seeking your customers’ dollar and want you to fail. Miserably. So put on your angry face and get serious! But first, let’s make sure we’re on the same page about the difference between imitators and substitutes.

Imitators do essentially the same thing you do. And they do it essentially the same way. For example, if your bread and butter is concrete engraving, then that guy down the street who also engraves concrete is considered an imitator.

Substitutes also do essentially the same thing you do. However, they do it in a different way — they effectively replace demand for your product. For example, if you’re a structural concrete artisan, you may find yourself submitting a bid to create an ornate water fountain for a customer’s backyard. But what if the customer doesn’t need a water fountain per se? Perhaps she simply needs an aesthetically appealing feature to compliment her landscape design. Yes, your unique water fountain may do that, but a tree would too. So in a way, a gardener would be your competitor on this bid.

Think of your customer market like a pie. Imitators will try to take a slice of your pie by providing customers another source for your specific type of product, which makes it harder for you to win the bid. Thus, strategies for managing imitators will try to prevent them from increasing supply to your customers and taking a piece of your market.

Substitutes, however, shrink the overall size of the pie. They reduce overall demand for your product. So remedies for substitutes help you preserve existing demand for your product and keep the size of your market from shrinking.

Understanding the difference between imitators and substitutes is critical because the strategies for managing the impact of imitators do NOT work on substitutes. I repeat, do not try to use imitator remedies on substitutes!

Three ways to beat imitators
The key to minimizing the damage caused by imitators is to implement specific business mechanisms that isolate your decorative concrete business from existing competition and create barriers that prevent new imitators from increasing supply to your market share. There are several types of “isolating mechanisms.” Each shields your business from the damaging effects of direct competition and helps prevent imitators from taking a slice of your pie.

Strategy 1: Service and quality
Some isolating mechanisms are customer-driven. One example is customer loyalty based on a reputation for legendary customer service. This is developed over time after repeated efforts to satisfy customers.

Loyalty based on your reputation for quality is another customer-driven isolating mechanism. Remember when that one customer hired you to fix another contractor’s mistake? Nothing destroys a decorative concrete contractor’s reputation faster than doing shoddy work. And one of the best ways to ensure you’re prepared to do quality work is reading and following product instructions. To the letter.

An enduring reputation for quality and customer service will help isolate your business from the threat of direct competition, because it is so challenging for imitators to recreate the same reputation for themselves without investing the same amount of resources.

Strategy 2: Be the first
Being the first to use a new product or decorative process in your market creates a timing difference that isolates your business from imitator damage. Being the “first mover” allows you to be proactive and forces your competitors to be defensive. It creates a business distraction that requires your competitors to invest resources (such as time, capital and labor) in duplicating your product (or business model) if they don’t want to be left behind. This means you need to be constantly aware of new technologies and product applications as they are developed. Talk to decorative concrete suppliers and manufacturers about what new products are coming down the pipeline. Try them. Experiment with them. Be the first in your market to introduce new technologies and you will force your competitors to play a perpetual game of catch-up.

Strategy 3: Nonrefundable deposits
Making it costly for customers to back out of their commitment to hire you is another strategy for isolating your business. An example of these switching costs is the initial deposit fee. Consider requiring customers to pay a nonrefundable percentage of the estimate upfront. This forces customers to stick with it until the job is done. If a competitor swoops in after the fact and lowballs your price, it will cost your customer to switch.

Responding to substitutes
Remember, imitators increase supply of your specific product and substitutes decrease demand for your product. While the solution for imitators is to keep them out of your market, the solution for substitutes is to find a way to share a portion of the market through a strategic alliance.

To identify the most rewarding type of strategic alliance, you must first understand what business you are in. Let’s continue the assumption you’re a structural concrete artisan. You may do an excellent job of designing and sculpting beautiful concrete structures. But are you in the business of simply selling concrete sculptures? Probably not. It’s more likely you’re in the business of adding beauty to your customers’ lives. Or perhaps you’re really in the business of distracting customers from the ugliness in their life. Yes, this is more subjective, but it broadens the scope of your market reach. So identifying possible strategic alliances would require asking, “What other solutions ‘add beauty’ for my customers?” instead of asking, “Who else sells concrete sculptures?” As in the earlier example above, a landscape architect or horticulturist might be a very legitimate substitute for a concrete structural artisan.

Connect with your substitutes and discuss the possibility of an alliance that would add value to your customers. To use an example from my day job, my manufacturing company, NewLook International Inc., recently established an alliance with Modello Designs. We don’t make stencils. They don’t make concrete coatings. But both create beautiful finishes. It was the perfect union of color and design, as we like to say. We created an open co-sponsoring partnership that helps both brands expand their reach to a broader customer base and gives decorative concrete customers access to Modello’s decorative masking patterns at a discount — a compelling value indeed.

Tips for Beating Your Competition

• Spend time researching and evaluating all your possible imitators and substitutes before developing a go-to market strategy. Remember, there’s a big difference between the two, and imitator remedies do NOT work on substitutes.

• Prevent imitators from stealing your market share by implementing customer-driven isolating mechanisms, such as an enduring reputation for customer service and superior product quality. These are easy to achieve and very difficult to duplicate.

• Infuse switching costs into your business model. Simple requirements such as down payments, for example, discourage customers from seeking your competition.

• Take risks when it comes to new products. No, don’t use your customers as guinea pigs! Rather, be open to using new product technologies and incorporating them into your service line. This contributes to a “first-mover” advantage that distracts competitors and forces them to play catch-up.

• Avoid a myopic definition of your business, which is more than just stamping or staining concrete. Open your mind. Discover what business you’re REALLY in and develop marketing messages with this emphasis. This will also help you better identify the substitutes in your market that decrease demand for your product.

Establish strategic alliances with substitutes that offer real value to your customers.

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