IGNORE:
Often the best course is to simply ignore the new competitor, which typically isn’t as dangerous or directly targeted against your business as you initially imagine.
The three advantages of this “no-action” strategy are:
- Protects from wasting money by not launching ineffective actions;
- Conserves resources to use if/when you decide to change to a more proactive approach; and
- Eliminates the risk of doing something that will backfire and harm your business.
STRENGTHEN BRAND:
A strategy that should be followed, even in combination with other tactics, is to reemphasize and even improve what makes your business successful.
- Communicate your message more often/to more people/in more ways;
- Continue promotional efforts that have proven successful;
- Strengthen consumer touchpoints;
- Eliminate customer irritations; and
- Retrain everyone to listen to and interact with the customers positively and personably.
LEVERAGE THE BENEFITS OF BEING ESTABLISHED:
A well-run business has several strengths, which a newcomer can’t leverage:
- Customers,
- Database,
- Suppliers (as partners with mutual interests),
- Trained staff that are liked by your customers, and
- Perhaps most important: A history that has taught you what works and what doesn’t.
UPGRADE:
This is a great excuse to do what you’ve been putting off:
- Updating facilities,
- Improving product,
- Adding services, and
- Expanding marketing and customer service (such as meaningful social media and web improvements)
TAKE ACTIONS AIMED AT SPECIFIC TARGETS:
1. Protect the Core
All businesses should develop a deep understanding of their current core customers and determine what makes them enthusiasts. These are the repeat customers that enjoy both buying from you and recommending you to others.
Adding loyalty programs is a typical strategy when trying to retain these influential and profitable customers.
2. Add New Customers
Whether or not the new competitor is successful, you always have to replenish your customer base since even the best firm loses customers.
The classic approach is to continue the marketing programs you’ve been using while launching new efforts. It is necessary to analyze available data to determine what efforts have generated your profitable new customers. Once you know this, the threat of a new competitor is an excellent reason to increase the frequency of these proven programs.
TIME YOUR CAMPAIGN:
1. Preempt
If you are selling a product with a long-repurchase cycle such as durable goods, by all means jump in front of your new competitor to accelerate sales.
Many companies also use loyalty programs, but these won’t keep most of your customers from trying your new competitor if it is targeting the same customers with an often-purchased product or service that is easy to obtain. Example: Nearby restaurant at a similar price plateau.
2. Counter Punch
If you are selling a frequently purchased product/service such as consumer staples or experience such as a restaurant, then it’s best to assume that many of your customers will try the competitor, and you’ll need to work to regain their business.
OUT SPEND:
If the established firm has “deeper pockets,” many simply out spend the new competitor trying to keep them from getting established:
1. Out Promote
The first option when using dollars to drive success is to increase promotions:
- More coupons
- Bundling more products, beyond what the competitor has to work with
- Leveraging existing suppliers
- Trunk shows
- Coupons
- Demonstrations
- Special products/services
2. Underprice
The second and more dangerous option is to drop prices on the directly competitive products/services. If possible, your firm should concurrently increase prices on less competitive SKUs that are less competitively shopped to retain some of the lost margin.
This is dangerous because you risk setting a new lower price-point expectation that cheapens your brand while killing your ongoing profitability.
3. Out Service
Better service is expensive but can pay off. This could be a case where the new feared competitor forces an expensive business improvement which payouts out. Consider:
- Longer hours
- More staff
- Better staff
- Better training
To survive a strong new competitor, it’s necessary to upgrade your entire business continually. If fact, if your business obviously is solidly established, many competitors will decide to move elsewhere to tackle easier prey.