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What it means to define and segment competition

Competition is important. Watch this overview of why you should evaluate your competitors' strengths, weaknesses, and positions.
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Defining and segmenting your competition– now, the first thing that happens to entrepreneurs when I mention the word competition is one of two things. Either they get nervous and they get a little scared and they want to kind of run away from it. Or, two, they get little cocky and say, oh, I don’t have any competition. I don’t need to worry about anybody. I’ve created something unique and different and special in the world. Well, that’s all well and good, but I’m here to tell you that you want competition. Competition is very important to your overall business, and it helps validate the market. It helps say that there’s a vibrant market out there for your business.
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And that’s very important, for not only you and understanding the feasibility of your business, but also for investors. Investors want to know that when they’re investing in your business, that they’re investing in an established market. And that helps reduce the risk and possibly also reduce the amount of money they have to put into your business to make it successful. Now, the second thing I tell entrepreneurs all the time is to embrace your competition. You want to know everything you can about your competitors. It’s very important. The first thing I do when I have a business idea or I’m starting a business is I go to Google and I start googling my competition.
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I start printing out pieces of paper on the competition and their websites and such because it’s so important that I just really get into the minds of my competitors as well. Now, when I’m working with my competition, I break it down into two areas. One is I want to define my competition by really understanding the characteristics of them. And the second thing I do is I do a market segmentation exercise where I break them up into different groups so I can understand how those groups interplay with one another. But I just want to make sure that you understand, the more you know about your competition, the better off you’re going to be, which is great.
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So let’s take a look at defining your competition. The first thing is I like to look at their strengths and their weaknesses, just to understand what I’m up against, if you will. The other thing is I love to look at their positioning strategy because if I can understand how they’re positioned in the market, whether they’re positioned upmarket or downmarket, or they’re providing a certain type of service, a complete service or maybe a particular piece of a service, that’s really important information to me. I also want to understand things like their pricing strategy. Are they really expensive, or are they super cheap? Or do they discount a lot, or they never discount?
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Those are all pieces of information that’s telling me about the competition and how I might actually position against the competitors. How about the size of the company as well– I want to know how many locations they have. I want to know maybe how many employees they have. Or about their revenue– if you can get to their revenue, that’s great. It’s not always easy to do. But if you can get to the revenue number, then it tells you how large the company is and how you’re going to have to deal with them as well.
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And then, finally, their customers– I always like to look at their customers because that tells me are they targeted at an older market, a younger market, an educated market. How are they addressing the market, and how I might address the market differently? Then the second thing I like to do is I want to segment. And when I look at market segmentation, I want to really understand the interplay within those different segments. How those segments interact with one another really helps me start to understand where I might be positioned in that marketplace. Now, I like to look at a couple of things. First of all, in each individual market segment, I want to see if there are opportunities.
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There are opportunities I can go after, and by looking at individual market segments, I can find those opportunities. I can find the holes in the market that I might want to address or position my company slightly differently to be able to take advantage of. The other thing is if I find a market segment that’s saturated, I might decide I want to stay away from that or position away from that particular market segment. Then finally, and I love this, I want to figure out either if that market segment is trending up or trending down. So let me give you a personal example that will help illustrate market segmentation to you.
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So while I was at work, I wanted to make sure that my dog Jake, who I absolutely love to death, was well taken care of. So I went out to my community and looked at about 20 different options. And I noticed that they broke down into individual buckets. So the first bucket was I could go and take him to a kennel. First of all, that didn’t even sound very good just because kennel doesn’t have a very good name to it, and it felt like he was going to put in a cage all day long. And I would never have that for my dog Jake. The second option is I had what I call the free option.
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I could drop him off at a friend’s house every day, and he could be cared for there. That’s fine, but may not be the greatest option for me. So the third option that I had was what we call a doggy day care. And basically what they would do is they would pull up in a beautiful van. He had a nice air conditioned van to go into. They would whisk him away off to a play field with other dogs. There was a pool there, so he could take a dip in the afternoon, come back in his air conditioned van, and lounge the rest of the day. Sounded like a pretty good option for me.
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And I could even have gone one step further, which I didn’t do, but I could have, which is kind of the luxury hotel, where it’s almost like a doggy spa, if you will, where he’s taken care of every day, belly scratches, and that really, really high-end service. But I chose that doggy day care option. I thought that was the best. So by looking at this example, we can start to see that the market of taking care of your dog every day starts to break up into different buckets. And each one of those different competitors had to be aware of those markets and understand what was going on in each one as we’re making those decisions.
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So I want you now to look at your market and see how it breaks up for you just like in this example. [LOGO SOUNDS]

You want competition. Why? Having competition not only validates the market you’re in but is an indicator of an established market—which is a risk-reducer from an investor’s point of view. Embrace your competition. This overview covers the importance of evaluating the strengths, weaknesses and position of your competitors.

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Crushing your Competition: Competitive Strategies to Make your Business Stand Out

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