Saturday, October 5, 2013

This article is about your industry and your competition. It talks about the forces at work in the industry and what you need to understand about your competitors. I hope the value you get from reading this is not just a better strategic direction but a framework to build a competitor database.

Industry Forces

Michael Porter many years ago wrote about 5 forces in any industry being:

  1. The Power of the Buyers

  2. The Power of the Suppliers

  3. The Intensity of Inter-Firm Rivalry

  4. The Threat of Substitutes

  5. The Barriers To Entry

So just to use an example of a business coach to illustrate the implications:

The customers who buy the services are typically small to medium customers who do not have large volumes of work to press for lower prices in return for high economies of scale. Industry effect of buyer power is low.

The suppliers who prevail are typically training and education suppliers of IP. To go to a university there is a high cost, to get corporate experience there is high cost, to buy into a franchise be trained by them comes at a high cost. Industry effect of supplier power is high.

Inter-firm rivalry is not intense as we don't typically have 5 business coaches tendering for every clients work. We are aware of each other but as potential market is so large we don't spend energy attacking one another. Industry impact is low.

The major substitute to a business coach is a person managing the business themselves and continually training to get better. (I think this is great and why coaching should be short term not long term.) The industry impact is high and major reason there aren't more people coaching.

The barriers to entry are relatively low. The larger franchises know that their power is high so actively try to recruit new coaches. I think this may be a reason that business coaching industry already has a tarnished reputation. The impact on the industry is high.

The implications for my business of the above analysis are to develop my own content and give great value to my clients to stay ahead of my competition. I also need to specialise in areas that my customers may not have as great a depth of experience as me.


Let's think about what are we really competing for? I'd argue it is for the customer in the market to decide they will buy from our business not the competitions. So basically we are trying to understand the decision making criteria for the products / services we are selling in the market place and how we rate against the competition.

To illustrate, I am going to use the example of Jodie and I selecting a Real Estate Agent to sell our home. (No we are not in the market so please don't contact me if you are an agent reading this.)

Our criteria will be a mix of both emotional and factual criteria.

  1. Agent is trustworthy

  2. Agent is a likable person

  3. Agent's practice has brand commensurate with the market we wish to target.

  4. Agent's brand is well exposed to draw a larger number of buyers to their agency.

  5. Agent's fees are on par with competitors

  6. Agent's fees include same or more advertising features than competitors.

  7. Agent's target price for our home matches our expectations and is well supported with credible comparable sales data.

So, buy knowing what the criteria are you can then rank your competitors strengths and weaknesses High, Medium or Low against the decision criteria. Include your own business so you know where to focus on improving and where you should be promoting.

You also need to know what are the criteria that the customers value the most.

If I was a Real Estate Franchisor I would be positioning my brand in the demographic of the market I serve as the friendly trustworthy agents who give you more every step of the way for your marketing investment.

So please write a list of your customer's decision making criteria and rank yourself and your competitors in a side by side spreadsheet table. This exercise will also help with overcoming price objections.


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