Competition is good for your small business

competition is good for your small business

Competition is good for your small business


I often say that competition is good for your small business. When a competitor joins your market it can grow the market and it forces you to look at your own small business and review your products, marketing, prices and unique selling proposition (USP).

Competition can help your small business by ensuring you remain innovative, creative and customer focused.

Market expansion

When a new business enters the market with a different USP you can both benefit as the differences are highlighted and the market can be expanded. This can be particularly good if it’s location based. When there are similar businesses with different offerings customers can head to your side of town and know there is something to please them.

When competition is good for business

Competition is good for consumers because it gives them better prices and more choices. Since competition makes customers happier, it can be good for your business. It can reinforce why they chose you to start with. It can also work when the customers who weren’t loyal to you, or were ‘difficult’ find a new home with your competition.

If your market becomes saturated by competitors that are all the same, your business could stand out above the crowd. By focusing on what makes your business special – your competitive advantage, superior customer service or high quality products should be evident to customers. Competition splits up the market into groups of people that are loyal to different brands. If your company is truly unique and offers value to customers, you will get some loyal customers.

When competition is bad for business

However, if a competitor enters your market with the same offering it can be detrimental to both businesses. And when a competitor has the same offering at a lower price point it can be damaging to both businesses as consumers question the product efficacy. With the current shortages of staff in some areas this can also have a negative effect on each of the businesses involved.

For example, a new café opens up the road in a busy café scene. On the surface the offering looks different to what all the other cafes are offering. There is usually a loss to surrounding business when there is something new and shiny for people to check out. That’s normal. People are curious. However, soon after the fanfare of opening, the original idea morphs into a combination of ideas gathered from surrounding cafes. All of a sudden the same cakes appear on the menu, at half the price and staff start to get poached. Is this good or bad? While competition can be good, imitation is a recipe for disaster – for everyone involved.

7 reasons why imitation is not good for business

  1. It’s confusing for customers. If some of your core products are being sold by a competitor at a lower price, the customer thinks you are ripping them off or the competitor’s products are inferior – you both lose.
  2. Customers want variety and choice. If they find the same product offering from different businesses they will be less tempted to shop around. It dilutes everyone’s business rather than the opportunity to expand everyone’s business 
  3. While second to market can be beneficial, if you are capitalising on the hard work that has been done by your competitor you might be left struggling when a new business enters the market.
  4. If you aren’t offering something new you won’t know what works. Trial and error can be more effective than duplication.
  5. You might be copying a failure. Just because a business looks good on the surface, you don’t always know what lies below the surface. If you are copying a product that is someone else’s ‘loss leader’ you could be setting your business up for financial failure.
  6. Your target market might be different from your competitors. If you have positioned yourself as different from your competitors through your branding and brand messaging and yet are offering something that is not unique, you will not build brand loyalty with your own market.
  7. It’s hard to maintain. If you are always copying somebody else you run the risk of diluting your brand. What happens if their business stops and you have no intel to call on? You will never be the market leader.

Rudyard Kipling said best:

‘They copied all they could follow, but they couldn’t copy my mind,
And I left ’em sweating and stealing a year and a half behind.’

While competition can be good for your small business, imitation can be bad for all involved.

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