Most new businesses are clones of similar businesses. They offer the same products and services and compete using the same approach as their market competitors. They divide up a limited market between them. If the barriers to entry into the target market are low, many new businesses will start up, causing competition to be so great that most firms will only eke out a minimal return on their investment.
Eventually, they will be forced to compete on price to differentiate themselves merely to survive. Businesses which have low growth generally have captured a leading position in a small stagnant market through customer loyalty.
Or, they have developed some level of differentiation and/or specialization to gain market share. The message is, don’t become one of those businesses that are forced to compete on price. By succumbing to the pressure to reduce your prices (and your margins) you have entered the slippery slide of business decline.
In this scenario, the firms that tend to succeed and grow are those that have differentiated themselves, either through their service or product offerings or a unique business concept. Study your competitors in your marketplace. Pick out your top three competitors that are successful and study how they market themselves, their pricing structure, their customer service, and generally what makes them unique.
Compare your services and offerings to theirs. Try to be as unbiased as possible, and think like a customer. Which business, would you choose to buy from? In a crowded marketplace, you really need to differentiate yourself with unique offerings, service or product or face declining business and the need to reduce prices to compete.
When you study your own business you may be surprised to find a unique aspect to the business that you haven’t capitalized on. With a little analysis of how your competitors are differentiating themselves, you could be inspired to change the way you present your business and thus improve your competitive position.