How to Stop Chasing Trends and Start Making Great Business Decisions
February 18, 2015
If you go exactly where your competitors are, you’re dead. Thorsten Heins, Blackberry.
When running a class based business, you can face some pretty rough competition. It’s easy to both win and lose business by following market trends. Every year it seems that some really successful industry leader is giving speeches about how expanding to offer twenty minute group Zumba lessons, Yoga sessions or Cycling classes tripled their income in no time flat. Yes, chasing trends with low cost entry can be lucrative. But if your competition is chasing the same trends as you are, your potential for profits just got cut in half. It’s time to start thinking about long-term strategies.
Monitoring the Market (the right way)
Let’s face it, the entire business environment has been revolutionized over the last few decades. Owning a business that keeps up with these fast paced changes requires a flexible, innovative and somewhat adventurous mindset; not just from the owner, but the whole staff. Everybody has to bring some unique skills and ideas to the table. But how do you decide which ideas to use? It is vital to think about how those changes will benefit your business in the long term, beyond just profit.
This article will take a look at some vital tools for monitoring the competitive environment, without falling victim to trend chasing. First, let’s start with knowing where your business stands in the competitive marketplace. To know if a new idea or trend is compatible with your business, you first have to know your strengths and objectives.
A SWOT analysis is a tool used to analyze a company’s state of being based on its strengths, weaknesses, opportunities and threats. These internal and external factors are a great starting point for top-down planning. They allow your business to determine vital or actionable problems that should take top priority when deciding how to use company resources, while also pinpointing items that may contribute to your competitive advantage.
Sometimes referred to as market mapping, perceptual mapping is a great tool for understanding where a business falls in the marketplace as perceived by customers. This method requires creating a grid with two driving factors from the marketplace with opposite values along two axes, such as price and quality, and ranking yourself and competitors based on those two components. This method is also commonly used to identify gaps or opportunities in the market (blank portions of the market map not being served by a business) based on those driving factors that could be potentially profitable.
Identifying your Competitive Advantage
Deciding a course of action is hard without knowing the one or two things that you’re particularly good at. In business, we call it a competitive advantage. In other words, how does your business stand out? In a lot of cases, the answer can be found in your strengths from a SWOT Analysis. A competitive advantage is also something that is hard for the competition to imitate. In the class business, this can be a famous staff member or student, a high ranking team, low pricing, being easily accessible to your ideal customers, etc.
In a competitive market, every business that makes the cut will have at least one strong competitive advantage. If you still haven’t identified yours, try taking a look at the 4 P’s of your marketing mix (product/service, price, place, promotions). Is there an element of that mix that makes your strategy different from other businesses in your industry or market?
In order to be irreplaceable, one must always be different. Coco Chanel, Designer.
Strategic Decision Making
Once you have found what it is that you do best (your competitive advantage), the right course of action will become a lot clearer. The right decision will do one of three things; leverage your existing competitive advantage, help to create a new competitive advantage or weaken a competitor’s advantage. If your plans don’t do one of these three things, it’s probably not the best investment for your business. It really is that simple!
If it's not going to help you stay in business, then your resources could be spent on something that will. So if you aren't known for dance or yoga and you don't own stationary exercise bikes and you don't already have someone on board or on call with the expertise to run it for you, saying no to those trends won't hurt you in the least. Don't get caught in the trend game. Being different is good for business.
One last tip...
If you really do want to shake things up by following a trend and you think it could be profitable, use this simple guideline to push that idea to the next level: either be the first to do it, or do it better.