5 Important Reasons Why Competition Is Good For Your Business [Benefits of Competition]

5 Important Reasons Why Competition Is Good For Your Business

The first thing a lot of people think about when they hear the word 'competition' isn't necessarily a positive thing.

In fact, it's usually quite the opposite.

Competition is always frowned upon, seen as something negative, something to avoid.

Lots of entrepreneurs try to avoid competition because they don't like the idea of having a competitor they need to deal with.

It can be difficult to keep up with business competition, it keeps you on your toes and if you're too slow, it can put you out of business.

However, some of the biggest and most successful companies we know today were built on competition.

Let's look at an example.  

Why competition is good for your business

A few years after Airbnb had launched, a company in Europe saw the massive success Airbnb was having over in the United States and wanted a piece of the pie.

Wimdu was born and was growing rapidly, overtaking Airbnb and receiving a massive $90 million investment.

They were even backed by the Samwer brothers, popular entrepreneurs in Europe who became billionaires by cloning American companies and selling them back to their original inventors.

At this point, Airbnb could have been history, however, it was the competition that pushed Brian Chesky and his cofounders to blitzscale, take on more market share, accept more investment, and overtake Wimdu. 

Of course, not every story will be as dramatic as this one, however, competition can definitely be good for business.

Let's explore 5 more important reasons why competition is good for your business.

Pushes you to challenge yourself

Imagine you were the owner of Google.

You have almost no competition - at all.

According to online facts, Google holds over 92% of the search engine market share.

It's one of the most successful (if not the most successful) businesses in the world, yet it almost has no competition.

To overthrow Google, you will need to come out with revolutionary technology that changes the way people search for information across the internet.

A lot of people would simply become complacent when they have so much power.

When there is no one else above you and you're the biggest fish in the sea, it's easy to lose sight of everything and think that you can just relax.

However, this is a dangerous place to be - if a market leader becomes complacent, they can quickly be dethroned by hungry competitors on the way up.

That's why a lot of business owners appreciate competition - it keeps them on their toes.

When you have an array of competitors all fighting for market share, you're going to be focused on fighting back, not sitting back.

Competition pushes you to improve your business, hire more people, improve the quality of your products and services.

Who knows, you might be able to come out with something that changes your business forever - all because of the competition.

Not only does competition improve your business, but it also pushes you to become a better person too.

Demand in the market

One of the biggest reasons why competition is good for business is because it proves there's demand for your products or services.

If you're creating a business that has almost no competitors, this could be a sign of two things:

• You're the first-mover (reinventing the wheel)
• There is no demand for your product or service in the market

Either option can lead to challenges down the road.

Building a business as a first-mover makes you a target in the unlikely event that the industry proves lucrative or opportunistic.

On the other hand, building a business that has no demand will be very difficult to scale in the future.

It can be near impossible to build a successful business when there is no demand for the product in the market.

When you find a market that is infested with competition, it doesn't necessarily mean you should rule out the business idea.

You might want to hold on for a little longer and explore the industry to get a better understanding of the landscape.

Let's look at the email marketing services available.

There are dozens, if not close to a hundred or more, email marketing tools available on the market - all with granular differences in features and benefits.

However, out of the options available to consumers, a lot of these businesses can be deemed 'successful.'

When I was building Condensr, there was one massive competitor in the space, surrounded by many little fish.

They had over 13 million users, while the next big player had around half a million.

When we looked at the total market size, however, there were almost half a trillion people that we could theoretically reach.

This opportunity was striking to some investors with whom I had the chance to speak, although I decided not to pursue the idea after all.

Competition is a great indicator that there is opportunity in the space - think more about the total market size, and how you're able to differentiate, slightly, from the competitors.

A blueprint for success

Going off the last point, we're also able to avoid a lot of potential potholes when building our businesses.

When we're building a business in a completely new space, there will inevitably be a lot of trouble we'll run into along the way.

Although this is still true for any business, competitors give us an edge when it comes to avoiding common mistakes and challenges.

We can look at historical records of businesses that have come before us to see what they have done before, and what worked or what didn't.

While building Hawk Prospecting, I was able to avoid a lot of potholes that new businesses might run into because I had a blueprint, a roadmap that worked, which I used and followed.

I already knew how to set up my product or service, I knew what my customers needed, and I understood why they used the solutions I was competing with.

The reason why a lot of data businesses fail is because their data isn't reliable.

On top of this, the prices some companies charge made it very difficult for smaller businesses to invest in some of these solutions.

When I launched Hawk Prospecting, the goal was to create a simple to use tool that had a massive yet reliable database, accessible to almost everyone in my target audience.

It was no surprise that it was a great success within it's first month.

Businesses with no competition don't have this luxury of following a model that works and find themselves shooting in the dark a lot more.

Focus on the customer

Massive companies are usually known for pretty bad customer service.

Let's hope I don't get in trouble for this, however, I believe that Facebook (Meta) has terrible customer support.

Why?

Maybe because they don't have customer support at all.

I would find it hard to believe that Facebook spends any money on hiring customer support reps.

You're unable to contact Facebook for support - a lot of advertisers find their Facebook ad accounts mysteriously banned and there's almost nothing they can do if Facebook can't be contacted.

In today's day and age, customers care a lot more about the brands they choose to buy from - they care a lot more about how much these brands resonate with them.

Competition forces you to go and speak to customers, post on social media, and provide great customer service.

This is not only good for customers, but for you as well.

Businesses that are able to provide great customer service can also leverage 'word-of-mouth' marketing because there are customers who will spread the word about their experience with your business.

Let's take a quick look at how effective word of mouth is.

Go on Amazon and type in a random product name.

Pick a product and go into the reviews section.

Find a bad review, and see how many likes it got.

There are some negative reviews on Amazon which have hundreds of likes, meaning that the business owners likely lost hundreds of potential orders because of one, small comment.

If we flip this on it's head, we're able to see how effective positive word of mouth can be.

Competition gives you the opportunity to do more than what is necessary to grow your business - taking care of the people who are responsible for your business' survivability is one.

Partnership opportunities

The way entrepreneurs and businesspeople think for the most part is all wrong.

Business isn't about being the biggest player, the real gold is found where partnerships happen.

When businesses partner up, amazing things happen - for all parties.

Both consumers and businesses benefit massively from partnership opportunities.

That's exactly what this last point is about - creating partnerships with competitors.

Although it might be hard to pull off, partnering with your competitors can lead to massive gains for both parties.

Think about it like this - you and your competitors are all aiming for the same end goal.

You're both serving the same people, building the same or similar product, and so it's only logical to partner up.

You may have heard the saying, “If you want to go fast, go alone. If you want to go far, go together."

Building business partnerships is crucial for the long-term success of your organization.

Massive businesses partner up all the time - maybe not in the traditional sense of 'partnering up.'

Facebook (Meta), as an example, bought Whatsapp and Instagram - two almost direct competitors, to increase their own market share.

However, these businesses are still businesses of their own.

This acquisition not only led to the growth of Facebook, but also Whatsapp and Instagram too.

Stop looking at competition as something negative.

Instead, think about how you can build mutually beneficial relationships with competitors to speed up your journey.

Those were the 5 important reasons why competition is good for your business.

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Mohamad