A couple weeks ago I sent my business partner in one of my projects a list of indirect competitors. He, a television producer without a business background, replied that they are not competitors. That made me realize that the many terms used in business are very confusing and their subtleties are unclear. So I put together a little glossary of some terms that are often misused/mistaken.
Direct competition vs. Indirect competition: Direct competition is pretty clear but what about indirect competition? For example Netflix’s direct competitor is Hulu. They’re both streaming video platforms. An indirect competitor can be the simple antenna TV or something that can be a technology that is still in R&D. Over the air TV broadcast isn’t necessarily a streaming on-demand platform but it is a substitute video entertainment/content delivery system. So a competitor can be something that is obvious or something that is not so conspicuous.
Industry vs. Market: Industry is what your company is in. It is your competitors, your supply chain, and related companies. They are essentially the parties that sell to the market. The market is your customers. They are the buyers of your product or service. When industry publications write “market size” they are talking about the amount of money that can be made from the customers.
Sector vs. Segment: Sector is a subsection of an industry. The “telecommunications industry” for example is made up of thousands of sectors; the router sector, the ground wire/cable sector, the GPS tech sector, etc. Industry term is only as broad as the scale of your analysis. If you are analyzing just the GPS sector, then you can say “GPS industry” and then breakdown the relevant sectors within that industry. Segment is a subsection of a market. A segment of the “millennial market” is tween girls, etc. (when a segment is referencing a group of people, then it can also be called demographic). A segment of the “restaurant market” is Mediterranean restaurants.
Revenue vs. Profit (income): Revenue is the money that is coming in before costs, expenses, taxes, depreciation, etc. are taken out. Once those pesky things are taken out you have profit. There is gross profit which is revenue – expenses, and and net profit which is revenue – expenses – taxes. Then there is retained earnings, which is another step!
There are many many more (branding, PR, etc.) so if you are unsure, please feel free to ask!
When you are asked what your competitive advantage is, what do you think? Processes? Patents/Intellectual property? Cutting-edge algorithms and data analytics? Those are all valid ways to have a leg-up on your competition. However, not all competitive advantages are high-tech and modern. Some are old-school. Tried-and-true methods for (in this case) building customer loyalty/satisfaction/based and making the sale. There are many areas in which a company can improve effectiveness, but that is for another post.
One of 7-Eleven’s competitive advantages allows one location to sell over 2,500 cups of coffee a day. 2,500 cups. A. Day. This location sells the most coffee out of any other 7-Eleven location in the world. Think of every single 7-Eleven you’ve ever driven by in your life. This 7-Eleven sells more coffee than that one.
Store manager Delores Bisagni. Delores, who is on kidney dialysis, has been working at her location in Shirley, NY 7-Eleven for 18 years. Delores’s secret is knowing virtually every single customer’s name. That’s it. You go there, and she greets you (by name if you’re a regular) sometimes with a hug, you get your coffee and get on your way. If you’re new, she greets you and asks your name. Over time, she’ll remember you, make you feel welcome for coming to her store, and causes you to come back. That is it!!! That is how she sells 2,500 cups of coffee a day! No traffic flow algorithm, CRM software, etc.
Delores might have profound name memorization skills and whatnot. However, I believe it’s more that she cares about her customers. “Care for our customers” is a slogan most businesses don’t understand and/or believe in. However, if you can truly understand and apply that concept, I think it will help you. Maybe not make you the #1 seller in your field, but will help you nonetheless. That is why I offer my services at a deep discount, give free editing for the life of your business, often give free advice, will work with clients that can’t pay right away, and follow up on how your start-up is doing. So far, it’s been working very well!