Competitive intelligence means monitoring the activities of your competitors -- the products and services they sell, the strategies they implement and the marketing and promotion messages they deliver. Competitive intelligence is gathered through a variety of means, including studying competitors' websites, talking to their customers, reading their product literature and having your staff members visit their stores. Small business owners should make gathering competitive intelligence a high priority throughout the year, not just when preparing the annual strategic plan.

Learn What Competitors Do Well

You may decide to use some of the same strategies to bring in new customers when looking at your competitors’ successful strategies. It's not uncommon for companies to emulate each other to an extent. One company may have identified a critical customer need and addressed it. You may not be aware of that need until you see it reflected in the advertising campaign your competitor is using.

Understand Their Strengths and Weaknesses

A small business owner seeks to draw customer attention to his company’s strengths -- what his company does better than his competitors do. If he can uncover weaknesses in the competitors’ products and service levels compared to his own, he can use this for his marketing message by highlighting his strengths and the competitors’ weaknesses. The business owner does not want to attack his competition where they are strongest. For example, they may have a substantial advantage in production costs that enables them to offer lower prices yet still maintain high margins. Competing against them on a price basis would not be possible without sacrificing profitability.

Avoid Strategic Errors

Competitive intelligence is crucial even before the start-up stage of the business. The first critical decision to make is whether to launch the company at all. The decision is based on an evaluation of the opportunity available to the company -- the potential number of customers -- and the strength of competitors already in the market. If competitors are too entrenched, it may not be financially feasible to build significant market share. Once the company is launched, each major strategic decision -- whether to launch a new product, whether to enter a new geographic territory -- is made in light of this same kind of analysis. A keen ability to gather and analyze competitive intelligence can prevent the company from underestimating the competition and, as a result, committing financial and human resources to strategies with little chance of success.

Deal With Threats

When competitors’ strategies work to the extent they are taking business away from your company, you need to be able to act quickly to minimize the damage. The first step is to know what is causing your company to lose its competitive advantage, and to do that you have to know the strategies your competitors have rolled out and analyze why they are working better than yours are. Companies with deep understanding of their competitors are able to go so far as preparing action plans in advance to cope with actions that competitors might take that could negatively impact the business. Referred to as contingency planning, this process is valuable because it creates a culture within a company of accepting that competitive threats will be ongoing. The small business owner can deal decisively and aggressively with threats because he has plans at the ready to deal with them -- based on thorough competitive intelligence.