From the September 2004 issue of Startups

Q: I'm interested in starting a homebased telephone-answering service. I want to research my competitors' prices and services, but I don't want to call them. What's the best way to do this research without letting them know that I'm a competitor?

A: We understand your reluctance to phone competitors yourself. Many people pretend to be prospective customers to get pricing information, but, according to the businesspeople we've interviewed, they're usually detected as would-be competitors. Some business owners tell us they don't give good information to those they suspect of being potential competitors.

There can still be value in making these calls, though, if you're upfront about being new in the business and seeking information. Here's why: If a business is in demand, people already in business are usually willing to help newcomers. Many times, business owners turn to other entrepreneurs when they're overloaded or when they want to refer customers who need work that's out of their area of specialization or interest. Some are just happy to give newcomers an opportunity to participate in a business they've benefited from.

But when business is not so good, and business owners are hungry, they're more apt to fear competitors and be closemouthed when a newbie phones for information. So the response you get by phoning "competitors" can be a bellwether for just how difficult it will be for you to make it in the business.

Here are some more suggestions:

Hit the net. Many business owners now post their prices on their websites. They know that prospective customers want to know this information, and posting the price serves as a screen to save the time of talking with people who are simply price shopping or who aren't truly prospects for their goods or services. Of course, this isn't true for all businesses, particularly those that provide highly customized services or sell very upscale products.

Hire someone to call competitors for you. This may involve no more than having them request your competitors' brochures and other sales materials. But this person must be able to answer some screening questions they may be asked. Someone with experience as a customer of the type of business he or she will be calling, or perhaps someone with experience doing market research interviewing, is best suited for this task.

Contact similar businesses that you won't be competing with. For instance, identify answering services in cities similar to your own (in terms of cost of living, type of industries and so on), and then contact them by phone, or search for them on the Web. You can be upfront with them about your plans, pointing out that you'll be working in a different community.

Check out pricing websites. Depending on your industry, there may be a trade association or a Web site that collects and publishes pricing data. For example, Brenner Books has a nationwide database of prices for "business support services," including telephone-answering services. It also sells pricing surveys for editing and writing services, graphic design, desktop publishing, pre-press, scoping, multimedia and Web site design. Computer consultants and authors can check out Realrates.com for prices. Keep in mind, however, that industry reports are based on national or state averages and may not be applicable to your community or clientele. But at minimum, they can give you a ballpark idea.

Talk with customers of other answering services. Find out if they're satisfied with the service they're getting and what they expect to pay. As you establish rapport with these people, chances are, you'll be able to find out what they're paying now. In the interest of finding out if they can get a better price for equal or better service, most people will provide you with such information. Such conversations are also a chance to discover additional services your future customers might like to have and what they would be willing to pay for those services.

One way or another, you'll be able to find out what others in your business are charging. The next question is: What are you going to do with this information? What pricing strategy do you want to pursue? Are you going to quote prices on the lower end of the range of what others are charging? Are you going to find the high and low, then split the difference? Do you want to offer top-of-the-line service and prices higher than the competition?

Keep in mind that for most businesses, pricing is like walking a tightrope between being neither too high nor too low. Pricing too low can hurt your credibility as being a business that provides high-quality service, but pricing too high may result in more business for your competition. Some companies, though, do quite well by positioning themselves as premium services and pricing at the upper end of the spectrum by adding value that enables them to charge more. They find that the more value they add, the more they sell-and price becomes less of a factor in making the final sale.

Regardless of the pricing strategy you choose, the best way to figure out what people will actually pay is to experiment with pricing and start getting reactions from prospective clients. If they're interested until you mention price, you're probably on the high side. If this is the case, you can ask what they were expecting to pay and decide what additional value you might need to offer to get your desired price. If they snap up your offer a bit too eagerly, chances are, you're underpricing. To find the balance, some people start low and keep raising their prices until they get resistance.

To get your business off to a sound start, it's also a good idea to go beyond simply finding out what your competitors charge. You should know your competition well enough that you're prepared to answer questions and demonstrate how your product or service compares favorably to others.

While it may not be workable for a telephone-answering service, one way to do this is to order or buy something from all your competitors. When you do this, work on answering these questions:

  • What is each competitor doing that sets it apart from others?
  • What's special about what it's doing?
  • Who are its customers? Who is the competitor best suited to serve?
  • How well are they doing at providing the product or service they claim to offer?
  • How, as a customer yourself, do you feel about the product or service?
  • How could it be improved? How could you do a better job?

With these questions in mind, you can identify ways to tailor your business to your personality and the type of customer you seek to serve. At the same time, determine if there's any new technology that can give you a competitive edge. You may also find that if you give people a reason to call you by offering special benefits like "calls answered 24 hours a day," "same-day service," "no overtime charges," "free estimates," "free consultation," or other features relative to your business, then they may gladly pay your price.

One final tip: If you find over and over that most of your competitors are doing things in the same way, this is generally a sign that these methods work. So consider how you might provide the same thing, but in your own specialized way.


Authors and career coaches Paul and Sarah Edwards' new book is The Best Home Businesses for People 50+. Send them questions at www.workingfromhome.com or in care of Entrepreneur.