Competitor research is critical for startups. It helps you understand the market and how your competitors are executing their business strategies.
Competitive analysis helps you determine what you need to do to stay ahead of the competition. It will also help you understand where you can make changes in your business model and product development process.
This will ultimately lead to an improved competitive advantage over your rivals, resulting in higher sales and better profits for your business.
Here are some ways in which competitive analysis can help startups:
#1. Identify key trends in the industry that affect your business prospects.
#2. Understand the market size and segmentation of your target audience.
#3. Evaluate competitors’ strengths and weaknesses based on their offerings, prices, distribution channels and more.
When should you do Competitor Research?
In business, companies often make decisions by looking at their own numbers and thinking about what they should do next. But this can lead to tunnel vision. When you’re building a startup, it’s important to understand how your competitors are doing as well.
You may not be able to afford the same resources or have access to the same data that they do, but there are still ways for you to learn from them and use that knowledge to inform your own decisions.
Competitor research should always be an on-going process that helps you make informed decisions for your business.
In fact, it starts before you even incorporate your business. Looking at competitors will help you understand whether your business idea has been done before or whether your business idea can withstand the test of the market.
It also offers a great opportunity to conduct SWOT and PESTLE analysis over your business idea/plan.
Competitor research also helps you understand the feasibility and market penetrative ability for your new product/service offering. It also helps you if you are devising a new marketing plan, working capital strategy or pricing strategy.
Competitor Research and Market Research – How are they Inter-linked?
There is a close relationship between competitor research and market research and some consider competitor research to be a sub-part of market research.
Market research helps you define who your target audience is and what they want out of a product or service. It will also tell you what they are willing to pay for these products or services. Basically, market research gives you insight into consumer trends.
Competitor research helps to identify the strengths, weaknesses and opportunities of the competitors in the market. It also helps you understand best-practices used by competitors that you can use for yourself as well as innovate your business processes.
The information gathered from the industry analysis can help you understand how to position your product against theirs, what features to include in your product and how best to position your product in the market.
If done together, it offers a great leg-up for a startup compared to its competitors.
Types of Competitors that you will find during Competitive Analysis
The aim of competitive analysis is to find threats (potential and actual) as well as strong points of your competitors that you can employ in your business. This results in three types of competitors in the industry landscape that you must watch out for:
- Direct competitors
- Indirect competitors
- Potential competitors
Direct competitors are businesses that offer similar products or services to the same target market. For example, if you’re starting a clothing store, your direct competitors would be other clothing stores that sell similar clothing to the same target market.
Indirect competitors are businesses that offer a different product or service, but still attract the same target market. For example, if you’re starting a clothing store, your indirect competitors might be department stores or online marketplaces that also sell clothing to the same target market.
In addition to direct and indirect competitors, there are also “potential” competitors, which are companies that are not currently in the same industry or market but have the potential to enter it.
For example, if you’re starting a clothing store, your potential competitors could be a fashion design company that is considering opening retail stores or an e-commerce company that is considering expanding into clothing.
Techniques for Competitor Research
Psst.. WinSavvy conducts competitive analysis for startups. Send us an email at adhip[at]winsavvy.com or book a meeting for free here and we will show you how we do it.
For startups, competitor research can be a tricky area. The trouble with competitors is that they’re often seen as direct competition for your business, which can make it hard to take a dispassionate approach.
But it’s important to look at what your competitors are doing and why as it can help you find out where there might be opportunities in your market.
Step 1: Competitor Profiling – Create a List of your Competitors
You can start with the usual search tools to find your direct, indirect as well as potential competitors.
But, you won’t be able to make a comprehensive list of the competitive landscape just by doing that. If you wish to go broad, you also need to talk to your potential customer base.
Start by gathering and analyzing data on the market, industry, and survey or interview your target audience to understand the products that they use to serve the pain point that your product or startup aims to address.
Sometimes the answers can be quite surprising and products or businesses that come up during the interviews/ surveys can bring insights on competitors that you had never thought of.
Step 2: Collect Data about your Competitors
This technique involves researching and analyzing the strengths, weaknesses, opportunities, and threats of direct and indirect competitors. However be mindful of data privacy laws, which may vary depending on where your startup operates.
Run a SWOT analysis on your own startup or product at the same time. This technique involves analyzing a business’s internal strengths and weaknesses and external opportunities and threats to identify areas for growth and improvement.
Once this is done, you can move on to step #3.
Step 3: Competitive Benchmarking:
This technique involves comparing a business’s performance against that of its competitors to identify areas for improvement. The goal is to determine how well the business performs against its direct or indirect competitors. This technique involves putting to the test, the strengths and weaknesses of your business, by comparing them with those of other companies in an industry, and taking action to improve performance.
The benchmarking process in step #3, is however linked to the purpose of the competitive analysis.
- Competitor analysis is done when launching your business,
- Competitive analysis is also done when launching a new product,
- Competitor research may also be used for indentifying, improving and innovating business processes, such as pricing strategies and marketing tactics.
Based on the purpose of your competitive analysis, you can follow the following steps:
- Surveys and customer feedback: This technique involves gathering information from customers about their perceptions of the business and its competitors. This industry analysis technique helps when you are trying to innovate a new marketing plan, brand positioning or branding strategy.
- Social media monitoring: This technique involves monitoring the social media activity of competitors to understand their marketing strategies, target audience, and customer engagement. This is a tactic used by digital marketers to improve upon their competitive positioning and ability to consistently share messaging on brand’s competitive advantage to its target audience.
- Search engine optimization (SEO) analysis: Again, a competitive intelligence gathering tactic used by marketers (or more specifically, SEO consultants), this technique involves analyzing the SEO strategies of competitors to understand their online presence and visibility. (Psst: WinSavvy conducts competitive analysis for startups using steps 1, 2, 3 and 5. Send us an email at adhip[at]winsavvy.com or book a meeting for free here and we will show you how we do it.)
- Website analysis: This technique involves analyzing the websites of competitors to understand their design, functionality, and user experience. This is a normal process used by designers to design a webpage, or conversion rate optimization experts to improve conversions across a website or at a landing page.
- Product or service analysis: This technique involves analyzing the products or services of competitors to understand their features, pricing, and positioning in the market. This is a very important industry analysis step that should be done by startups before any product launch. Usually it is done, before you even create your proof of concept, prototype or MVP.
- Trade shows and events: This technique involves attending trade shows and events to meet and gather information from competitors. It helps you gather insights on future business plans by your competitors and can help you devise your competitive strategy in the long-run.
Analyze the Data collected in the Competitive Analysis process and Make a Decision
Even with all the data in the world, the final decision rests on you, the business owner. Sometimes, even with the best data, businesses make wrong decisions, due to lack of innovative thinking or vision or a misalignment with a startup’s goals.
You have to streamline how you use your industry analysis for achieving the best results for your startup.
For that reason, the Live-Not-Fight Plan is a useful tool.
Live-Not-Fight Plan is a tool that we, at WinSavvy use for our clients in their business or product launch brainstorming processes.
Step 1 – What’s your unique selling proposition (USP)? What is your point of differentiation?
If your startup or if your new product or service is serving a demand, that no one else is, that can be a USP in itself, albeit a weak one.
Ask yourself, what is the differentiating factor that your brand has, that can not be copied by your competitors. If you don’t have such a factor, your startup or product or service does not have a very good chance at fending off competitors.
How to Force Differentiation in Your Business or Product/ Service Idea
Use the data collected on your competitors to identify opportunities for your business to gain a competitive advantage. This could include offering unique products or services, targeting a specific niche, or providing exceptional customer service, in industries where customers value customer service but do not get.
Ally Bank is a great example of an upstart bank capitalizing on customers’ dissatisfaction over customer service in the banking sector.
In case, you are unable to differentiate your business/ product or service, use the data collected during competitor research to identify new opportunities for growth or expansion for your business.
This could include entering new markets or developing new products or services. We, at WinSavvy, always advise our clients to pick blue ocean thinking over fighting entrenched competitors in the market.
Step 2 – Innovate a Business Model, Pricing Strategy and Revenue Model
Use the data collected on your competitors’ pricing strategies to innovate your business model. If the industry has too many businesses offering a business model that is outdated, it is a great opportunity to innovate and deliver solutions to customers that they always needed.
Same goes for creating your revenue model and a pricing strategy for your business. This information you collect in your market analysis can help you to price your products or services competitively or to differentiate your business by offering premium pricing.
This is also a great way to identify the best practices of your competitors and then implement them in your own business. It will also help you execute and attack on the weak points of your competitors more effectively.
Step 3 – Test Your Assumptions
This technique involves testing out assumptions about one’s business model, product/ service and customer needs. This can be done through experiments such as A/B tests, surveys, interviews, etc.
However creating a proof of concept or MVP is the best way to hit the road.
If it works, use the data collected on your competitors’ marketing strategies to create a marketing plan for your business, that is in consonance with your business strategy. This could include identifying the channels and tactics used by your competitors and determining which will work best for your business.
Wrapping it Up
Use the data collected during the competitor research as a benchmark to regularly monitor your business’s performance and improve your competitive positioning and creating a competitive advantage.
Startups should also be amenable to sudden market changes.
While the data collected during competitor research can help you stay informed about changes in the market and to adapt your business plan accordingly, sometimes issues crop up that can lead you to pivot extremely suddenly.
This could include launching new products or services, targeting new markets or revising your marketing strategy.
The key is to use the right processes to arrive at the right action plan to make the best use of your competitive research.
WinSavvy conducts competitive analysis / competitor research for startups. Send us an email at adhip[at]winsavvy.com or book a meeting for free here and we will show you how we can do it for your startup.