Businesses, no matter how unique, do not exist in a bubble. The success of your business is directly affected by the successes and failures of your competitors, some of which may exist outside your immediate industry. Often, entrepreneurs associate competitor research with pricing. While this is one area that can be analysed, there are a number of different sectors that should be taken into consideration when looking at the competition. Business owners should look carefully at marketing strategies, product development, industry trends, component costs, and customer motivation.
Competitor research is a crucial step in determining marketing strategy. First, you must identify your competitors, which is not always as straightforward as it seems. Every business has direct and indirect competitors. A direct competitor is a company that sells an identical or similar product or service to yours. An indirect competitor is a company that sells a product or service that satisfies a similar need. Understanding the difference between these two is crucial to ascertaining how you can more effectively target a niche.
Once you have identified the competitors, you can begin to search for their strengths, weaknesses, opportunities and threats (commonly referred to as SWOT analysis). This type of analysis provides a clearer picture of the competition, and thus allows you more information to make decisions. Once you have discovered a rival’s weakness, your marketing and product development can highlight that area and fill a market gap your competitor cannot. Discovering a competitors’ strengths allows you to do one of two things; fortify your company’s performance in that sector, or focus energies elsewhere to develop a different customer base and niche.
Thorough research of competitors can also help future-proof your business. Historical data from competitors may provide you with a forecast of your industry’s supply and demand. It can also help you determine forthcoming trends in your market sector.
Competitor research also gives you insight to successful strategies. When you review past and present strategies, you can determine which strategies were successful and which require tweaking. Careful examination in this area is a low risk way to assess the impact of a particular marketing strategy.
Whatever you resources as a business owner, invest in thorough competitor research. It will help you avoid easy mistakes, and lay the groundwork for future success in your industry.