How Does Your Business Idea Stack Up Against the Competition?
One of the hardest things about launching a business is making the transition from having this idea you love (but only lives in your head) to running a company that exists in the real world. Great planning can help you make sure you have the best business plan possible, but in the real world your business faces something it might not have in your head - competition.
Doing a competitive analysis for your new business is one of the most important things you can do to make sure you can find success. Your business won’t exist in a vacuum and there’s a good chance you’re entering a market where you’ll face more than one competitor. If they have been around for a while, they probably have a number of advantages over your start-up, including stronger brand recognition, a larger customer base, and better production pipelines.
That doesn’t mean your business is doomed, though! Quality competitor analysis can give your new business the advantage you need to make a splash when you enter the marketplace. Check out our 5 quick steps for competitor analysis below, and click the link below to sign-up for our full Pathway to Business Ownership Toolkit for more tips on competitor analysis and everything else you need to be ready to launch your business!
Get To Google. If you have an idea for a business, you probably have an idea about who you’d be competing against. First instincts are powerful, but you should back that up with some solid research – both competitor research and marketplace research. The good news is that you can start this process without leaving home (or even your couch). Search engine optimization and marketing can be a powerful tool for driving people to any business. That’s what makes searching so valuable for market research for a new business. Search for the terms that you think your future customers would use to learn about your business and what you offer. The names that pop up first? Those are some of your competitors. That results page can be scary. It’s often bigger names and companies, brands you wouldn’t think of yourself in competition against. Combine your first instincts with some of the names from this results page and you’re well on your way to developing a picture of your the competition your business is facing.
Define the battleground. Your business may not be able to compete with everyone right off the bat. That’s totally fine! The important part is to decide what things you are going to compete on. You may be competing on price, offering a local service the big competitors can’t compete with, or just plan on developing a level of service that wouldn’t be sustainable for them. Knowing the business strengths of competitors and the advantages of your new business helps you start to strategize how to win business from your competitors.
Why are their customers “their” customers? It’s not enough to know what you offer – you need to understand why customers are currently choosing your competition. What are they doing that drives their success? Making a guess here is helpful, but you’ll get the fullest picture of your competition if you create your own “secret shopper” program. That’s easier than it sounds - just go to their business and use their product! It can feel weird spending time and money on a business that you see as your competition, but it’s the best way to do competitive analysis. Put yourself in the shoes of their customers and keep in mind why you’re doing it – you’re about to turn them into your customers!
Why would they switch? You know your competition, you know how you’re competing with them, you know why customers are choosing your competition, and now we get to the big questions: Why will customers switch companies and why will they choose your business? As your business grows, you’ll be able to use business analytics for competitive analysis to answer these questions, but for now, go with your gut. When you checked out your competition, what were the things you knew you could do better? Can you do it cheaper? Can you offer better service? Think about it and then ask yourself one more question - If you weren’t running your business, would this be enough to get you to switch?
How Do You Make Customers Switch To Your Business? Now that you have done the competitive marketplace research, it’s time to figure out what specific actions you need to take to draw customers from your competitors!Take the reasons you’ve determined people might switch and create specific activities and actions to encourage that choice. Think about how to differentiate yourself from your competition and create a to-do list to make sure that happens. This may be marketing efforts, improving your product, or focusing on a specific thing you do better than your competitors ever could. It looks different for every business, but if you’ve done the analysis of your business competitors, you’re well on your way!
Comparative market analysis like this isn’t a one-time thing. You’ll be creating competitor profiles throughout your time as an entrepreneur as new competitors pop up and you grow to take on bigger and more established companies. Market research is only part of what you’ll need to succeed though! To learn more about analyzing competitive products, demographic analysis, and competitive price analysis, create your account with skysthelimit.org to get access to free business resources, including our Pathway to Business Ownership Toolkit today!