Research Competitors
Research and create a profile of your competitors. This may be one of the most daunting yet most revealing and rewarding steps in your market research.
Customers Buy for Their Reasons, Not Yours
Customers purchase products and services from competitors for their own reasons. You must understand those reasons in order to determine why customers will buy from you. Your competitors can be your greatest source of valuable information about the wants and needs of your customers. If you miss this step, you could be in for a rough ride.
Do not underestimate your competitors. They are in business because they understand their customers’ wants and needs and they know how to sell their products and services to customers. No matter how many things your competitors might be doing wrong, they must be doing many things right to be in the market. You need to understand the good and the bad, the positive and the negative.
Direct and Indirect Competition
Your business will have direct and indirect competitors. A direct competitor sells the same products and services, competing for the same customers and sales. An indirect competitor sells entirely different products or services, and competes for the same funds from the customers’ wallets. You will need to consider all the competitors in your scan and then determine the impact of each on your potential sales.
Who Are Your Competitors?
If you know who your competitors are, make a list of them. For some businesses, this can be as simple as going to the telephone directory; for others, the information can be more difficult to find.
How Will You Research Your Competitors?
Don’t be timid when it comes to researching competitors. This is a task that must be taken seriously if you’re going to succeed.
Here are some suggestions on how to research your competitors:
- Conduct a survey of your competitors.
- Research them on the Internet.
- Telephone them.
- Pose as a customer–call or visit and ask questions.
- Buy and analyze your competitors’ product(s) or service(s).
- Join an association whose members are your competitors.
- Contact a competitor outside your market area, and ask if he or she will help you.
- Get a job and work for one or more of your competitors.
- Interview your competitors’ customers.
- Read books, magazines, newspaper articles.
- Watch TV or other media coverage about your competitors.
Differentiation and Positioning
Differentiation is the term used to describe how you are different from your competitors.
Do you wish to be the cheapest, the fastest or the most convenient? Will you aspire to be the best in your arena and command the highest prices?
View the Example: Positioning Statements
Action
This step is to gather information for research purposes. If you set up folders in Step 4, we suggest creating a subfolder in the “Business Plan” folder, called “Worksheets” and saving the following worksheet with the file name Competitive_Analysis_year_month_date
Download the Competitive Analysis Worksheet
Here is one simple method for establishing how your business might be different from the others. Create an expanded version of the table like the following sample (with as many rows as you need, but at least seven). Determine what features or characteristics are most important to your customers. This information can be sourced from secondary sources, but it can also be determined from a market survey of your potential customers. It can also be learned through informal questioning and discussion with those who are knowledgeable about your products or services.
The “Competitive Analysis Worksheet” can be used to differentiate your business or goods from the competition.
- List your business in the first row.
- List your top six competitors, more if you think it useful or necessary. Rank the competitors according to their importance to you, beginning with the most important.
- List the features (price, quality, service) from left to right, according to their importance to the customer. Research to determine where each of the competitors is positioned with regard to each feature. For example, is the competitor’s product high, low, or medium quality?