Researching and Analysing the Competition
When you start up a new business it is highly unlikely that you will be supplying a completely new product or service. You should certainly have something different about your product, your service, the way you present it, sell it, or what it does for the customer, but if it’s a product or service that is already on the market, you will have competition.
Analyse The MarketFor the business plan and for forecasts of cash flow and profit and loss, you need to be able to forecast sales. To do this you need to analyse the market and estimate how you might fare against the competition. Research into your competitors’ businesses and products will help you to price your own offering and position it in the market.
Monopolies in a market are very rare, so there are likely to be several businesses in the market, though some may have a dominant position. For a small business, it is likely that you will be entering a market with many other small businesses, so no single business will hold a high percentage (more than 5%) of the market share.
How To Research The MarketThere are some ways to research a market, though these may be harder for a small business to access than a large organisation, due to cost. However, as business owner you should be prepared to do the research yourself.
Basic Methods For Research Include:
- Internet research
Internet ResearchIt is not even worth asking… You must have access to the Internet. This is a mine of information, and you can access the websites of your competitors in seconds. This will enable you to see the type of message they are giving, how they are selling, prices etc. Remember – you must be different. There are also numerous websites offering market research and analysis tools, but tread carefully. Make sure what they are offering is what you want – and that it is affordable.
ReadingIt’s basic, but unavoidable if you want to analyse your competition. Plough through your trade directories – who is out there and where? Look for guilds or trade associations in your business sector. Spend some time reading the trade press to get an idea of your competitors and trends in the market. Get hold of and read your competitors’ literature. What are they saying about the market, and about themselves? Look at any reports or statistics you can find on the sector.
InterviewsGo out and find people to talk to. Try networking events, exhibitions, seminars. Seek out your competitors and talk to them. You don’t have to announce that you’re about to be in competition, and people are usually quite willing to talk about their businesses. Also seek out customers – what were they looking for? Did they find it? What was their experience like? Ask similar questions of other people working in the industry, such as suppliers, distributors, retirees. You can also carry out telephone interviews. To stop it becoming a ramble, have a list of questions written down that can help you guide the conversation.
TestsIf there is any way you can build a prototype of your product or service, which you can then test, that would be an excellent way to “test the water”. If this can be done without investing huge amounts in plant, machinery and supplies, then so much the better. There is no better test than the real thing, and no amount of talking can replace it.
SWOTAs part of your research you should also carry out a SWOT analysis. An acronym for Strengths, Weaknesses, Opportunities and Threats, it is a process carried out with the main people in the business (it might only be you as the sole owner!), to try and identify what you do well, what you don’t do so well, and, particularly in this context, the external circumstances that might present opportunities or threats for your business.
For example, external factors could be technology, and the way it is changing products or the way products are developed, constructed or marketed. Another area for threat or opportunity could be the economy – how is that affecting the market, and what can you do to make it work for you? Other external factors include society (for example trade unions); legislation (e.g. date protection act); ecology (the very availability of raw materials, energy and environmental factors). Perhaps the most significant external factor is the market itself for the sector you are in. Is it growing, declining? Are other companies joining or leaving? What are the trends?
It is important to research and analyse your market and the competition. There are various ways to do this, but much of it will mean graft for the business owner him/herself. SWOT analysis is also a useful too.