Competitive market research is a very important part of any good marketing plan. This term could elicit some negative images however competitive market research has nothing to do with spying. This type of research has everything to do with paying attention to your competition as well as what they are doing.
Many individuals will lose out on business to competitors which they have never even heard of simply as they’ve never taken the time perform competitive market research. Understanding what your competition is doing will assist you to position yourself, and your product or service, within the market.
What Is A Competitive Market Research?
Every market has more than one company which is pitching similar products or services to the same group of buyers. Competitive market research helps to identify the main market players, determine what strategies they utilise to succeed and identify resources your company could utilise to overshadow the market.
In economics, there are two main theories around businesses getting a competitive advantage:
- The Market-Based View (MBV) strategic framework makes the statement that a business’ performance is determined solely by the structure as well as competitive dynamics of the industry.
- Emanating out of that is the Porter’s five forces model, which demonstrates five main forces which add competitive pressure to your industry. Analysing these forces will give you an improved understanding of the target markets and prepare for launch.
Why Are Your Competitors?
The first step is that you’ll need to figure out who you’re really competing with so that you are able to compare the data accurately. What works in a business that is similar to yours might not work for your brand:
Divide your “competitors” into two categories: direct as well as indirect:
- Direct competitors are companies which offer a product or service that could pass as a similar substitute for yours and which operate in your same geographical area.
- Conversely, an indirect competitor is one which offers products that are not the same however could satisfy the same customer requirement or solve the same problem.
It seems straightforward enough on paper, however these two terms are often misused.
When comparing your brand, you should only concentrate on your direct competitors. This is something which many brands get wrong. Now, this doesn’t mean you should throw your indirect competitors out the window entirely. Keep these brands on your radar as they could shift positions at any time and then cross over into the direct competitor zone.
The market can and will move at any time. This means that if you’re not constantly scoping it out, you won’t be aware of these changes until it’s too late. Also, this is one of the motives why you’ll want to routinely run a competitor analysis.
Analyse Your Competitors’ Product Offering
Now you know which brands are known by your target audience, you can begin researching them. Become familiar with their product range:
- What do they provide that you don’t (or vice versa)?
- What price array are they in and how does your pricing compare?
Look at the quality of the products:
- Are they better/worse or the same?
- How slick is their website?
Be objective about it. It’s important not to look at your own brand through rose-tinted glasses!
Try to ascertain each competitor’s value proposition. In other words, what the brand tells people it stands for and why they should shop with them. Look at the messaging on its website – what are the key themes? Maybe it trades on being environmentally friendly or having the best prices? It’s very important to understand how your competitors are appealing to their customers.
Try to draw up a market map. Market mapping involves arranging competing brands/products on an axis according to their positioning. For example, whether they are high or low cost or whether they are complex or basic.
Finally, what is your competitor’s business model? And which distribution channels do they use? For example, do they sell through third-party retailers or only direct-to-consumer? Do they list on marketplaces? Do they franchise or license their products, or sell by subscription? Do they have a freemium offering? This process can highlight the potential to innovate your own business model.
Do you want to learn more about market research? If you do then you need to do our Market Research Course. Follow this link to find out more.
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