Competition is inevitable when you start a business. You’re bound to have at least one direct competitor, if not 10, and there are plenty of alternative products and businesses all vying for a share of the consumer’s expendable income.
However, conducting competition research is one way to keep ahead of the curve, spot your weaknesses, and learn to adapt quickly when needed.
Competition research is part of every business and marketing plan for good reason: it helps you to identify the strengths and weaknesses of your product or service, and your competitors as well. Using this information is an opportunity to learn from others and understand where your business stands in the marketplace to the consumer.
We’re going to simplify the topic in this blog, using a coffee shop as an example. However, if you need more information on the topic, there are a lot of other blogs on the internet that go more in-depth on this topic, and some provide you with templates you can use to conduct competition research.
Identify Competitors
Competitors are broken into four categories: direct, indirect, substitutes and new entrants. Let’s start with our example of opening a coffee shop that also offers donuts and other baked goods.
The direct competition for your shop will be all the other coffee shops in your area that also sell baked goods, not just the Dunkin’ Donuts or Starbucks down the street. These are brands or businesses that first come to mind when you think about your competition.
The indirect competition will address the same customer needs, but in a slightly different way. For this example, you can think of local diners, bubble tea cafes, or bakeries. The target audience will overlap (think coffee drinkers and those with a sweet tooth), but it’s not an exact match.
Substitute competitors don’t sell the same products as you, but you’re still competing for the consumer’s money. For this example, we would look at bars, ice cream shops, the grocery store, and a person’s home, where they can make their own coffee and cookies.
New entrants are businesses that have recently entered a market offering the same products or services. This could be a new Dunkin’ that opened in town, or another new cafe.
Comparing Time!
Once you identify your competitors, it’s time to start comparing them to your business or product.
You’ll look at price points, services offered, target demographics, and user or customer experience. When you’re doing this research, it’s best to keep these things organized in a spreadsheet, where you can take a glance at all of it.
This is also a good time to talk to your current or potential customers about your business and your competitors, too. This will give you a sense of where you fall in the consumer’s life and wallet.
The last action will include looking at your competition’s online presence, such as their website, social media content, engagement, and reviews (and how they respond to them). Sign up for their newsletters, and like their social media pages. Take note of how they speak to their customers and about their business and how that reflects on them. You’ll want to look at the good and the bad.
Identify What Makes You Different
After doing all that research and taking extensive notes, start identifying what makes you different. Let’s go back to the coffee shop, for example. If you’re going to be selling coffee, are you selling a particular brand? Are you a latte artist? Will you come up with fun drinks to pair with donuts and other baked goods? Do the other shops in the area also do these things?
And speaking of those munchies, are they traditional donuts, or are you doing fun flavors, like Coconut Chocolate Caramel or Lemon Meringue Pie? Are you going to host open mic nights or other events? Will you have a frequent buyer card or another loyalty program?
Learning how you differ from your competition teaches you what to focus on when you market your business and how to grow your business. It will also help you understand where you can improve to gain loyal customers.
All of this research can help you create goals and track how you’re doing with those goals. And, as always, with anything you do in business, this isn’t a one-time thing. Try to conduct this research, if not every year, then every other year, to stay relevant and find new customers.
Remember, your competitors can do this research as well, and they can recognize what your business isn’t doing well and can seize on that opportunity. If you are doing something well, competitors can take advantage of that, too. They do say the best form of flattery is imitation, right?
If you ever need help getting started with this research, feel free to reach out to Rising Tide Community Loan Fund at 484-893-1039 or RTCLF-marketing@caclv.org.
