When you are preparing your market research, it is important to analyze the competition. This will allow you to know what their strengths and weaknesses are, as well as the strategies they use to attract consumers. In this way, you will be able to adapt your own strategies according to what the competition is doing. In this post, we explain how to analyze the competition in your market research.
What is a market study?
Market research consists of analyzing consumer behavior and preferences. In this context, “consumers” can refer to your company’s potential or current customers. In addition, market research helps you to identify trends in the market you will be working in.
Parts of a market study
In general, a market study consists of three parts:
- Internal analysis: This section examines the most relevant aspects of the business you want to start. For example, the product or service you will offer, your target market and your market objectives.
- External analysis: This section analyzes the conditions of the market in which you are going to operate. For example, competition, trends and opportunities.
- Action plan: This section sets out the strategies you are going to use to compete in the marketplace.
It is important to mention that not all market studies include all of the above mentioned parts. For example, if you are going to launch a new product line in your company, you may not include the “internal analysis” part. The reason is because you already know the advantages and disadvantages of your company, as well as the most important aspects of the business. Therefore, if you are going to launch a new product line, you should simply analyze the target market (“external analysis”) and establish the strategies you are going to use to compete in it (“action plan”).
External analysis: Competitor analysis
First of all, in order to analyze the competition in your market research, you must define your objectives very well. This will allow you to make a more accurate and efficient analysis. For example, if your objective is to sell more products, you should analyze what strategies the competition is using to attract consumers.
If your goal is to generate leads, you should research what offers your competitors are making to attract customers. In this way, you will be able to develop more attractive offers than those of your competitors.
Once you have clearly defined your objectives, it is time to analyze the competition. To do this, you should research the following characteristics:
- Products and services: Know what products your competitors offer and what their strengths and weaknesses are. Also research the characteristics of their products to determine if they are similar to yours.
- Pricing: Researching the price they are charging for their products is a good way to find out what strategies they are using to attract consumers. If the competitor’s price is lower than yours, they are probably using discounting or aggressive pricing strategies.
- Distribution channels: Know which distribution channels your competitors are using. For example, if they sell their products in physical stores, they probably have a good territorial presence. On the other hand, if they do not have any physical presence, they are probably using digital distribution channels.
- Marketing strategies: Researching the marketing strategies that your competitors are using will allow you to know their strengths and weaknesses. For example, if they are using a Push marketing strategy (based on sending unwanted messages to consumers), they are likely to have a high bounce rate.
- Objectives: Researching what your competitors’ objectives are will let you know if their strategies are effective. For example, if their main objective is to attract consumers with aggressive offers, they probably have a lot of customers, but they are not making money.
- Strengths and weaknesses: Knowing your competitors’ strengths and weaknesses will allow you to develop better strategies to attract consumers.
Why is it important to conduct market research?
Conducting market research is important for several reasons:
- To know the market in which you are operating.
- To get to know consumers and their preferences.
- To know if the market is profitable or not.
- To detect consumer needs.
- To identify your competitors and analyze their strengths and weaknesses. In this way, you will be able to adapt your own strategies according to the weaknesses you have identified.
- To know the current position of your business in the market and make the necessary changes to improve.
- To identify the business opportunities around you and adapt them to your capabilities.
Why is it important to analyze the competition?
It is necessary that your company has a well-drawn plan to be able to surpass or displace the competition. To do this, you must conduct an analysis of the competition in the market.
If you are not clear about the strengths and weaknesses of your competition, it is very likely that other businesses will end up generating a disadvantage to your company.
Competitors’ strategies can vary greatly, so it is important to know them thoroughly. For example, if you know what type of advertising your competitors use and what their main strengths and weaknesses are, you will be able to develop a more effective advertising campaign.
In addition, competitor analysis will allow you to better understand the market in which you are operating. Thanks to this, you will be able to identify business opportunities that other competitors have not detected.
In order to conduct a competitive analysis, it is important to consider the following aspects:
- Type of product or service offered
- Prices being charged
- Marketing strategies used
- Distribution channels
- Differential attributes of the product or service
- History and business trajectory
Competitor analysis tools
To perform the analysis of the competition, you can use different tools. Some of the most popular ones are:
- SWOT analysis: this technique allows to analyze the strengths, weaknesses, opportunities and threats of the competition.
- Segmentation analysis: with this tool, you can divide the market into different segments and analyze the characteristics of each one.
- Direct and indirect competitors: it is important to distinguish between direct competitors (those who offer the same product or service) and indirect competitors (those who are not direct competitors, but may affect your business).
- Benchmarking: this technique consists of analyzing competitors’ data and comparing them with your own numbers.
- Porter’s Five Forces: this model determines how different companies interact in a market.
In addition, you can conduct interviews with customers, suppliers and employees of competitors to get a clearer picture of the market.
Analyzing the competition and even a location analysis is a fundamental step for the success of your company.
How do I know if my business is successful?
To know if your business is successful, you should look at these criteria:
– SalesOne indicator that your company is successful is the volume of sales it makes. In this context, “sales” can refer to the total sales or the number of customers your company has.
– Profit margin: Another indicator of success is the profit margin you make. In other words, the difference between the selling price and the cost of production.
– Profitability: Profitability is the relationship between income and the investments made in your company. In other words, how much you earn for each peso you invest.
– Liquidity: Liquidity is your company’s ability to pay its debts in the short term.
If you observe that your business is successful in any or all of the above criteria, you should take advantage of it. For example, if you have high liquidity you can use that money to invest in new product lines or services.
Inprofit. Market research. Agency 360
To analyze the competition, you must take into account the type of products or services they offer, the prices and marketing strategies they use, their distribution channels and the differential attributes of the product or service.
If you analyze all these aspects and manage to detect any weakness in your competition, you will be able to take advantage of that to generate a competitive advantage.
If you are thinking of expanding your business or creating a new one and you need to develop business strategies to ensure the success of the project, Inprofit is a 360º agency and we develop market research for expanding companies. Contact us.
