Market research and competitor analysis
Market research is an important step when deciding to start a business. Before you decide to invest your money and start a business you need to understand your products and services, whether there is a market for them, and whether your ideas are viable in the first place. Extensive market research can help you determine the starting capital you will need for your specific business.
• Market research will highlight how much customers are willing to spend on your products and services and give you a good idea whether the profit margin would be high enough to make your business successful.
• As part of the market research you should identify your target audience along with the market opportunities which could help you establish your business more efficiently.
• The size of your target customer base will give you an insight into your growth potential. If it is too small then your business idea may not be viable, but if it is too big, although you will have room to grow, the market may already have lots of competitors.
Market research is also very useful when planning your marketing and sales strategy. Planning your strategies based on the data you have collected about your customers, competitors, the market and the industry will give you a competitive advantage. You will be able to optimise your marketing budget and achieve the best returns for money invested.
• The aim of your marketing strategy is to advertise the benefits of your product and attract new customers. Knowing the preferences of your market will give you an advantage as you can target your marketing to those specific needs.
• Understanding what the customers in your market want and need will also help you develop new products and expand your business portfolio. The products you develop will have a higher chance of success since you developed them specifically to meet your market’s need.
Some markets are bigger than others and consequently have more competitors. As a small business you might have a hard time competing with larger businesses or too many other businesses at once. Finding a specific niche in the market can help your business become successful. By doing something completely new or something more specific in an existing market, you will be able to create unique products or services to satisfy the needs of your target customers. Your offering will be better targeted than the more generalised solutions offered by larger businesses, giving you an advantage.
Benchmark your product against the competition. Compare different segments and make sure your product outperforms other products in the market in terms of price, quality, durability and so on.
Understanding your position in the market is an important aspect of running a successful business. Knowing where your threats and opportunities are enables you to protect your business and steer your growth strategy in the right direction.
• A good way of determining your current position in the market is by conducting business analyses, such as SWOT and PEST.
• Competitors will have a large influence on your market positioning. Regularly compare yourself to your biggest competitors, so you are able to react faster to any changes to the market that they cause.
SWOT analysis is a structured planning method used to evaluate the Strengths, Weaknesses, Opportunities and Threats for a business. It can help you analyse your microeconomic environment, which includes factors that are, at least to some extent, under your control. When using SWOT you distinguish between internal and external factors – the strong and weak points of your business and your competitors, and opportunities and risks in the market segment in which you are operating. The information you collect will help you estimate the current position of your business and create new goals and strategies, as well as action plans for their implementation.
• Strengths – key determinants of the success of your business in segments where you have the upper hand in comparison with the competitors: product quality, price, speed of delivery, customer service...
• Weaknesses – key determinants of the success of your business in segments where you have weaknesses in comparison with the competitors: high cost of production, long delivery times, limited production capacity...
• Opportunities – areas in which your business has an advantage and could expand in the market; areas where your business can beat the competition. Make sure to set your business goals after identifying your opportunities: untapped niche in the market, competitors not able to meet demand, ability to customise products for customers...
• Threats – segments of the market that show possible threats to your business that can harm your market position: low barriers to entry, availability of cheaper comparable products, competitors with similar manufacturing capabilities...
Illustrative example of conducting a SWOT analysis
A hotel and rafting company family run had low occupancy rates, so the management decided to conduct a SWOT analysis. By assessing strengths, weaknesses, opportunities and threats, the company expected to come up with possible solutions to the problem. The SWOT analysis showed as follows:
Strengths: The business started a decade ago giving the owners great knowledge about the landscape, which is an attractive holiday destination.
Weakness: Despite the dramatic canyons that surround the nearby river, rafting is almost completely unknown as an activity for tourists that visit the country in which the hotel is located.
Opportunities: The company was the only tourist centre in the area to offer the sport.
Threats: New competition could dominate the market if they didn’t act quickly.
By reviewing the analysis the company was able to take advantage of the results. It hired a local marketing consultant to tackle the weakness and seize the opportunity. The company jointly with the local consultant developed a comprehensive kit of promotional materials. The company also updated the business’s web site in both look and content and connected them to social media, and management and staff received training in using Google Analytics and other modern online marketing tools to gather data on their online presence.
Armed with the new promotional materials and an updated marketing approach, the company attracted new foreign visitors and achieved high occupancy rates.
Reaching a broader market
If your domestic market is becoming saturated and your growth is stagnating, you should try reaching new customers and markets by exporting your products. Expanding your business abroad will bring you more sales and revenues, new customers, bigger growth opportunities and wider brand recognition, all without jeopardising your business in the domestic market.
• Typically, exporting increases revenues and generates additional profit, but it has many additional benefits for your business. If you stay solely in the domestic market you will eventually reach a certain limit to your growth. On the other hand, exporting provides you numerous different markets available to expand your business into and flourish within.
• Going international will also allow you to experience different cultures and discover new opportunities for product enhancement and new product development.
• If your business is season dependent, export could allow you to achieve sales all year round.
Keep in mind that expansion into foreign markets requires a good understanding of the situation there. You need to know the main competitors, the revenue you might expect, your distribution options and more. Linguistic awareness and knowledge regarding legal and cultural requirements is also essential. Going to foreign markets without conducting proper market research may result in failure.
b) Barriers to entry
When entering a new market, you may encounter a number of entry barriers. Some of these could be capital requirements, economies of scale or restrictive government policies. You should understand and prepare for these entry barriers in order to succeed in the market.
• Each industry is different and the entry barriers will differ according to the environment.
• If you do not satisfy your target market’s entry barriers, your business will not be able to compete or succeed in the chosen market. These barriers could be erected by governments, competitors, customers or other parties. The barriers may also be natural barriers, such as increased shipping cost or time to remote locations.
• New competitors entering the market place can threaten or decrease the market share and profitability of existing competitors, who may react by changing the existing product quality or price levels. For example, if a new business enters a market with a lower price, it will put pressure on their competitors to either lower their prices or enhance different aspects of their products and services.
Satisfying all the market entry barriers does not mean your business will succeed in the market. If the market you are penetrating is already saturated with competitors, your business will be immediately under pressure. Already-established markets require new businesses to be highly efficient and unique in at least one market segment. If your products and services do not provide an advantage over the competitors, it might be hard for your business to gain significant market share and survive in the market.
Different strategies for different customers and suppliers
Your suppliers, customers, market and product type (commodity versus luxury) are all factors that influence your business. There are different customer and supplier strategies you can adopt to try control them, but there is a limit on the control you can achieve in practice.
Illustrative example of modifying your business strategy
A local restaurant wanted to analyse their business activities and find areas for improvement. They conducted an overview of their most important areas.
• Suppliers – getting the necessary ingredients from local suppliers.
• Everyday operations – preparing ingredients, making the food.
• HR – employing skilled workers with a passion for food and the food industry.
• Marketing – advertising the restaurant on social media and in newspapers.
• Technology – up-to-date equipment, digitalised operations (such as digital order-taking).
They understood they were not able to compete with bigger restaurant chains in aspects such as scale and advertising reach and so needed to differentiate themselves:
• From their social media customer relationships they found out that their burgers were very popular. They decided to invest more money into top class burger-making equipment and hired creative employees to bring new ideas for different burger combinations. Their upgraded menu proved successful.
• They also discovered that they needed to create strong relationships with their suppliers so they can continuously obtain quality ingredients to draw customers in, letting the products speak for themselves, since they did not have a large marketing budget.
• They set up a new food preparation process which was more organised and efficient. This saved them time and money.
Regardless of industry or market, customers today have greater knowledge, expectations and power than ever before. Customers are the source of every business’s revenue, but have become one of the biggest challenges for the continued success of a business. Successful businesses create an environment of relentless focus on the customer, as expressed in organisational structure, processes, technology and culture.
Choosing your target audience
All customer strategies should start with defining your target customers during market research. If you want your business to succeed, you need to understand what your customers want and need and then shape your business around satisfying this.
• Your target audience is a group of customers that share the same need for or interest in specific products and services. They are the ones that are most likely to purchase your products or services.
• Researching your customers provides a host of benefits, including discovering their intrinsic motivation behind purchasing decisions, the features they want in your products or services, and how much money they are willing to spend.
• Knowing the decision-making processes behind purchases can help you market your product better and increase your sales by satisfying your customers’ needs and interests.
• If you cannot deliver what your customers want, when and where they want it, they will go to someone who can.
The ability to build and maintain trust in a world where consumers are highly attuned to the impacts that businesses have on the world in a broader sense, including the wellbeing of the community and the environment, is critical. The same consumers are also increasingly concerned about protecting their personal data.
• Data analytics can help you analyse your customers’ values. Some of the relevant data you may want to explore includes purchasing behaviours, feature preferences and price sensitivity. Make good use of the data your customers share with you, and keep it safe.
• In order to tap into data analytics, you first need to have a pool of data to analyse. There are many different ways for you to collect this data. You can conduct surveys with your customers, create loyalty accounts that help you collect data on individual customers, collect sales data from different regions, and more.
- Online platforms generally have basic analytic tools already built-in. For example, the Instagram platform enables you to review statistics such as how many new followers have you collected in the last week, how many likes and views your content received, how many of those came from your customer base and how many were acquired by your marketing efforts.
- Traditional brick-and-mortar businesses should purchase tools and connect them to their sales systems to enable efficient analysis. Other options require manual collection and analysis of the data which can be quite challenging if you deal with large customer bases.
• Knowing customers’ purchasing behaviours allows you to maximise the possibility of a customer buying your product. For example, in a supermarket, many people buy small chocolate bars and chewing gum impulsively, so those items are often placed near the cash registers. On the other hand, some items are often bought together, so it is sensible to place them close to each other, such as electronic toys and batteries.
• Provide your customers with personalised and customised product and service offerings that suit their needs even before they realise them themselves.
Customers today need access to a broad range of purchasing channels. When interacting with businesses online, they require the ability to switch devices or channels as necessary in order to fulfil their needs. You should digitalise your business, opening different online channels, including a web site and social media channels.
• Some of the popular social media channels include WhatsApp, Instagram, Facebook and many more. Determine which ones best suit your business culture and products and you will be able to use them as easy and inexpensive platforms for communication with your customers.
• Social media has expanded the opportunities for customer interaction, and customers have shown a clear willingness to discuss their relationships with the brands they use, providing vast amounts of potentially valuable data.
• Investing money in and building omni-channel marketing and sales capabilities will not only help you keep your business alive during challenging times, but also create an asset for the future.
Almost all businesses need to deal with suppliers in order to get the materials they need to produce products or perform services. Good relationships between business and suppliers are necessary, as businesses cannot survive without input resources.
Choosing the right supplier for your business
Every business has its own needs and standards that suppliers must fulfil. When choosing suppliers for your business, define the process and the expectations you have of them. Make sure that you always have alternate suppliers in case your main suppliers are not able to deliver.
For more information on how to find a supplier, click here.
Supply chain resilience
A challenging environment can disrupt your business functions, including the proper functioning of your supply chains. During such times, both you and your suppliers will need reassurance. You need to know that you will still receive your supplies in order to keep your business afloat, and your suppliers need reassurance that they will not lose you as a customer or be left unpaid.
• Determine whether any supplier services or technologies have been adversely affected by the challenging times and assess whether this delays or interrupts deliveries.
• Develop contingency plans for supplier services and technologies that have been affected.
• Analyse supplier weaknesses, including their finances, their ability to deliver the same quality of service in the face of disruption and their ability to adhere to the contract.
• Communicate directly with your suppliers and be honest about your current situation.
• Look into any potential replacement suppliers to mitigate any disruption.
• If your suppliers come from further away, consider switching suppliers and moving the supply chain closer to home to create a micro supply chain. For more information on micro supply chains, click here.
Supply chains and innovation
Having fully-integrated supply chains that can bring products to market in a way that enhances the customer experience – and grows the business – requires innovation and vision. In essence, your goal is to get the right product in front of the right customer at the right time and for the right cost.
An important aspect of supply chain innovation is introducing new technology to the business and creating a co-existence of technology and the human workforce across all activities. There are many different technological solutions you can implement in your everyday supply chain that could help you optimise your processes and enhance their effectiveness. These enhancements will optimise your supply chain processes and allow you to adapt to market changes, enabling you to satisfy consumers more efficiently.
• Investing in digitalisation is key for a successful business in the future. Customers want the ability to purchase your products on different platforms, such as instore, on your web site, via social media and using their mobile phones. They also want options from in-store pick-up to home delivery. Not offering flexibility and convenience could cost you a significant number of possible customers.
Employees as your key competitive advantage
Successful business strategies, new technologies and processes are available to anyone. Any business can choose to buy a certain technology, but not every business can attract the best employees. Skilled employees bring competitive advantage to your business and are an invaluable asset.
• Having the right employees can help you grow your business and make it stand out from your competitors. Your employees can be your biggest advantage, as they interact with customers, provide customer services, bring innovation and keep your business alive.
• Skilled and competent employees can be the difference between a successful business and a business that is barely covering its costs.
• Attracting and retaining quality staff is not easy and you should consider offering good incentives in order to attract employees. These incentives could include higher monetary remuneration, flexible hours and a fun working environment.
Today’s businesses face a rapidly changing workplace and workforce. Employees are increasingly digital, global and diverse; their view on the role that work plays in their lives has changed. Businesses today are focusing on improving employee experience, since they are aware that employees are their most important asset and that a happy employee has a significant impact on creating a positive customer experience.
The best businesses realise that employees are in effect customers of their own internal systems, technology and processes, and have certain expectations accordingly. Investing in these internal tools is essential to cultivating and retaining effective employees. Your business should be empathic and responsive to the needs and desires of your employees to create an employee experience that will attract and retain top talent.
For more information about workforce planning, leadership and management, click here.