Why competition is good
Competitors are many things, but what they aren’t is a reason to give up. First and foremost, they are a confirmation of potential success. Having competitors in the industry you’re trying to enter confirms that there is a market for what you want to provide. Also keep in mind that it’s very rare for a service to be monopolised. Most users are willing to try out different providers of the same service, or keep on different providers for different contexts.
Following your competitors will give you a breadth of information on how the industry behaves and the preferences of the audience you are targeting. The way they promote themselves, choose to do customer service, choose to upgrade their features, as well as the feedback they receive from their users is a consistent snapshot of what trends are growing in the industry, as well what technological trends your competitors are responding to. Use the feedback they receive to improve your own product, look at their ads and content to get a sense of their approach. Apply the principles that are successful for them and fit your own business model, but never copy something word by word. You can get only so far with another “me too” product.
Scoping your competition out
Google is your best friend when it comes to researching the competitive landscape of the industry you’re entering. Once you get a good idea of who your competitors are, test out the services they offer to get your own insight in what works or doesn’t work. To sum it all up, use the tools below to map out your competition.
The competitor analysis matrix
The competitor analysis matrix is a table where you can centralise all the information you gather on a competitor. Each column covers a point of interest, while each row covers information on one competitor, that you will fill out as you do your research.
Include in the points of interest the following topics:
- Company overview: a short description of the company, including their public profiles, location and service statement.
- Target market: a description of the audience they are targeting with their services. Some competitors might have a single target audience (for example, a hostel might target only youth), others might have a wider audience (for example, a bed&breakfast might target families or small business teams)
- Marketing strategies: an overview of the communication and promotion tools the competitor is using. Do they have a store, a website, social media profiles? Are they advertising and where? Do they have a certain tone and voice? Are they consistent throughout all their channels? Did they have a particularly successful campaign?
- Products or services: a description of the product or service the competitor provides. Start from the competitor’s main value proposition (for example, Airbnb offers rentals in apartments and homes for travellers), and add any ways in which the product/service is diversified (continuing the Airbnb example, they also offer experiences and business rentals)
- Features: make a list of the features used by the competitor to put their value proposition into practice (AirBnB allows you to make your own account, search and filter rentals, save to favourites, save your history of bookings and payments, contact your hosts, etc.)
- Strengths: summarise the strengths you have drawn from the research you’ve been doing on a competitor. Is their product very good? Is their communication clear? Is their customer service friendly and efficient? Is their user experience delightful? Some competitors will be very good at one thing, other competitors will have strong points in more departments. Don’t hesitate to put all their strengths on the table, as it will give you a clear picture of what you can compete against and what you can’t, as a startup.
- Weaknesses: just as you’ve summarised strengths, do the same with weaknesses. Are there any weaknesses in their product? Are there any gaps in their customer journey? Is their communication too clunky? Too insistent? Be honest with their weaknesses, but don’t be gleeful if you have many items on the list. Some problems might be easy to fix, and you coming into the industry might be just the push the competitor needs to start fixing things around their company.
Pro Tip: When working on filling out the competitor analysis matrix, remember to also include alternatives and substitutes, not just direct competitors. For example, if you’re thinking of building a Customer Relationship Management tool for small businesses, you’ll be competing with both other apps of the kind, as well as people who prefer to use spreadsheets instead of a dedicated application.
How to differentiate yourself
Now that you’ve built a coherent image of what your competitors are doing, it’s time to decide how to position yourself. There are two approaches you can have here: do something different or do something better. This will be your value proposition. Both approaches to formulating your value proposition can give you the edge in acquiring your own clients.
Most importantly, remember that your strongest competitor is yourself. If you’re bad at managing your business and aren’t efficiently using your resources, failure will catch up with you faster than any outside competitor. But if you always strive to give the best service, to offer real value to your customers and to be financially sustainable, you are already on the path to success.
Do you have your own business idea and are struggling positioning yourself against your competitors? Sign up for a free one-hour consultation call and we can help you identify your ideal value proposition.