Whether you’re running a brick-and-mortar store or have transitioned to an online enterprise, knowing who your competitors are and the market you’re in is essential to succeeding.
Gone are the days when you can simply put up shop and assume a monopoly of a commodity or service. With the booming e-commerce scene, your competitors aren’t simply those in your immediate vicinity—it can be businesses from the other side of the globe offering the same (or even better) product or solution.
Why Is It Important To Understand Your Market And Competition?
Markets have exponentially expanded, especially in the digital realm. The only way to keep up is to fully comprehend who your competition is and to conduct research to gain the upper hand in marketing, product development, and customer acquisition and retention.
Competitors: Direct vs Indirect
Investopedia defines a market as “a medium that allows buyers and sellers of a specific good or service to interact to facilitate an exchange.” Markets may either be a physical or a virtual platform, and sellers who vie for a customer are each other’s competitors.
Competition comes in two forms, either direct or indirect.
- Direct competitors are those who provide identical goods or service to the same customer base, with the same revenue goal. An example of direct competition would be Pepsi vs Coke or McDonalds vs Burger King.
- Indirect competitors, on the other hand, may offer the same or similar products among a wider option-range and/or to a broader group of customers, with a different revenue goal. Substitution also occurs in indirect competition when, for example, a customer buys a gym membership instead of purchasing a stationary bike. The same goal of weight loss is achieved but through a different means.
What Is Market Research And Why Is It Important?
Market research is often conducted before developing any product or entering into business, as it involves gathering data about the industry, target customers, and competitors. The analyzed data will help you gain insight into how your product or service will be received, and how marketing and advertising strategies can be tailor-fitted.
Data gathering can come from many sources and not just on the industry you are entering. For one, local economic indicators can help you determine to price depending on the employment rate and average income of your customers. Also, take into consideration global trends as international markets influence the pricing of materials. Or, if your business is online and serves an international market, competition automatically becomes worldwide. Lastly, aside from desk research, nothing beats being in the field. Reach out to past and potential customers for valuable feedback. Create surveys to see how you can improve on their experience, or when you want to find out their opinion on a possible offering.
At the end of the day, market research is all about considering what has happened in the past—to assess if current products and services meet the market’s needs and expectations, and understanding the present—to gain an understanding of what new offerings may bring a profit.
Conduct Market Research in 5 simple steps
Conducting market research primarily comes in the form of two methodologies—primary and secondary research.
Secondary research usually involves desk research that looks into available reports, market statistics, industry publications, published competitor sales data, etc.
Conversely, primary research needs to be carried out to get firsthand information on your market and customers. This can be accomplished through a variety of ways ranging from online surveys to focus group discussions (FGDs).
Before you do this, keep in mind these five steps to make the most out of data collection:
1. Visualize Your Buyer
It is vital to know who your customers are before trying to find out how they will react to the product you have in mind.
To properly visualize your customer, you must describe your buyer persona—a portrayal of your target buyer. This involves defining their age, gender, location, occupation, family size, income, and major challenges. The goal is to use this representation as a basis to find actual customers to reach out to and learn from.
Know that you are not limited to one buyer persona. For example, if your product is a microwave meal for kids, a buyer persona can be defined as a 35-year old working mother of three. To better understand your customer, another buyer persona can be a stay-at-home mom of the same profile whose challenges and behavior may differ from a career mother.
2. Gathering Your Sample Customer Group
Next, you need to gather a representative sample group to engage with. They can either be people who have made a purchase or who have consciously decided not to.
After gathering this group of people and depending on the time and resources available, you can conduct one-on-one interviews personally or via phone, hold a focus group discussion, and/or send out an online questionnaire.
Aim for at least ten participants per buyer persona. Find a mix of people who are both your customers and patrons of your competitor’s products to get a balanced perspective. Their buying experience should also be relatively fresh, ideally within a six-month timeframe to ensure relevance and accuracy of answers.
3. Have a Discussion Guide
One mistake often made during market research is making a detailed list of yes or no questions.
The golden rule is to ask open-ended questions to prevent swaying your audience or inciting customer bias. But don’t set-up a phone interview or gather a people for an FGD without preparation. Failure to put together a guide will prevent you from making the most out of the conversation and will be a waste of time for both parties.
Below is a general outline for a 30-minute survey:
- The Basics (5 minutes)
This can be an icebreaker. Start with small talk to gain basic information such as age, occupation, household size, leading up to what led them to make/ consider making a purchase of the product or service.
- Awareness (5 minutes)
Awareness tries to understand the light bulb moment of the buyer. What was the problem/ challenge they were trying to address when they bought the product? What other options were they considering?
- Consideration (10 minutes)
Consideration delves into where and how the buyer found out about the product. Where (word-of-mouth, Google, etc.) did you go to look for solutions to your problem? Was it helpful? Could there be a better way of finding out information?
- Decision (10 minutes)
Decision examines the criteria that helped compare various options that ultimately led to a purchase. It also attempts to find out which sources above played a key role in making the decision, along with other factors that impacted it.
- Wrap up
Closing the discussion or interview involves asking what the ideal buying journey would be compared to what they currently experienced, and providing a platform for further clarifications from their end.
4. Identify the Competition
As discussed above, competition may either come in the form of direct or indirect players. Complement primary data gathered by maximizing the secondary research you conducted to fully understand who your competitors are.
5. Condense Results
Prepare a report or presentation template that you can easily fill out after all the data gathering. To help make things easier, below is an outline you can follow and customize to summarize findings:
- Objective(s). Market research should always begin with clear goals in mind. Outline in this section what you aim to achieve.
- Audience. Define who your buyer persona is. If multiple buyer personas were identified, use a table to classify the varying characteristics of each persona.
- Key Takeaways. Summarize results and interesting findings. Match these with what you intend to do about the insights learned.
- Purchasing Path. Based on the discussion guide, outline the main themes that came about from each step (awareness, consideration, and decision) of the buying journey.
- Plan of Action. After filling out the template, list down new marketing strategies or ways to improve on existing ones, along with a timeline and budget to get you started.
How To Use And Analyze The Data Gathered
After data gathering and research, an analysis must be conducted to achieve an informed decision on product or service viability, as well as overall business feasibility. This is especially true when it’s a niche market.
There are generally two kinds of data—qualitative and quantitative.
Simply put, qualitative data involves information such as anecdotes, insights, and observations. On the other hand, quantitative data is any information that can be measured and written numerically, such as audience demographics, the frequency of purchase, market share and the like.
Analysis of these two data types differ:
- Qualitative data analysis may come in the form of summarizing key points, “coding” or grouping similar responses to be converted into qualitative data or using automated content analysis that will identify word frequency to gain insight on large unstructured data sets.
- Quantitative data analysis is more straightforward, as it basically entails inputting data on a spreadsheet program and using mathematics and statistical methods.
At the end of the day, combining quantitative and qualitative data analysis is essential to interpreting the results of market research that will enable you to make informed decisions and come up with better strategies.
Market research may be an overwhelming and daunting task to do, yet it is requisite to ascertaining your business’ success. Equipped with a newfound understanding of its importance and a step-by-step guide, you’ll be able to do it in no time! You might also want to check this PFMS.