Discovering your niche in the small business world can be difficult; however, when you start a business, you can use market research and competitive analysis to be more strategic. Market research focuses on the ideal customers for your product and services, while competitive analysis allows you to carve out a niche by creating a truly unique business. Once you combine your findings, you can find your competitive edge.
Here’s why market research and competitive analysis are so important when you start a business.
Market Research: Insights into Customer Needs
Without market research, you won’t know if your business idea is going to succeed. When you consider how to start a business, you can learn more about consumer behavior and watch economic trends, both of which provide insight into issues your business can resolve and which customers need that solution. It’s all about pinpointing a customer base so you know how to reduce the risks of going into business.
You can ensure there is a need for what you offer and learn how to spot opportunities while addressing limitations you might not have considered. Demographics, such as age, family status, income, and the like offer basic insights, while big data allows you to delve deeper and look for specifics relevant to your offering.
The Key Questions of Market Research
Market research answers key questions related to your specific market including:
- the demand and desire for the products or services your business offers
- the size of the market and how many people will be looking for your product/service
- current economic indicators, including income range and employment rate
- ease of customer access to your products/services
- the competitiveness in your market (i.e., is the market oversaturated, which will make it difficult to compete?)
- price point the market will bear for your products/services
- current market trends in your chosen market (i.e., is there an area you can enter while it is still relatively young?)
Answering these questions will help determine if there is enough market share available to make a profit.
Competitive Analysis and Market Advantage
Knowing what you’re up against helps you compete effectively—the only way to create a competitive edge. Therefore, your competitive analysis must focus not only on the general market, but on similar products and services, as well as market segments. A simple SWOT analysis, looking at strengths, weaknesses, opportunities, and threats, offers a strong basis of comparison for your competitive analysis. By understanding these four areas, you can more easily discover opportunities presented by weaknesses.
You can also ramp up your efforts in areas where they tend to outdo you while being aware of common industry barriers that could impact your success. Don’t discount indirect or secondary competitors; it is important to realize there are other industries fighting for the same customers. Competitive analysis is crucial because it helps you identify all threats, the level of competition, and factors that affect price.
Through your competitive analysis, you can also address the viability of your proposed products and services. Comparing your offering to your competitors allows you to see how your offering is similar, better, or worse. If you find your products are too similar, using a highly objective eye, you can look for ways to bring additional value to your customers. More important, you can look to fill gaps in the market. By adapting to better meet less obvious needs, you can effectively create a niche market.
Finding the channels your competition is using to reach customers and your ideal target audience offers valuable insight into your own marketing strategies. If you can see where your competition is not advertising, you find an opportunity to expand your marketing and tap into uncharted areas. You should also consider how advertising is used to target certain demographics so you can potentially spot new demographics you haven’t yet targeted.
While it can be difficult, you might just find a segment of the population not yet reached by your competition. Testing audiences and fine-tuning segments allow you to be more effective in reaching out and presenting your product/service as the best possible solution.
Your competitive analysis is ongoing because your competition never sleeps. New competitors are always lurking. Also, the market continues to evolve, which can leave you in your competitor’s dust if you don’t maintain a recent, realistic picture of the market. Your growth is based on market evolution and remaining one step ahead of the competition. To get our small business supplement plan, click here.