Being an entrepreneur and setting up a startup can be challenging and exciting but it’s also quite risky if you don’t take all the necessary measures to achieve success. Even then, there is no guarantee that your product/service will reach the kind of success that was initially projected.
Moreover, around 50% of startups don’t make it past the fifth year of their existence and around 42% of startups fail because the founders fail to correctly identify a market need for their product or service. This tends to happen because new entrepreneurs tend to skip a very important step: competition analysis.
In this article, we will discuss the importance of sizing up the competition and the best ways to do it, in both online and offline environments.
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Why is Competition Analysis so Important?
Sure, you have to share the market with them and maybe even fight for customers, but there is a lot to learn from your competitors. First, it’s crucial to understand that regardless of how unique your idea seems, there’s always someone else who is thinking the same way.
If you look closely enough, you’ll always find a similar product or service that’s already on the market.
But you shouldn’t be discouraged by this. When you have competitors, you have access to valuable data and insight that allow you to reshape and repurpose your ideas.
1. Understand the Audience
The audience (or future customers) is the key element to your startup’s success. But, in order to create a product that will respond to their needs, you first need to understand what those needs are.
Now, there are lots of cool tools a business can use to get in touch with their possible audience, but one of the best resources is offered by your competitors.
Analyze their business and understand their ups and downs in their relationship with customers. Their success is a lesson in how to communicate with the audience and their failure lets you know about caveats and paths not to take.
For example, if you feel like starting a blog to promote your startup, your competitors will provide valuable data into what works and what doesn’t. By studying their online campaigns you learn what triggers the audience you want to address and what’s missing from their communication.
2. Find Your Startup’s Identity
A good look at your direct and indirect competitors is a fantastic way to get a new perspective on your startup’s possibilities.
A good example to support this theory comes from Cadillac who liked to say that their biggest competitors were diamonds. Now, what does a car manufacturer have to do with jewelry?
According to Cadillac, they were not just selling vehicles; they were selling reputation, social status, and self-esteem (just like the diamond industry).
The lesson to learn from this example is that it helps to look at your own business from a different perspective. You learn from their mistakes and you may find new ways to market your product/service or even identify new audiences.
3. Find your Uniqueness
If you think you have a completely unique and unseen before idea you’re probably in denial or haven’t done enough research.
However, this doesn’t mean you can’t come up with a different approach to an already existing idea and make it your own. Let’s look at the electric vehicles industry for a minute.
The prototype for an electric vehicle was designed over 100 years ago and there were a few attempts to create a viable electric car along the road. However, it took the mind and determination of Elon Musk to shake the auto industry to its core and bring the idea to life!
Elon Musk took the idea and made it his own, creating an entire company and a strong culture around it. And this is exactly what you need to find for your startup – the unique elements that let you create and not just recycle old concepts.
How to Size Up the Competition
We’ve established why the importance of competition analysis. Now, let’s talk about the best tools to use and how.
1. Get to Know your Competition Online & Offline
Start by correctly identifying your competitors (both direct and indirect).
Luckily, in today’s day and age, there is a lot of data easily available on companies’ websites, public records, annual reports, surveys, and so on.
This gives you access to valuable information when it comes to your competitors’ growth periods, their moves and campaigns, products and services, and more.
If your competition is mainly private companies, it may be a bit more difficult to analyze their data (not publicly available). But you can learn about them by attending conferences and trade shows with them. There’s also the option of developing a relationship with their distributors and retailers.
In addition, there is a lot to learn about a company from their online presence. Look for reviews from customers, blog posts about their products/services, online marketing campaigns, news, and social media presence.
Most data available online should be easy to find with a simple Google search, but you’ll also need some specialized tools to help you understand it better.
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2. Use Analytics Tools
Competition analysis is a lot easier in today’s online world because we have access to a wide range of tools that provide in-depth reports on specific segments such as social media behavior, site performance, online brand reputation and more.
For instance, with the right tools, you can learn what your competitors are doing for SEO, which is extremely valuable information. You can also track overall performance, type of content that performs better, social media platforms to approach, and so on.
There are tools that can run a complete website analysis, which can tell you about how competitors attract the audience on their site, what are their main resources, and how they use the navigation to create a smooth sales funnel.
However, their strategies often vary, so it’s important to find the right tools for your competition analysis. Some of the most popular platforms are SEMRush, SimilarWeb, Ahrefs, and MozBar, but you need to study their reporting features to make sure you’ll get the information you need about your competition.
3. Run the Analysis
There are lots of smart platforms that can provide well-designed reports but it is your job to run the analysis on the aspects that matter for your startup.
This means that you will have to run a comparison between your competitors’ growth patterns and your own. Also, you need to understand why certain strategies worked for their products and services and how to apply this knowledge to your own campaigns.
Overall, competitors’ analysis is a wonderful way of learning from others’ mistakes and successes, but it won’t help if you don’t know how to adapt the data to your situation.
Your campaigns and strategies must be tailored to your own products and/or services, based on the type of audience you want to attract. So yes, it’s important to know and understand the competition, but it’s important to let this knowledge inspire your actions and not lead them.
Use the data to avoid obvious pitfalls and innovate your own processes – this is the best way to run a successful startup with solid chances of becoming a powerful business!
Author: Erika Rykun
Bio: Erika is a content manager and copywriter who believes in the power of networking and white hat SEO. In her free time, she enjoys reading and running.