Why and How to Identify Competitors at an Early Stage

The search engine industry today is pretty much a monopoly led by Google. But neither was Google the first to the market, nor will it be the last. Facebook has a similar story- social networking sites, even if quite primitive, were in the market almost a decade before it was launched. But in today’s world, social networking is dominated by Facebook and the companies it has acquired.

The point here is that even the biggest of companies faced competition from day 1 (still do) but they carved out a niche for themselves by understanding how they could be better than the others. Rival firms shouldn’t be ignored; rather, learning more about them can help you find your USP.

The competitive analysis is carried out to firstly, identify the competitors in the space and further to gauge their strengths and weaknesses in relation to yours. It’s not a complicated exercise to carry out for startups but is critical.

Understanding Your Competitors

Depending on what you’re building, you may have companies doing something very similar while a few others will be indirectly competing with you for the market share. For better understanding, competitors can be placed under one of the following categories.

Primary Competitors: This includes all those businesses that are selling similar products/services to the same target market as yours. For example, Nike and Adidas cater to the same audience with a similar product line.
Secondary Competitors: If you know of companies that are selling similar products/services but to a different set of people, they will become your secondary competitors. For instance, Walmart and Gucci both sell clothes, but the latter caters only to the luxury segment.
Tertiary Competitors: This category includes those businesses that sell different products/services but to the same target market as yours. For example, Gatorade and Adidas both target sportspeople but Gatorade exclusively focuses on drinks while Adidas is into apparel and accessories.

Analysing Your Competitors

The good thing about the competitive analysis is that you are free to define its scope. You can dive as deep into it as you want. Depending upon your preference, here is a brief idea of what all you should uncover about a rival firm during your analysis.

For a high-level analysis:

Who is the primary audience of the company?
What kind of products/services are they offering?
Where does their USP lie and what value addition are they giving?
What is their approximate market share, and how has it grown in the recent past?
What kind of revenue is the company generating?
How do they price their products in different marketplaces? (example- online v/s offline)
Where and how do they market their products?
Do they have any key partnerships in place that help them promote their products?
What do their post-sales services look like?
Have they received external funding from Angels or Venture Capitalists?

For a detailed analysis, apart from the above points, you can find out:

What customer experience elements stand out? (mobile app/website interface, customer support)
What features do their websites have? (product layout, images, search options)
How do they approach social media for marketing? (Kind of posts, frequency, engagement, paid reach)
What do their promotional tactics look like? (Discounts, offers, referral coupons, their frequency)
What are their content marketing strategies? (Blog posts, type of content, frequency, writers)
Do they focus on email marketing and newsletters for engagement?
What kind of customer reviews do they get? (Areas of appreciation, criticism, keywords used to describe their products)
Any major strategic changes they made in the recent past? (Dropping some products, catering to an additional segment)

Ways to Gather Information

Once you have an idea about the data you need to collect, you must know how to gather the same. You can find information about your competitors, either through primary research or secondary research.

Primary Research: In this case, you assume the role of a customer and check what your competitors are doing. You can go over their website/app, add items to cart, subscribe to their newsletter/updates, follow them on social media and even buy a few products.

This will give you a great first-hand experience of how the company is dealing with customers, their onboarding process, delivery, marketing efforts and post-sales services. You can also plan some interactions with their customers to understand more about their experiences.
Secondary Research: Secondary data is derived from others’ experiences or sources compiled by them. Today, there are numerous tools (some even free) that can give you fantastic insights into your competitor’s performance. For example, Buzzsumo can provide an idea of your competitor’s top-performing content while Facebook Audience Insights is a good resource to understand the market being targeted.

Apart from this, there are plenty of books and databases that will help you gather data about the company’s financial performance and fundraising efforts.

What’s Next?

Once you are satisfied with your data and have been able to get answers to the given set of questions, it is time to answer, well, some more questions. However, these pertain to your company to help you figure out where your competitive edge lies.

Some key questions to ask yourself:

Is there an area where I am superior in comparison to my competitors, i.e., do I have a strong USP?
Am I giving their customers enough value-add and incentive to shift to buying from me?
Can I build a barrier to entry (intellectual property, patents, technology)?
Do I know my customers better than my competitors (building the end-user persona, primary market research)?

If your answers are in the affirmative for these questions, then there is a fair chance that you will be able to stand out in the market. However, if you are uncertain about any of these factors, it’s a good idea to work some more on yourself before taking on the competition.

A word of caution, though- these questions are for your benefit so answer them most objectively. It is very easy to get swayed and overlook your flaws during this process. The onus lies on you to be critical of yourself. That’s the only way to build a company that lasts.

Advantages of this Process

We have already stressed the importance of competitive analysis, so here’s a quick overview of how this process is advantageous to a startup.

Spotting Underserved Markets: While carrying out the competitor analysis, you will be able to judge if there are some areas that very few players are serving and can be capitalised by you. You can build new, more aggressive strategies to use it to your advantage.
Industry Insights: One great advantage of the analysis is that you will be able to understand a lot more about the industry and how it is functioning. By figuring out the ongoing (and previous) trends, you can hone your USP further. You can also see the direction in which the industry is going.
Understanding Your Positioning: By gathering information about your competitors, you can understand your unique positioning in the market. An in-depth analysis will help you ascertain how you stack up against others and where you need to improve.
Better Decision-making: The fact of the matter is that if you don’t go out to analyse the market, you will make assumptions about it- and assumptions can go wrong at any time. By carrying out proper analysis, you will be able to make better, more objective decisions for your startup and won’t fall prey to conjecture.
Know Your Business Better: By putting multiple aspects into perspective, knowingly or unknowingly, you’ll gather greater knowledge of your business and how you should build it further. The intention is always to be better than the others, and by way of self-introspection, you may get there quicker.

Summing it up

You will rarely come across a market segment that does not have rival companies. And even if you think you are alone, it won’t be long till others follow you there. Without knowing where you stand in comparison to others, you will lose out on opportunities to grow. Your competitors demand your respect, and in this case, ignorance can never be bliss.