Surveying the Battlefield: An Entrepreneur’s Primer
Most startup businesses enter the market with at least a few direct, indirect, and mindshare competitors. Before you take the plunge to set up shop, do a thorough review of the competition. Along the way, you’ll discover insight toward a sales and marketing strategy to keep pace with and outmaneuver competitors.
But what constitutes a thorough analysis? First, define the criteria of direct, indirect, and mindshare competitors.
Here’s a universal breakdown for all types of startup businesses.
- Product Competitors: Companies that sell similar products or services
- Brand Competitors: Companies whose messaging sounds similar, though, they may service a different target market or have a niche offering within the same market
- Budget Competitors: Companies who sell different products but the cost of their service comes from the same intended budget
With an established criteria it’s easy to develop a list of brands that fall into each bucket. It’s helpful to include how the competitors market their business. For example, look at their slogan or tagline.
To elaborate, here’s an example scenario based on an upscale burger restaurant. The planned tagline is Everyday Gourmet Burgers. We’ve rated the local Phoenix competition against our fictitious upscale burger restaurant’s tagline and product offering.
Competitor Analytic Framework
Hopdoddy positions itself as more than just gourmet burgers. Their tagline implies it’s an experience to dine at Hopdoddy. Zinburger plays on burger lovers’ emotions, suggesting their burger experience makes you feel young. The other brands have more conventional taglines.
The insight from the chart projects the need for a strong positioning statement. It should be unique from Hopdoddy and Zinburger to differentiate the hot new player into the local burger market. The directional insight this exercise provides is valuable for market positioning, messaging, honing value proposition, defining differentiators and overall market strategy for all types of startup businesses.
The competitive scenario outlined above offers a healthy start to conducting market intelligence. Depending on the type of business you’re starting, there are other competitive variables worth incorporating for a more in-depth overview. The expanded view of variables to add into the intelligence mix are:
Customer Analytic Framework
The first five columns are from the initial market intelligence exercise. The next four relate to competitors’ market maturity and potential staying power. Answering for each variable will give you an interesting understanding of the market you’re about to embrace.
For private companies, this information is typically not public. But put your detective hat on! You can back into the data if you know where to look.
Start with a basic Google search for each variable. Often the founders or business owners share tidbits of company details with the press. Another avenue is press releases. When companies get funding, they announce the series and amount. To find the number of employees, simply jump on Glassdoor or LinkedIn to get an idea.
It’s important to have a perspective on how to use all this data to your advantage. Each data point on its own offers a valuable perspective”.
For example, if the top two competitors have been in business less than a year, it could be a sign that the market is wide open. It also might signal that the market needs more education about the value of your product, so maybe think about setting aside a healthy marketing budget.
If the top competitors have been in business more than five years, that’s a sign of market support for the product. Voila, market validation. But! This could also suggest that being a new player, you’ll need a larger marketing budget to generate awareness and redirect the market.
The Funding Series and Amount offer another perspective about your competition. Round C or D entails more intense dedication from financial institutions. Which means more scrutiny on the market opportunity for investor upside. The negative side to competitors with multiple rounds of funding as they’ve been through the early growing pains and are more likely to be operationally sound. This could be problematic when companies compare the newcomer to an established entity.
Another way to leverage the data is to estimate the potential health of a competitor’s business. For instance, if a competitor has been in business for two years with an annual revenue of $1M, 15 employees, and a recent Series A funding of $2M, you can estimate their cash flow. You probably know the cost of the types of employees they hired. If not, check Glassdoor. You might even have a sense of your competitor’s average contract value. A little information can go a long way toward projecting the competition’s staying power.
20 year+ Marketing veteran and MediaPost content contributor, David Baker, Co-Founder, Chief Strategy & Operations Officer for Cordial says, “To effectively compete; startup businesses must understand the competitive landscape to define the right differentiators that best position their brand and deliver market value.”
Before you invest a dollar in your startup business, study your competition. The competitive observations will help you develop a stronger business vision and roadmap. In the end, it should improve your prospects for success.
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