Does competitive analysis make sense?
I am convinced that each of us has heard the phrase at least once in the past: "do your own thing, don't look at others". In my case, such phrases came very often from the mouths of parents or academic lecturers. They shaped my approach to life - they taught me to be assertive and non-conformist. They made me realize the importance of having my own opinion. I would list almost all areas of life, professions, for which the advice mentioned would be pertinent. Almost all of them, because they do not apply to business to any extent... So, paraphrasing the above statement, one can ask the question - why is it important to look at others in business? Having a lot of knowledge about the competition increases our chances of success in a given market. Although I find this answer very compelling, there are still many young entrepreneurs who downplay the importance of competitive analysis. What exactly can they learn from companies that are in the same industry?
The target group defines the potential addressees of our products or services. Knowing the common characteristics of our customers allows us to modify the characteristics of the goods and apply specific marketing strategies so that they suit the audience and allow us to increase sales. It is not difficult to guess that the highest sales are accompanied by the best possible knowledge of the needs of potential recipients. This task is not one of the simplest, and it is extremely responsible and greatly affects the ultimate success of the entrepreneur. In order to avoid mistakes in determining the target audience, it is worth paying attention to the practices of companies that offer similar products. Based on the analysis of their experience in selecting groups of potential customers, we can shape our strategies. Sometimes successfully specifying the target group, is the result of correcting erroneous assumptions of competing companies.
There are several techniques in operation for determining the price of a product. Most companies, in order to conduct the most effective pricing policy, combine all techniques. One of them (along with, among others, studying demand and brand strength, or estimating manufacturing costs) is benchmarking - that is, creating a pricing strategy based on a comparison with competitors. Only if we have a good knowledge of the pricing practices of other companies will we be able to determine the value of our good, which will be both attractive to us (as it will guarantee us an advantage over the competition to some extent) and to potential customers. It is worth emphasizing that the aforementioned analysis should be carried out regularly, as pricing policy must be flexible and allow us to respond to numerous changes - both those relating to the actions of competitors and the current needs of potential customers.
PRODUCT STRATEGY VS. COMPETITIVE ANALYSIS
Product promotion strategy is one of the components of marketing that is directly responsible for successful sales. It is a field that offers a wide spectrum of the most diverse ideas for creating and satisfying the needs of both the company and customers. It should be remembered, however, that while brilliant, effective solutions bring big profits, misguided decisions can lead to financial troubles. Choosing the right product strategy is an extremely responsible task. However, this does not mean copying other companies' solutions for your own campaign. A product promotion strategy is something that should be unique in the first place. Something that should distinguish the company from the rest of its peers. So why follow your competitors' doings when it comes to product promotion? First of all, it is useful to know what distribution channels and types of advertising have not worked in the past. In this way, we will avoid some misguided decisions. It is also good to be aware of what solutions competitors have never used. Implementing them will make our strategy innovative and unusual in the industry, and this is already a big added value.
The structure of liabilities in a company (especially a start-up) is a source of many dilemmas and doubts. Raising foreign capital is among the necessary solutions when growing a company. However, to what extent is it safe to get into debt? Which obligations can be the most advantageous from the company's point of view? It is worth paying attention to the market and sources of financing for similar institutions. Many industries have a specific capital structure in the company. If such solutions work well across the sector, it is worth following them. Analysis of similar companies can also give us some clues as to how they have raised capital in the past. We will then see how longer-established companies dealt with this problem when they were still in the early stages of development.
ANALYSIS OF DIRECT COMPETITORS - IS THAT IT ?
Very often, young entrepreneurs making a competitor analysis make a textbook mistake. They forget that this kind of comparison should be done on two levels. First - it is necessary to define the practices of direct competitors. What characterizes such companies? These are companies that resemble our business almost 1:1 in terms of the activities they perform. They offer similar products to ours, have the same target group, etc. It often seems that analyzing such companies exhausts the subject and guarantees us all the necessary information. Nothing could be further from the truth. So let's assume that a newly established company is a pizzeria. Its owner knows very well how other establishments of this type in the city operate. In addition, his pizza is by far the tastiest. Does this guarantee his success. Unfortunately, no. So what if he makes great pizza and knows all the pros and cons of direct competitors, when people in town are definitely more likely to eat kebabs? This brings us to the second level of competitive analysis - this is looking from the point of view of a potential customer. We consider what needs we satisfy with our business. In the example analyzed, we satisfy customer hunger. But are we the only kind of food outlet? After all, people eat more than just pizza. Thus, many items are added to our list of competitors. These are indirect competitors, that is, those who offer different products, but satisfy very similar (or identical) needs. It's also worth taking them under the microscope, as we will then better study trends and preferences in the area.
Effective competitive analysis can prove to be the missing link in achieving business success. Knowing the realities of the environment in which we do business can help us make optimal decisions. Sometimes by knowing the habits of our competitors, we can learn from their mistakes and protect our enterprise from significant financial losses. Above all, competitive analysis is an important aid in answering many questions related to the development of any enterprise and, therefore, is an essential tool in the management process.