The competition analysis must be carried out as soon as your business is launched because it makes it possible to identify what makes your added value compared to existing products or services. You can then define your strategy and your business model according to this added value.
In addition to this, competitive analysis is an important part of your business plan : it shows investors or bankers that you understand the market in which you operate and that, therefore, you know how to come up with an innovative product. suited to your market. With the trending websites you can expect the best now.
Finally, this analysis will be useful for establishing your financial forecasts. By analyzing competitors comparable to what you offer, you can get an idea of the growth and margins you can get. These are three excellent reasons to accurately analyze your competition for this.
Distinguish between direct and indirect competitors
It is not uncommon to hear entrepreneurs say they have no competitors, that their product is innovative, never seen, and therefore they will be the only ones in their market. Do not make this mistake in your business plan , you will automatically discredit!
Indeed, as revolutionary as your product, it only provides a new way to meet an already existing need and for which there are other products that meet them. Never a product or service creates a new need and a response to that need at the same time.
The origin of this error is the confusion between direct competitors and indirect competitors
Direct competitors offer a product similar to yours. For example, Quick is a direct competitor of McDonald’s. Indirect competitors offer another product / service that meets the same need: this product is called a substitute product. In our example, McDonald’s indirect competitors include pizzerias, breweries, bakeries, and even grocery stores and supermarkets. Indeed, all these signs can meet the need for lunch .
- When the first e-reader, the Cybook, appeared on the market in 1998, it had no direct competitors . Indeed, it was impossible to read a book or magazine other than in paper format.
- However, did the two entrepreneurs who launched this e-reader leave the “competitive analysis” part of their business plan empty? Certainly not ! They had significant indirect competition: the entire book industry.
- Thus, with their reading light, they did not create a new need but only brought a new answer to the need of readers reading books. The paper book was then a substitute for their reading light.
- In your analysis of the competition, start by analyzing precisely the need that you answer then list all the existing products / services that respond to it.
Test competitors’ products yourself
Want to know what your competitors are proposing? Try their products. This will give you a first approach to your competition. You will be able to identify their weak points (to avoid reproducing them) and their strengths (to inspire you).
The only condition for this field analysis to work is to remain as objective as possible . Do not fall into easy criticism of everything your competition does, recognize their qualities.