Understanding the competitive landscape – who the competitors are and what they are offering to customers – in the market that you want to enter with your own startup company will make you smarter as an entrepreneur. No question about it.
- By understanding your (potential) competitors and their products, you can create a better product.
- By entering a market that is pre-existing with many customers already using something similar or related to what you want to develop, you will approach people who already have an interest in the product category that you will be associated with.
- By knowing your competitors, you can find out who is winning and who is losing – and why – so you can learn from them and avoid their mistakes.
It is easier for you to reinvent something than to invent something from a blank slate. You can enter a pre-existing product category (i.e. mobile wallet) and figure out the strengths and weaknesses of all the competitors. Then you can position your (future) product against these existing products, explaining why your idea is an advancement. And when you figure out why people buy from these existing, established companies, you can target that same “why” with your messaging and product value proposition.
How to Do It
There are multiple ways to do competitive research and analysis. You can read the information on a company’s website (even though it is biased); you can read market analyst reports on the market segment that interests you (but it may cost you to buy the reports); you can talk to people in the industry who have the experience and expertise to know. However, there is also a simple and free way to do research about the market and the competitors: Google Keyword Tool.
You can use Google Keyword Tool to find out what people are searching online in the area that interests you for your startup. You can see what terms are most popular and then you should check how do competitors talk about the same products and solutions.
If there is another company that uses the word “marketplace” to describe its digital platform, you will know you can gain an advantage over that company because if you were to do a search on “marketplace” on Google Keyword Tool, you’d discover that very few people use that term. So, the competitor is basically shooting itself in the foot, so to speak. And you would not want to limit your startup by position it as a “marketplace.” You may call it that as a startup strategy, but you will want to use customer-centric terms. You should examine how customer-centric the terminology competitors use really is.
The more customer-centric you are, the less the competition can hurt you, but to explain to future investors and customers why your startup is work it, you always need to have your finger of your pulse on who the competitors are (old and new) and what they are doing to “reinvent” the market segment or product category you are entering as a solution provider.