Nowadays it's quite rare to have an idea that has absolutely no competition (and also makes for a viable product). In most cases, if there is a market for something, then there is at least one person serving that market.
So the question is, can a new startup capture market share?
How do you evaluate the competition, and decide whether or not there is room for one more?
In many ways, I think this is more of an art than a science.
Yes, there are numbers to look at, but there's so much more that goes into it than just the metrics (most of which, you are not privy to anyway).
In fact, although I tested a few tools to see what they came back with, I didn't find any single silver bullet. Most of it was very manual.
Here's what we came up with.
First and foremost I really think it comes down to the product. If you can't build a product that offers something that the other guys does not, how can you ever expect to compete?
The first thing I do with an idea I'm interested in pursuing is testing out the other guy's products. Seeing as we are in the digital marketing space it's quite easy to get a hold of everyone's product and test it out as part of a free trial.
- What is the functionality? What are all the features it has?
- How is it designed?
- How does the user flow through the platform?
In each case I am looking at it from the perspective, of this is how it is, and this is how I think it could be improved. That second part is where I want our product to be.
When we looked at our competitor's products we saw what we believed were some major red flags, such as:
- The absence of key data and functionality
- Confusing UI, which made it difficult to navigate
In one way or another these were confirmed by people we talked to, which led us to believe that there was an opportunity to create a superior product.
Marketing and The Market
Next up is marketing and the market. Let's start with the former.
- How is the company marketing their product?
- Which channels are they using? Aren't?
- How can we be more effective in channels that they are using?
As a digital marketer I can think of tons of channels to market your product, such as:
- Guest Posting
- Paid Advertising
- Affiliate program/referrals
- Bill Boards
The list goes on and on.
Now it is probably the case that some of these are either not relevant or not cost effective. For example, our competitors are not using television, but I don't really see this as an opportunity because it isn't cost effective.
So I look at what they are doing and ask myself if we can do it better.
What we found were somewhat stale blogs. Additionally no one was doing a podcast nor did there appear to be a lot of video marketing. A few other competitor analysis tools told us that no one was really doing paid advertising.
Again, a lot of opportunities.
Of course doing it better is very subjective and high level, but I think the key is to think critically about your skill set, your resources, and your man power and ask yourself whether or not you can do XYZ better.
Now on to the market.
- Roughly what percent of my target market is using the competitor's products?
- Is that market growing? Shrinking? Flat?
Of course this is at best, an estimate, but what we found was that the majority of digital marketing agencies were not using anything at all. In fact I would say less than 10% were using a competitor's products.
Part of that was an education issue, whereby they weren't entirely aware of the value of influencer outreach (another opportunity). The other factors were things like cost, or just choosing to do things manually, etc.
Lastly, as most things in the digital space are growing, we see an upward trend in the market.
In total, again, it seemed like there were rooms for significant improvement.
The last thing I think about is customer service.
Quality customer service is key to preventing customers from churning off and also transforming them into brand ambassadors whereby they will tell their friends and colleagues about your awesome product.
- Do they have live chat on their website?
- Do they do phone support? Email support?
- If they do, what is that experience like?
General competitor analysis
There are dozens of other questions you should be asking yourself, which will tell you where you stand.
- Is the competitor funded (you can sometimes check Angel List for things like this)?
- How many employers do they have (check their about us page)
- How much traffic are they getting? How many customers do we think they have?
- How much are they charging? Are they raising/lowering prices?
- Are they offering additional services that could monetize the product (courses, consulting, one time purchases)?
Again, just the tip of the iceberg, but this is how you can start to tell how powerful the competitor is and whether or not they have too much velocity that you will not be able to catch up to them.
Competitor analysis is an absolute must before you write a line of code or put any money into your idea.
I take a holistic approach to it and try to consider all of the factors that make a great business, and see where my competitor is excelling and where they are falling short.
If they are falling short in areas, I have to evaluate whether or not I reasonably think that winning on those fronts is enough to gain market share for a new product.