As an established business owner, you know nothing ever stays the same in the marketplace. Learn how to analyze your competitors and customers so that when the market changes, you can, too.
By Vicki Gerson
When it comes to business growth, worthwhile opportunities don’t have to be shoot-from–the-hip ventures. With a little planning, mature companies can stay nimble and leverage market research in order to beat their competition. Achieving success is a matter of obtaining information about the marketplace and then responding to that information.
You don’t have to spend a fortune to do market research, but you do need to develop a system for obtaining and analyzing data. You can determine how the market is changing and find out what your customers’ needs are with these four strategies for conducting an efficient market analysis.
Don’t Just Look For Data; Use It
“Any business needs to know what business it’s in and determine what metric to use to make sure it is doing well,” says Robbie Kellman Baxter, principal of Peninsula Strategies in Menlo Park, Calif. “To stay on top, you must use the data. It’s not enough to know what your competitors are doing or how your customers feel. You need to have systems in place to respond to the information.”
For example, if you own a train company, and you think of your business as only providing train rides, that is the wrong point of view, Baxter says. Your company is in the transportation business, and to be viable you must be aware of trends not just on the tracks, but on the road and in the air, too. You need to look at a broader picture; a consumer-driven picture. Determine where you fit in and establish metrics that will indicate when something is wrong. And when something does go wrong, implement systems and/or plans to help you take action with the information you’re getting.
Analyze Changes Within Customer Segments
“You need to be mindful of what changes are occurring with customer segments, whether new needs are emerging—which might suggest an opportunity for re-segmentation—and which aspects of business are becoming commoditized,” says Rita Gunther McGrath, an associate professor at Columbia Business School in New York and author of MarketBusters: 40 Strategic Moves That Drive Exceptional Business Growth.
If you’re in the hotel business, for example, your research will tell you that one of the fastest areas of growth is in stripped-down business hotels. These hotels lack on-site restaurants and lounges and operate with a bare-bones staff, but they provide unlimited high-speed Internet access, refrigerators and microwaves for all business travelers. This takes them out of the market for conventional hotels.
Using a few simple tools on a regular basis can help you see exactly how your customers’ needs are changing. McGrath suggests using these two analytical tools.
The first is consumption-chain mapping, which identifies all the experiences your customers have with your business, from the moment they first become aware they have a need until the service is complete or the product is disposed of. Your map should end with the customer paying for your product or service, not walking out of your store upset or dissatisfied.
The second tool McGrath recommends is an attribute map, which describes your offerings in terms of customer reactions. An attribute map will help you visualize how your customers feel about your products and services, whether they react positively, negatively or indifferently. One example of this type of thinking is when McDonald’s analyzed moms’ eating habits and found they weren’t eating the same fast food as their kids. Based on this information, it introduced salads to capture moms’ interest and their share of the market.
Of course, another way to find out what your customers are thinking, according to Baxter, is to ask them. Verbally ask your customers what drives them to your business. Or, if you want to let numbers speak for themselves, you can track inventory to find out what people are buying and when. Compare this year’s sales to last year’s, today’s against yesterday’s. “Maybe last year a particular toothbrush was flying out the door, and now it’s not. It’s time to figure out why,” Baxter says. Supplement conventional data with personal exposure to customers and competitive offerings.
Analyze Your Competition
There are three types of competitors you should be aware of, according to McGrath. The first are traditional competitors—companies you face head-to-head. The second are “oblique” competitors—companies that may not offer the same products and services that you do, but that still compete for consumers’ time and attention, such as television and the Internet. Finally, there are potential competitors—companies that are edging into your market with a twist on a product or with a new way of selling.
Most companies only look at the first type of competition in a market analysis. To stay ahead of the curve, you should examine and experience all three.“Personal observation is quite important when analyzing your competitors,” Baxter says. For instance, if you own a restaurant, you should spend time in other restaurants to see how they have changed their menus to meet customers’ needs.
Begin mining competitive information at Hoovers and by following links to relevant trade associations and industry groups, which you can find online with a simple Yahoo! or Google search.
Identify Micro Trends and Macro Trends
A micro trend is what is happening in your neighborhood: What are your competitors doing? Are they pricing the same way? What are they doing differently in reference to advertising, testimonials and networking?
A macro trend, on the other hand, is much broader and affects consumers nationwide. Take mobile technology, for example. According to Baxter, a vast majority of businesses in the United States are thinking about what mobile technology means for them, in terms of advertising on mobile phones or offering free wireless access in their stores to attract customers. Stay abreast of macro trends by regularly browsing the contents of business search engines, such as the one at Business.com, which highlights hot products and services on its homepage.