Market and Competitive Analysis
No matter how good your product service may appear, the venture cannot succeed without effective marketing. And this begins with careful, systematic research. It is very dangerous to assume that you already know about your intended market. You need to do market research to make sure you’re on track. Use the business planning process as your opportunity to uncover data and to question your marketing efforts.
There are two kinds of market research: primary and secondary. Secondary research means using published information such as industry profiles, trade journals, newspapers, magazines, census data, and demographic profiles. This type of information is available in public libraries, industry associations, chambers of commerce, from vendors who sell to your industry, and from government agencies.
Primary research means gathering your own data. For example, you could do your own traffic count at a proposed location, use the yellow pages to identify competitors, and do surveys or focus-group interviews to learn about consumer preferences.
In your marketing plan, be as specific as possible; give statistics, numbers, and sources. The marketing plan will be the basis of sales projections. While engaging in market research and competitive analysis consider the following topics:
- Economics (facts about the industry): What is the total size of the market/industry you wish to enter? What percentage of the market do you wish to capture (is it locally, nationally, internationally)? What is the current demand for your product/service in the market? What are the barriers to entry into the market (what would keep you from starting your business)?
- Products/Services: Please describe your product/service from the eyes of your targeted customers. What are the features/benefits? What is special about your product/service? What will the product/service do for the customer? Will you provide any after-sale services? What makes you different from the competition?
- Customers: Who are your targeted customers? What are their key characteristics? Where are they located? What is their annual income? What are some of the related products that they buy? The more you know about your customers (income, gender, age, social class, education, type of business, size of firm, industry etc.), the better equipped you will be to make advertising and sales decisions for the company. You will need to do this research for each customer group your business will have.
- Competition: Who are the companies that will compete against you? What products/services will compete against you? What secondary items will compete against you for your customer’s money? Where are your competitors located? How will your product/service compare to the competition?
Using the Competitive Analysis table by SCORE to compare your company with your two most important competitors. In the first column are key competitive factors. Since these vary from one industry to another, you may want to customize the list of factors.
In the column labeled “Me”, state how you honestly think you will stack up in customers’ minds. Then check whether you think this factor will be a strength or a weakness for you. Sometimes it is hard to analyze our own weaknesses. Try to be very honest here. Better yet, get some disinterested strangers to assess you. This can be a real eye-opener. And remember that you cannot be all things to all people. In fact, trying to be causes many business failures because efforts become scattered and diluted. You want an honest assessment of your firm’s strong and weak points. In the final column, estimate the importance of each competitive factor to the customer. 1 = critical; 5 = not very important.
Marketing, Ads and Sales
Now that you have systematically analyzed your industry, your product, your customers, and the competition, you should have a clear picture of where your company fits into the world.
Now a marketing, advertising and sales plan (M&A) needs to be developed that will reach your intended market. The M & A plan needs to be tailored to your business and industry that will achieve projected sales and growth goals.
Marketing is a wide range of activities that is focused on the continual need to meet the demands of customers while getting an appropriate value in return. Marketing involves research and outreach; customer information and customer opinion; strategic planning and company messaging; as well as product pricing and product promotion. Meanwhile, advertising and sales are different disciplines that grow from marketing activities. Advertising (or promotions) is utilized in sending messages to customers about the business. A sale is a process of capturing the attention of the customers to complete sales of the product/service.
- Advertising: In developing advertising/promotion plans, seek to answer how will you get the information out to the customers? What media, why and how often? Will you engage in traditional or social media advertising? Will a mixed media or tiered advertising approach be planned, why or why not? How will you track progress/success with your advertising efforts? What is the image you want to project? Will you need to hire a marketing/graphic design firm? When will your website be launched? What other graphic elements do you need (business cards, stationary, etc.)? What technologies will you utilize in advertising? What type of website do you need? Who will develop your website? When will you launch your website? What is the mission of your website, and how will you track success?
- Advertising Budget: How much will you or can you spend on advertising? What are your priorities with your advertising plan?
- Pricing: Explain your method or methods of setting prices. Does your pricing strategy fit with what was revealed in your competitive analysis? Compare your prices with those of the competition. Are they higher, lower, the same? Why? How important is price as a competitive factor? Do your intended customers really make their purchase decisions mostly on price?
- Sales Forecast: Now that you have described your products, services, customers, markets, and marketing plans in detail, it’s time to attach some numbers to your plan. Prepare a month-by-month sales projection for the first 12 months, then project year two sales. The forecast should be based on your historical sales, the marketing strategies that you have just described, your market research, and industry data, if available. You may want to do a “best guess” forecast as well as a “worst case scenario” projection as this will give you a realistic picture of what can happen both good or bad. Remember to keep notes on your research and your assumptions as you build this sales forecast.