How to Do Market Research and Competitor Benchmarking
Congratulation, you have validated your business idea from the people around you and it looks good in their eyes. You want to go ahead and start working on the idea.
No matter if you are a veteran in the industry and have good connections to help you start; or your idea came from your personal experience while you have little experience on the market. The first thing you will end up doing is market research.
Remember, you are doing the research to:
- Make sure the idea in a correct way;
- Identify what your end users are comparing to
- Understand what challenges you will face;
- See how you can make money;
You are not doing the research to:
- Copy what the other companies are doing
- Exhaust all potential competitors in the market
What I always to, is a 5+1 market analysis. In the beginning, I would start with a 5-day analysis with the following schedule:
Day 1: Find a list of companies that are targeting the same end users you want to approach
For most of us, finding the list of companies that are targeting the same end users is not difficult. So for example, you want to invent a new lamp that is better for reading, you will be looking into the table lamp industry; if you want to develop a self-heating lunch box, you will be looking to the lunch box industry.
You can refer to the company vision and industry report to find what they are: iresearch; Boston consulting group; emarketer etc are all good examples.
The list should not be too long, you don't want to spend all the time looking at competitors instead of developing your own business.
Day 2: Find out how these companies are doing in the market
Today you start to google them one by one. Take a look at their website and their online channels first if there are any. If they are sold in any shops, pay a visit to the shops.
Find out how to products and services are described and priced; see what are their sales and consumer acquisition channels; see how much each product is sold through the online channels; and if it is a physical store, have a chat with the sales people on the ground and some users who are buying similar product.
For a B2B product or service, price can be difficult to find from public sources; in this case, try to find if your current company, or any of your family and friend company is using this product or service and how much they are paying; find out what kind of conversions there are where these companies present themselves, and maybe you can pay a visit to them later.
For C2C, you can even use price comparison sites for your product research. Pay attention here that most of the sites do not show you price of all merchants but the merchants they have contracted with and get commission from (that is where I actually got my product idea Zwoop, to build a true and fair price and product comparison solution that users truly benefit from), but still, Amazon, eBay and some large e-marketplace are covered.
Take notes as you do the research, you should find at the end of the day, answers to key questions what channel, how and how much the products and services are sold on the target market.
Day 3: Find out what the end users are saying about what the competitors are doing
E-marketplace; consumer forum; product comparison blogs are the three main sources for understanding end user opinion on the product or service; spend some more time in the shops and talk to more people.
What about B2B2C product, such as white-label mobile payment solution; loyalty system; and you are trying to find out what the second B think about the solution.
Again let's start from your network; ask people I'd they know anybody who knows relevant people; and if yes then if they can connect you. Sometimes these will work.
If not, well, that's fine. You will discover this quickly when you start selling your own soon.
Take notes as you do the research, you should find at the end of the day, answers to key questions what these companies are doing that is welcomed and is not welcomed by the end consumers.
Day 4: Find out who can be the first adopters for your products and services
All products and services follows a basic life cycle from the development, to introduction and then to maturity and then decline. Early adopters use and talk about the products and services, the rest of us follow their opinions and decide if we will follow or not.
How do you find early adopters; let me tell you an unconventional way, when I want to find them, I ask my nephew and niece where do they pick up such information and ask them to show it to you. I find it especially useful for cosmetics, toys, photo editing tools, apparel, movie ... Anything they are a user of.
Take notes as you do the research, you should find at the end of the day, answers to key questions who and what are the early adopters, how big is their fan size and what channels their followers interact with them.
Day 5: Summarize and reflect the research findings
Day 5 is usually the end of my research in which I try to translate what I have learnt into what I should and should not do.
As you can see, for the past 4 days, I took an outsider perspective (if somebody is to do it, what is suggested to do and to avoid); on day 5, I start to relate it to my (or your) idea.
I want to do it in such a way because what a new product or service is basically trying to do, is to break into the existing section and draw its own domain. End users make comparisons, no matter how much you talk about your product being innovative and ground breaking, between what you are offering and what they saw elsewhere.
It is also because in this way, you can see how the world is can be different from what you believe it is, or it is supposed to be.
You should write down and action list at the end of the Day 5:
What to do
What to avoid do
Who to first each out to and then who
Then finally, there is the "+1".
I suggest to spend 1 day each month to refresh all the research findings, to go through the above day 5 in an executive way.
Once you have done it, the incremental effort needed to keep up to date on what is going on in the industry would not need such effort.
If you cannot finish the research in five days, no problem, make it 10 or 20. After all, this is the first round of market research, you will likely be carried away by what you discovered.
But you can't do it 10 or 20 days Every Time.
Eventually it is just 1 day a month if not less.
A piece of market research is not a wholly Bible; I know a lot of article and opinion leaders are there talking about listening to the market, but if you pay attention, you will find they don't actually tell you how you listen to it.
Because it is up to you.