Identifying Your Competition
A helpful tool for doing this is a
In addition to your target market, another critical
area of market research involves identifying your
competitors.
Types of Competition
Your competitive intelligence will be of two types:
1. Direct competitors. A business in your market
that sells a product or service similar to yours is
your direct competitor.
2. Indirect competitors. A business that sells a
different product or service from yours but fills the
same customer need or want is your indirect
competitor.
Determining Your Competitive
Advantage
Competitive intelligence enables you to compare
your competitors’ strengths and weaknesses with
your potential business. During this process you
will be looking for unique ways to provide your
product or service to your target market. You will
be looking for your competitive advantage.
Gather Competitive Intelligence
One way to gather valuable competitive
intelligence is to pose as a customer and gain a
sense of what it’s like to buy your competitor’s
product or service.
Ask yourself these questions:
 What products do they carry? How are the
products displayed? How much do they
cost?
 What is their customer service like? Did the
staff offer to assist me? Were they friendly
and helpful?
 How many other potential customers are in
the store?
 What do some of the customer
demographics seem to be (age, gender,
etc.)? What about customer
psychographics, geographics, and buying
patterns?
 Do they provide any other special services,
such as free delivery? What is their policy
for returning purchases?
Analyze the Competition
Just gathering market data is not enough. You must
organize that data and then analyze it. Analyzing
direct competitors requires a more detailed and
thorough approach.
competitive matrix. This is a grid that compares
characteristics of your business with those of your
direct competitors.
Identify Your Differentiators
Your competitive advantage could consist of one or
more differentiators. A differentiator is a unique
characteristic that distinguishes your business from
others. Ask yourself these four questions to help
identify potential differentiators for your business:
 What product or service can your business
provide that your competitors don’t?
 What mix of products or services can your
business provide that your competitors
don’t?
 What specialized selling or delivery method
can give your business a competitive edge?
 In what unique ways can your business
meet customers’ wants or needs?
Steps in Researching a Market
1. Identify Research Objectives - Before you
actually start gathering data, list the
objectives you want your research to
accomplish. Determine the information you
need. What problems are you trying to
solve? What questions do you have? Make
a specific checklist of all the information
you need to resolve the problems and
questions you’ve identified. The
information will probably include:
 Industry Data. This could be composed of
industry size, potential room for the
industry to grow, seasonal or economic
trends in the industry.
 Customer Data. This could include data
about consumers, businesses, or both.
 Competitive Data. This category of
information includes data about direct and
indirect competitors.
2. Determine Methods and Sources - Based
on your objectives, decide which research
methods will best help you achieve your
goals:
 Will you need secondary research, primary
research, or a combination of both?
 If you are using secondary sources, which
will you use?
 If you are using primary sources, which
research techniques will work best?
 3. Gather the Data - As you collect the data,
you may discover additional things you
need to find out. Market research is usually
a process of discovery. You typically will
have to make adjustments to your course of
action depending on what you learn.
4. Organize the Data - As you gather
information, begin to organize it.
 Group indirect competitors into
categories by industry, product, or
service.
 Select the three or four direct
competitors who appear to be your
strongest competition.
 Look for areas where important data
may be missing. Go back and collect
more information if necessary.
5. Analyze the Data - Analyze your data by:
 Comparing competitor’s
characteristics.
 Identifying potential differentiators.
What could you potentially do or
create to set your business apart
from your competition?
 Creating an expanded SWOT analysis
that compares the strengths and
weaknesses of your business to
those of your competitors.
6. Draw Conclusions - Using the information
in Step 5, decide whether to proceed with
your business idea or to stop. When making
your decision, be as objective as you can.
That is, try not to be overly positive or
negative. The following focus areas may
help you draw realistic conclusions:
 Target Market
 Market Size and Demand
 Carrying Capacity
 Expanded SWOT Analysis
What Is a Marketing Plan?
 As you’ve already learned, a market is a
group of potential customers for a
particular product or service. Marketing is
a way of presenting your business to your
customers. The main reason for marketing
is to clearly communicate the value of your
product or service. To do this successfully,
you create a marketing plan. A marketing
plan is a detailed guide with two primary
parts:
Marketing Goals
Every marketing plan is unique because each business
has its own marketing goals. When you first begin
creating a marketing plan, it’s important to know what
you want to accomplish.
Your marketing goals should agree with your business
plan’s over- all objectives.
Marketing goals also require a time frame:
 Short-Range Goals
 Mid-Range Goals
 Long-Range Goals
Some additional things to keep in mind when
considering goals:
 Motive
 Consistency
 Cost
Another potential marketing goal can be defined in
terms of market share. Market share is the percentage
of a given market population that is buying a product or
service from a particular business.
Marketing Strategies (Marketing Mix)
Every marketing plan has five main strategy areas,
sometimes referred to as the “Five P’s.” How a
company chooses to combine these areas is called
its marketing mix.
People - Without a doubt, your target customers
are the key to defining all the other strategies in a
marketing plan.
Product - What item(s) can your business provide
that will best meet the needs of your target
market? This is a description of the product(s) or
service(s) your company plans to offer.
Place - This strategy refers to selling and delivery
methods. How and where will customers be able to
buy or receive your product or service?
Price - What price will your target market feel is
reasonable, or perhaps even a good deal, for your
product or service? Your pricing strategy may need
to vary over time depending on various factors,
about which you’ll learn later.
Promotion - The process you use to make potential
customers aware of your product or service and to
influence them to buy it is referred to as
promotion.
Attracting Customers to Your Product
To attract people in your target market, you need
to choose a product that matches well with their
needs or wants. When given a choice, consumers
buy the product with the features and benefits that
best meet their requirements.
The features of a product are what it does and how
it appears to the senses.
The benefits of a product are the reasons
customers choose to buy it.
Often you can get customers’ attention by how you
choose to package a product.
If you choose to sell more than one product, you
need to consider how the products relate to each
other. The combination of products a business sells
is called its product mix.
Maintaining Customer Loyalty
Successful businesses do more than attract new
customers by marketing a product’s features and
benefits. Their ultimate goal is to keep customers
coming back again and again.
Great ideas can be copied and modified by
competitors. The competitors may even be able to
make improvements. Or they may be able to sell a
similar product at a lower price than you can.
What competitive edge can you create that cannot
be easily copied? One answer is to build a brand.
A brand is a marketing strategy that can create an
emotional attachment to your product in the mind
of the consumer. This is because a brand is
perceived in a certain way. It may be seen as
excellent quality or high status—a premium brand.
This process of creating a strong image is called
product positioning. It is a way of influencing
potential customers to distinguish your brand’s
characteristics from those of the competition.
Branding can cause customers to think of a
particular company first.
Mind share is the awareness or popularity a certain
product has with consumers.
In addition to its name, you can use a symbol or
other graphic design to identify a brand. This is
often referred to as a logo, or brand mark.
Packaging
An important aspect of a product’s strategy is how
that product is packaged. Packaging contains and
protects the product until the consumer uses it.
The packaging needs to be suited to the method
used for the product’s distribution and sale.
Packaging should be designed for your target
market and, if sold in a retail store, should be eye-
catching. It should promote the image of the brand
and be distinguishable from competitors’ products.
Packaging for certain types of products must meet
legal requirements.
Determining Place (Distribution)
Strategies
Distribution channels are the various ways that a
product can reach the consumer.
What Channels Will You Use?
There are two kinds of distribution channels:
A direct channel is a pathway in which a product
goes from the producer straight to the consumer.
An indirect channel is a pathway in which the
product goes from the producer to one or more
intermediaries before it reaches the consumer.
An intermediary is the bridge between a producer
and a consumer.
Where and When Will You Sell?
Place strategies need to include the selling location
and the hours during which customers can buy the
product.
Such strategies include the following:
 Choosing an excellent location for a physical
store.
 Determining the days and hours when
customers are most likely to shop.
 Providing an easy-to-use Website that
customers can access any time, from any
location.
  Taking orders via a toll-free telephone
number, with operators standing by 24
hours a day
When determining your strategies, be sure to
consider how widely you want to distribute your
product. For instance, do you want to use many
sales outlets or only a few?
Here are three basic options:
1. Exclusive Distribution. This type of
distribution is the most limited of the three.
Exclusive distribution gives a specific
retailer, or authorized dealer, the sole right
to sell a product in a particular geographical
area.
2. Intensive Distribution. The opposite of
exclusive distribution is intensive
distribution. The object of intensive
distribution is to make a product available
at as many sales outlets as possible.
3. Selective Distribution. Allowing a product
to be sold at a moderate number of sales
outlets, but not everywhere possible, in a
particular geographical area is called
selective distribution. Retailers/dealers are
usually chosen based on a set of conditions.
How Will You Transport and Store
Products?
Transportation is used to move a product from one
point to another along a distribution channel.
Developing Price Strategies
There are many kinds of pricing strategies and
techniques. However, you should base the price of
your product on two things: your target market
and the potential profits for your company. Your
product’s price should be low enough that
customers want to buy from you rather than the
competition. At the same time, your product’s
price must be high enough for your company to
earn a profit.
Identifying Price Objectives
The first step toward setting a price is to identify
what you want to achieve by it.
Following are a few samples of price objectives:
Build or Maintain an Image - Prices can create or
affect the image of a product in consumers’ minds.
Increase Sales Volume (Quantity) - Higher prices
may lower the number of sales, and lower prices
may increase the number of sales. However, you
can charge a slightly higher price than the
competition if your product has more features or
benefits
Obtain or Expand a Market Share - Sometimes an
initial lower price can help a new business attract
customers from competitors.
Maximize Profits - If you are introducing a new
product into a market, you could charge a high
price to maximize profits. Later on, if competitors
imitate your product or find some other way to
reduce its attraction, you could drop the price.
Selecting a Basic Pricing Strategy
After defining objectives, the next step is to pick a
strategy for determining actual prices. There are
three basic pricing strategies.
1.Demand-Based Pricing - A pricing method that
focuses on consumer demand—how much
customers are willing to pay for a product—is
called demand-based pricing. A demand-based
pricing strategy is most useful when customers
perceive your product as unique or having greater
value than similar products. You can determine a
maximum price by surveying potential target
customers.
2.Competition-Based Pricing - A pricing method
that focuses on what the competition charges is
called competition-based pricing.
3.Cost-Based Pricing - Setting a product’s price
based on what it costs your business to provide it is
called cost-based pricing.