The gradual shift towards e-commerce platforms and virtual markets opens numerous business growth possibilities. According to Oberlo statistics, the number of new business applications doubled from 2012 to 2022. The startup success stories of Facebook, Uber, Slack, and many others, draw entrepreneurs to build their ideas into profitable enterprises.
Simultaneously, the startup failure rates are extraordinarily high, reaching 63% in some industries. The most common failure reasons include mishandled finances, pricing, and marketing issues, low service quality, misunderstood market demand, and fierce competition. Instead of considering them separately, we can learn that competition analysis can help solve other problems, like pricing and market demand.
This article elaborates on the importance of competition analysis and provides guidelines for those who don’t know where to start.
Nowadays, it’s tough to come up with an entirely innovative business idea. Most startups choose service improvement as their starting point, building on existing ideas and improving them. That puts them in direct confrontation with other growing businesses or established brands. Knowing who these companies are is the first step to competition analysis.
Identifying competition is more complex than it sounds, and the more effort you put in, the clearer view you’ll get. We can separate five competitors types:
- Direct competitors. These businesses will challenge you for the same customer base. They offer services that can replace yours, and each new customer means one less for you. Mapping out direct competitors is essential. Analyzing their strategies will reveal failure and success criteria, pricing insights, and brand positioning you can learn from.
- Indirect competitors. They provide the same or similar services not in the same market. For example, there are numerous streaming services to choose from, but some are only available in the US, UK, Australia, etc. If your streaming service functions solely in Europe, they will be your indirect competitors.
- Future competitors. These are brands that are likely to enter your market. Currently, Microsoft is negotiating one of the biggest acquisitions in the gaming industry by buying Activision-Blizzard. Because Microsoft owns the Xbox console, Activision-Blizzard becomes a future competitor to Sony, which owns the PlayStation.
- Potential competitors. Similar to future competitors, they also provide similar services but are unlikely to enter your market. It’s best to passively monitor potential competitors to avoid future surprises.
- Replacement competitors. They do not provide the same service but nevertheless can replace yours. For example, Antiviruses provide unique and crucial cybersecurity benefits. However, some VPNs recently developed real-time malware protection, which could be used instead of an Antivirus.
As you can see, there’s a lot to consider. But once you map out the competition and inspect their strategies, aligning your prices, marketing campaigns, and future risks becomes much easier. What’s next?
Now that you’ve identified the competition, the next step is to extract value. We will focus on three key points: pricing, SEO, and marketing campaign analysis. Furthermore, we will simultaneously focus on current data-gathering technology.
Setting Reasonable Prices
Inadequate pricing is one of the major reasons for startup failure, and it goes both ways. You will not attract consumers if your service is significantly more expensive than the market average.
Likewise, your revenue will be insufficient if you set the prices too low.
Setting prices on approximation is not a very good idea, as even a slight misalignment affects consumer choice. Although commodity prices are public information, businesses don’t deal with one or two products but with thousands of different pricing plans and holiday discounts involving hundreds of competing businesses.
Having a dedicated employee go through their websites manually is time-consuming and involves human error. Instead, you can use professional web crawlers to automate the task and get as accurate data as possible. In reality, most businesses that utilize e-commerce platforms use web crawlers to extract valuable competitors’ information. It’s called web scraping, and we’ll get back to it near the end of the article.
Search Engine Optimization is one of the best channels to drive organic traffic to your website without spending extra on pricey PPC campaigns. The Advanced Web Ranking graph illustrates the decline of CTR the lower you’re placed on Google SERP, with the first spot enjoying 40%, going to barely 1.34% on the tenth. In other words, to use SEO as a main channel, you will have to put effort into ranking as high as possible; otherwise, the return value will be insufficient.
It’s best to decide on an SEO strategy early on. If you are growing a business in a fiercely competitive environment, established brands will have secured the top spots already, and taking their place will take time. On the other hand, if you notice the top spots do not have an elaborate SEO strategy, you can focus on reaching the top three spots quickly to drive funds for other channels. Check out our blog post dedicated to advanced SEO strategies to learn more.
Marketing Campaign Analysis
A safe way to ensure your marketing campaign does not fail is by learning from the competitor’s success. You can combine SEO analysis with web scraping using crawlers to inspect backlinks pointing at their landing pages and deals posted on social media. It will give you an early view of where your potential buyers gather. For example, tech people often prefer forums like LinusTechTips, and gamers gather on Twitch, Discord, and Reddit.
Learning from bad examples is just as important. Startup failures like Theranos and the recent FTX crash teach growing businesses the importance of transparency and compliance. These valuable lessons illustrate the possible challenges you can expect in your industry.
Final Words – Web Scraping for Ongoing Competition Analysis
Lastly, we’d like to draw your attention to web scraping. Competition analysis inevitably involves data; nowadays, it’s usually Big Data, which you cannot gather manually. Web scraping automates data-gathering tasks via web crawlers and proxies targeting thousands of websites simultaneously to extract the required information.
It’s important to notice that web scraping requires ethical consideration, as gathering personally identifiable or private data is uncompetitive and can get you in legal trouble. Competition analysis is an ongoing process because competitors often set new prices and release new marketing campaigns. Mastering web scraping will keep your competition analysis up-to-date and relevant.
About the Author
Martin Brown is a business professional who is always looking for new opportunities and likes to share his knowledge with others in the field. He has been working in the industry for over 10 years and has a deep understanding of what it takes to succeed. Create. Cultivate. Consume. Learn. Explore.