Our prospects are making buying decisions or not buying every day. In order to sell more and also to develop more attractive offers, it is necessary to understand what is going on in their minds, especially as regards the competing options they are seeing. Therefore, to get this mental map of both the (direct) competitors and the substitutes (indirect) will give us valuable data.
See also: All About Price Setting
What is the Mapping of Competitors?
Differentiation and innovation are essential factors for the survival of any company in the long run. Basically, you need to offer something new or special to your customers so they find that your company is worth it and they decide to spend their money on you.
Of course, to create something different, you need to know what already exists and that is precisely why managers must keep a constant attention to services and products that compete for the same budget of their clients. In many cases, it is not enough just to keep an eye on the direct competitors, but also the indirect ones.
Direct vs. Indirect Competitors
The concept here is very simple, the direct competitors are those who seek the same target audience and have the same value offer. Already the indirect competitors or substitutes (see Porter Forces), also target the same target audience, but have different value propositions. An interesting American term to understand this is the "Share of Pocket", That is the participation you have from your client's" pocket ", how much he has to spend.
Example of Direct Competitor: Taxis and Uber are a modern example of direct competition. They respond to the same need for urban displacement and have basically the same value transport offer for individual cars.
Indirect Competitor Example: Taxis and Uber Vans and Bicycles and Scooters. In cities such as São Paulo, taxi drivers and Uber have lost market share, as new bikes and scooters sharing services have won the preference of the same customers.
How to Map the Market
Understanding the market you are entering will depend a lot on your type of business and your area of expertise. A neighborhood business, for example, like a hardware store, manages to monitor your market very easily. Now, a national chain of pet shops, has other challenges. Anyway, let's know some methods that can be applied by everyone:
Competition Analysis: This is the most famous and most used method. In it, a formal investigation takes place, raising all the possible data of the competition to be able to do the comparative with our own company. He is also known as benchmarking, which is precisely the process of seeking references in the market for our decision making.
Informal Conversations: This strategy is not as structured as the analysis of competition, but it has a gigantic qualitative feedback potential. This is nothing more than the famous chat with the client, but with a certain intention. A careful manager should always enjoy contact with his clients to question, in a natural and gentle way, where else he buys, what he likes and does not have, and who attends to it today.
Satisfaction survey: A satisfaction survey well-made is nothing more than the more structured informal conversation that generates more reliable quantitative data. A classic question that may help you is: If our company did not exist, what would you do?
Mapping and monitoring your competitors and substitutes is an essential part of a successful placement strategy and marketing strategy. Never say that you have no competitors, because substitutes are powerful opponents that should be taken into account, however innovative your product. If you want to structure an analysis of professional competition, be sure to test our spreadsheet.