Market and competitors’ analysis for market validation

Table of Contents
The analysis of the market and competitors, whether direct or indirect, is an essential phase in the broader process of validating a business idea for an aspiring startup founder and must be carried out in a very accurate and complete way. It is a phase of study and research.
But how to deal with it? Below are some ideas to help you in the validation process of your idea and to better carry out the analysis of the market and competitors.
Market and competitors’ analysis: we start with the market
In this first part, we focus on the market analysis by giving some suggestions on how to proceed.
Study of growth ecosystems
It is first necessary to study and do a deep dive into the growth ecosystems, i.e., to study the different markets, their interconnections, and new opportunities, to choose the best reference ecosystem for your startup, making sure that it is a promising ecosystem at the market level, and, at the same time, it is in line with your skills, knowledge, and attitudes.
Analysis of growth horizons
Within the analysis phase of the market and competitors, it is also very important to carry out the analysis of growth horizons, which allow you to then decide whether with your startup you want to improve a mature industry or explore other options in emerging areas. The type of innovation you want to build will depend on this choice. In fact, you can, for example, decide to innovate an existing product / service or you can create an innovation that will only be usable after a few years. In this way, you are creating an innovation that expands the potential market, or you can also decide to make a disruptive innovation that will therefore represent a longer-term investment.
Graphic representation of its reference market
A good method to give a representation of your reference market is the one done with the use of TAM-SAM-SOM:
- TAM is the Total Addressable Market
- SAM is the Served Available Market
- SOM is the Serviceable and Obtainable Market
In other words, the TAM is the first step in starting your own business and represents the total number of customers who make up the market for a particular product or service. At this stage, it is very important to try to make estimates as reliable as possible, supported by research and sector studies.
The SAM represents the part of the TAM that can be reached because it is in line with your product or service or reachable from a geographical point of view. Finally, the SOM is the portion of the market that you can acquire and it directly depends on the ability to know how to use your internal skills and resources.
Market and competitors’ analysis: we continue with competitors
Before moving on to analyse the market in more detail by seeing how the various competitors play within it, it is useful to give some suggestions to help you in the research and identification of the competitors.
Among the various tools which are useful for this purpose, we suggest:
Google is very useful to do searches and, by putting yourself in the shoes of any consumer, you can search for the product/service of interest and analyse each of the startups or companies that are listed.
Crunchbase was born as a tool to learn about startups, but later it has expanded to include data on any type of company on a global scale and represents an excellent database of information on companies.
LinkedIn, like Crunchbase, is a great source of information on companies worldwide.
SimilarWeb / Semrush offer an overview of the monthly visits and the traffic that certain keywords generate on a website and therefore represents an excellent website to do digital analysis.
Mailcharts is used to analyse the e-mail marketing strategy of competitors.
Buzzsumo allows to analyse the competitors’ most relevant contents through the shared statistics, by entering their domain.
Alexa offers information on the demographic characteristics of readers and reports a list of sites that have linked or mentioned a competitor.
But what is the competitors’ analysis for? First, it serves to identify the products, sales techniques, and marketing strategies of the competitors to lay the foundations of their business strategy. By identifying the weaknesses of your competitors, you can try to do better than them.
To proceed with the competitors’ analysis, however, it is first necessary to divide the competitors into two categories:
- Direct competitors: they offer a product or service that is the same or almost the same as yours and they operate in the same geographical area.
- Indirect competitors: they offer products or services that differ in various aspects from yours, but at the same time respond to the same customers’ problem or need.
Once the competitors have been identified, there are many aspects to pay attention to, such as:
- Competitors’ strengths
- Products/Services offered
- Sales strategy
- Marketing strategy
- How they generate awareness and reach customers
- Social media analysis
Once the competitors have been identified and the first analyses have been carried out, here are some tools to be able to continue the analysis in a more structured way.
Analysis of the five Porter forces
We continue to carry out the analysis of the market and competitors by presenting the model of the five Porter forces, which is a useful tool to evaluate your competitive position with respect to the ecosystem defined above. This model is a tool to better understand the structure of the sector in which you will operate and its profitability, thus, to gain the greatest competitive advantage. The five Porter forces model, also known as the extended competition analysis model, is a marketing tool that allows companies to determine a lasting competitive advantage in the economic environment in which they operate, starting from understanding the structure of the sector of competence, its profitability and anticipating the latter. This model identifies, through the study of competitive intensity within a sector, five factors that determine which elements give rise to long-term profitability and attractiveness in the market. The intensity of these forces is inversely proportional to the profitability of the sector, consequently the greater the intensity, the lower the profitability. The analysis of the five Porter forces allows companies to assess the competitive context in which they operate and allows them to anticipate and face situations that would, in the long term, affect profitability. The competitive context in which a company operates depends on the simultaneous interaction of five forces:
- direct competition
- threat of new entrants
- threat of launching substitute products on the market
- increase in the bargaining power of suppliers
- increase in the bargaining power of buyers
The Benchmarking Table
It is a tool to graphically organize all the data collected on competitors. The Benchmarking table allows you to make an immediate comparison between your product or service and those of your competitors, analysing each feature in detail.
The Cartesian graph
The Cartesian graph allows you to place on abscissa axes and ordinate axes the variables that you consider most interesting for your analysis, for example price, quality, etc.
The Value Proposition Canvas
The Value Proposition Canvas allows you to focus on consumers’ needs and identify:
- Points of Parity: the same characteristics that you and your competitors offer to consumers.
- Points of Difference: the characteristics that you offer to consumers and those competitors do not offer.
- Points of Irrelevance: the characteristics that do not interest consumers.
After the market and competitors’ analysis, choose the Business Model
The last point to be addressed is choosing the most suitable Business Model for the success of your startup. At this stage, it is necessary to study and examine in detail the various innovative business models, even in different industries, to understand and evaluate which one is best suited for the expansion and success of your startup. Through Design thinking, all that remains to do is the design of the business processes to implement the strategy for the evolution of your startup. Design thinking supports the application of a creative culture, devising models focused on the person, the end user, and, through a series of tests, build the prototype that best meets your needs.
Conclusions of market and competitors’ analysis
Once you have completed the market and competitors’ analysis, you can move on to the next step.
If you are interested in startup validation, find out more on Validate your startup idea page. You will discover more interesting content and videos to watch!
Please also read the following articles on our blog: Validation: a key process to move from an idea to a startup, Validation of the problem: the client-problem couple and Validation of the solution and construction of the MVP
