Guest Post: The following post is a sponsored guest post by SEMrush. All views and opinions represented in this post are the views and opinions of SEMrush and do not represent those of 500 Startups or any of its staff or affiliates. 

When you’re researching a market for the first time, it’s essential to find out what companies operate in your niche. And it’s no less important to understand how these businesses made it to the list of top industry players and what marketing strategies they follow. You also need to research target audience characteristics and preferences, regional opportunities, competitors’ offerings, and overall market development in dynamics. The question is, how are you going to do all that?

Most startup owners prefer to check out other small businesses. It sounds obvious to look at the companies that are just starting out (like they are), operating similar budgets, and can’t boast of any extraordinary brand awareness. Founders hope that it will help them outperform their closest rivals in tactics — and, at some point, it really does.

However, such tactical improvements don’t contribute to the long-term strategy.

A different approach is needed for sustained growth.

It could be more beneficial for startups to explore new horizons by analyzing the best practices of successful businesses. Studying their experiences can save you time and resources and take you to the ambitious goal you’ve set with less effort.

In this article, we will show you how to do market research for a startup using the example of LaunchDarkly. We’ll do it in three steps: first, we’ll look at the entire market from a broader perspective; then, we’ll go searching for the market audience insights; finally, we’ll analyze product and online marketing strategies and tactics of the competition.

Step 1. Look at the Entire Industry and Potential Market

Market research for startups, just like for any other business, should start with specifying the companies you’re going to analyze.

Note that the list you come up with will be changing. The businesses you look up to when conducting pre-launch research may differ from the ones you choose for regular competitor monitoring in the future.

But that’s enough theory — let’s jump straight into practice.

• Find the strongest competitors in your market

Imagine you’re starting a feature management platform. You know there is at least one visible player in the niche. Rest assured, this is enough to start exploration of all of the competition. Tools like SEMrush Market Explorer can help you make a long list of companies that target the same audience online. These can be:

• direct competitors that provide similar services to the same customers;
• indirect rivals offering different solutions to a similar audience;
• or even organic competitors that may belong to a completely different category but fight with your website for online visibility in SERP.

The latter may be especially interesting for you when you are researching the market for your startup as these domains can steal a large share of organic traffic from your site. If they do, you will need to study their marketing strategies and tactics closely. But first things first.

We looked at a feature management platform as an example of that one competitor we know about and revealed that there are some stronger players out in the online market. 

We switched to Narrow Focus to check the researched company’s place in the niche. In the case of this company, it turns out that they lead in their specific field.

The next step will be comparing if the performance of these top startups matches with industry trends as a whole

• Reveal the trends and averages of the market as a whole and compare them with the strongest competitor’s dynamics

From hospitality to online education, many industries face regular peaks and declines in demand, but businesses need to stay afloat regardless of volatility. It’s far more secure to live through the low season when you know when to expect it and what kind of marketing support you may need at the time.

In these graphs, we see that traffic to the company mostly followed the total market trend — however, there were two periods when these two lines mismatched. Both times happened to be in the spring-summer season (2018 and 2019).

How did the startup manage to grow its popularity when the rest of the companies were going down? This is a question for further research. For now, study one more total market trend — the top digital marketing channels for startups in the niche.

We see that search and direct visits make up the majority of all traffic to websites similar to the company. This means that for a new business in the same market, the most typical thing would be to invest in SEO and brand awareness growth (and choose a domain name that’s easy to remember).

• Evaluate your potential of entering the niche

Check the top competitors’ online market shares. Are there many rivals fighting for an equal piece of the pie? Or is there one leader attracting most of the audience, and the rest of the players only get crumbs? Assess how easy it can be to enter such a market, judging by what you see in the graphs.

Take more aspects into account. While it is important to know market opportunities and your own business’s strengths, it may be even more important to keep your eyes wide open to any possible threats and barriers to entry. These may include:

• new entrants (pay attention to the bottom of the Relevant Sites list in SEMrush Market Explorer and note how they earn their online market shares over time);
• products or services that can be a substitute for your solution;
• local players that you may not know about if you’re looking at the competition from a global perspective;
• cultural differences, language-related issues, and difficulties in logistics.

You may prefer to research each of these points in more detail further on, but you should be aware of them at the very start to avoid certain failure.

Step 2. Analyze the Market Audience

Market research for startups involves more than competitor data collection. Target audience estimation, market segmentation, and opportunity analysis are crucial for a deeper understanding of customer needs and preferences.

This way, you can find an original idea that will be relevant for your audience — let’s see how it works in our example.

• Estimate the total market size and potential.

Pay attention to the key players’ web traffic volume in absolute numbers. If your website receives the same number of unique visitors (= potential customers), will it be enough for your business in terms of leads?

Take the rate of traffic growth into account too. How much time (and effort) could it take for you to reach as many users? Roughly outline the budget and calculate the projected revenue from this number of clients.

• Get to know existing competitors’ audiences: demographics and interests

Before launching your own startup, you must have researched your target market inside and out, so you can feel that you know for sure who you should appeal to.

It is never redundant, however, to check what kinds of customers your competitors are already attracting. What are your market audience’s typical interests, age, and gender? Is there a specific group you haven’t thought of as a profitable target? Or will you need to think of reaching a slightly different audience in order to differentiate?

Make sure to compare your strongest competitor’s audience demographics with the total market’s. The difference may be one of the reasons why their growth doesn’t run in parallel with the entire industry trend.

• Review the potential of the target region

If you’re thinking of launching a startup abroad, be ready for a larger scope of work as you may need to research a number of aspects for each of your potential regions separately.

Goal number one: detect the most promising territory. For online businesses, this is not a problem at all. Using a tool like SEMrush Traffic Analytics, you can analyze your top competitor’s website traffic and see where most of the visitors come from. Make note of this market — there may be users willing to buy your product too.

In our model research, the Narrow Focus leader, launchdarkly.com, receives a major share of traffic from the US, while visitors to the top player in the broader competition, github.com, are more dispersed around the world.

If you already have a promising region in mind, go on to checking it directly. Just filter your list of market players to leave only those competitors that are active in the target region.

In our example, we wish to expand the business to Brazil. Focusing on this location in market research, we can find out that the long list of top players doesn’t differ that much, but the shortlist (Narrow Focus) includes some more local names.

• Understand the market audience’s online behavior and see if their preferences may be easy to change

You don’t conduct market research to find out if a startup like yours is potentially successful. You want to discover how many chances you have to actually succeed. For this, you need to reveal your target market’s real preferences and estimate how easy it is to influence them.

As a first step, we recommend that you estimate audience overlap between your key competitors. This way, you will see the percentage of user base they actually share (not just the characteristics of the audience they aim at) and then calculate how much of the target market is not covered by any of your rivals yet.

Second step — look at your rivals’ audience overlap in dynamics. Does it look like consumers switch from one competitor to another over time? Or have they always been considering several offerings?

In our example, the percentage of shared audience visibly changed quarter to quarter. It may be especially interesting to research what caused such a dramatic drop in audience overlap between the company and two of the top competitors in September.

A similar workflow can be used for evaluating media platforms. Sometimes, reaching the same users on several sources is a mistake that your startup can’t afford; other times, it’s the right way of scoring the required number of touchpoints with your audience.

In any case, knowledge of your target market online behavior and audience overlap, in particular, can help you make a better-informed decision.

Step 3. Gain Insight into Top Companies’ Product and Digital Marketing Strategies and Tactics

You can’t get too detailed in market research — provided you keep your ultimate goal in sight. How can you choose the focus of further analysis and stick to it? Let us show you.

• Select up to five companies for marketing analysis

We recommend that you limit your list of well-established players to the five strongest competitors.

Five — because this is the most realistic (and common) number of rivals that businesses can monitor regularly.

Strongest — because if you want to find the strategies that perform the best for startups, you need to look at the businesses that have already made some tangible progress. Average and below average performers are worth your time only if you’re searching for anti-models.

• Reveal the top rivals’ marketing mixes and the best-performing channels

At this point, you already know a thing or two about a typical marketing mix in your market. Now it’s time to find out what extraordinary tactics (if any) your top online competitors used to get above the average.

We continue our research example of a startup competing with feature management platforms and the like. For this shortlist of competitors, the most notable finding concerns traffic sources. Firstly, oracle.com, taking third place in the overall competition, turns out to be the second by share of search traffic. Secondly, YouTube happens to drive the most traffic among social networks, which may not be that obvious for the niche.

And this is just an example.

• Find out what products/services perform the best 

At the beginning of your startup journey, you may have only one product to develop and promote, while your stronger, well-established competitors may already be juggling a broad range of solutions.

And this is exactly the reason why you should look up to them. These top rivals have already tried a lot of both product development and product marketing ideas — the kind of experience that you are likely to lack.

You can easily discover their best practices and epic fails in online marketing by simply analyzing their Top Pages. Let’s get back to our example again.

The leader of our model niche, GitHub, pursues two target audiences: those interested in developing software with their service and those interested in a final product. The website has dedicated pages for each group, and see how their promotion differs.

Normally, pages on a startup’s website will reflect services, packages, or solutions for different target audiences which a company provides. This way, studying the top-promoted pages, you can detect your competitors’ main focus and get some ideas of how to structure, present, and promote your own products and services.

• Get to see the number of users that made it to competitors’ cart, checkout, and payment pages and estimate their conversion

One of the most burning questions you may have about your competition is — how do they convert?

It is almost impossible to get a precise answer (unless you’ve somehow got to see your rivals’ internal reports), but you can reveal the estimates.

If you are lucky enough, in the list of Top Pages, you will find URLs containing keywords like “signin”, “login”, “authorize”, and “profile” (revealing the number of registered users) or “basket”, “cart”, “pay”, “confirm”, and “thank you” (reflecting the number of online shoppers that made it to the purchase).

This is what we get to see in our example (note that these are the numbers for one month):

• Note gaps and promotion ideas to try

Hopefully, you’ve been making notes throughout your entire market research, and now you’ve got a draft list of gaps and ideas you could try.

For startups, quick reaction and innovative moves are indispensable, as in highly volatile industries there is no time for mistakes. This means every marketing and business decision should be based on solid grounding, and competitor analysis is one of the core steps to effective product marketing and online promotion.

About SEMrush: If you’re looking for a fast, easy, and cost-effective way to get information about competitors and their marketing efforts, SEMrush is a solution for you. Its tools for competitor research enhance your marketing intelligence and provide you with the information needed to make business decisions. Learn more about the features included in SEMrush Market Explorer and Traffic Analytics or go straight to practice with a 14-day free trial.

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