What is a competitive market? (Definition and advantages)
By Indeed Editorial Team
Published 8 July 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Competitor markets occur when there is a high consumer demand for certain products and services. A competitive market encourages businesses to evaluate their marketing strategy and customer offerings so they can gain a competitive edge over their market competitors. Understanding how these markets work and how they can help businesses is essential if you want to boost the economic activity of a company. In this article, we discuss what a competitive market is, how the information it provides can help businesses and tips on how to stay ahead of market competition.
What is a competitive market?
A competitive market is a structure where many producers or businesses compete with one another to provide the goods and services that consumers want or need. This means that no single consumer or producer has the power to dictate the market. Producers operating in these markets may keep production costs relative to their sales so that they can sell goods in line with standard market prices. Independent price changes often lead to a business operating in tandem with the market and results in sales losses as consumers get their products from another economically viable source.
The purpose of these markets is to create the perfect conditions where buyers and sellers benefit from the consumption of goods and services. They operate independently of the overall market, meaning actions in the market can't influence the entire market. In competitor markets, several businesses offer consumers similar products to create more choices. Businesses reduce prices or use specific marketing techniques to gain an advantage over competitors and attract customers. There are no requirements to entering competitor markets, which means anyone with a product or service to sell can operate in them.
How competitor markets help businesses
There are many ways that these markets can help businesses. By using information from competitor markets to their advantage, businesses can gain better insights and stay ahead of competitors. Here are some ways that competitor markets can help businesses:
Commonplace products were once a technological breakthrough stemming from pioneering inventions. Market competition encourages businesses to consider new inventions and boost innovative techniques. This leads businesses to create new or better products or implement more efficient production processes. Companies may race to introduce new technology to the market so that they can hold the title of the innovator of the product or technology. These innovative products attract more consumers and lead to increased economic growth for a business.
Understand consumer needs
The primary aim of businesses in a competitor market is to attract and retain customers. Businesses can look to their competitors in the market to determine who their target demographic is and what their needs are. They can then use this information to develop new products or services that meet these needs or desires, all the while remembering that customer expectations can change.
Lower manufacturing processes
Businesses in a competitor market keep their production costs as relative to their sales as possible so they can generate a profit. Competition leads companies to invent lower-cost manufacturing processes that can help them increase their profits in the long term. Businesses can pass these savings on to the consumer as new products or reduced prices.
Learn more about competitors
Learning about the competitors in a market is essential if a business wants to compete with them. Competitor markets allow businesses to perform simple research into who their competitors are, their strengths and weaknesses and what they offer customers. Businesses can use this information to create a platform that differentiates them from others and makes them more appealing to consumers.
They drive sales prices
Competitor markets force businesses to evaluate pricing structures and product quantity to keep them in line with consumer demand. Businesses struggling to agree on price points can look to the market for guidance. The market also informs them when is most suitable to reduce prices to compete with other business sales.
How to stay ahead of market competition
Business competition can be fast-moving and fierce, especially where consumers shop around the market in search of the most convenient product or service. There are several ways that businesses can defend their market position and compete with others. Some ways to stay ahead of the competition include:
1. Store information in one place
Compile all your marketing and sales data in one place along with account information, delivery notices and inventory figures. This ensures that all necessary team members have easy access to the documents and can consult other records to support research findings. Dedicated CRM (customer relationship management) systems are a good way to track this information and use it to generate valuable business insights. The system you choose depends on the primary goals of the business, whether that's generating new leads or improving customer loyalty.
2. Differentiate from competitors
Give consumers a reason to choose your business developing a unique selling point (USP). Ensure the USP meets consumers' wants and clearly represents the USP. Creating a unique platform means you can win customers based on what you offer rather than having to compete on price. It also promotes the business and increases brand awareness. For a selling point to be unique, other businesses in the market can't offer the same thing. For example, even if a business offers the same product as a rival business, the product may have a new feature that differentiates it from the rival product.
3. Target new markets
Introducing your products or services to new markets allows you to spread your risk and increase your customer base. Target markets that have similar customers to the one your business already operates in. Consider whether selling products online or offering global shipping can help you reach a wider audience and make a profit.
It's important that you adapt your offer and approach to each different market segment. This requires you to perform market research into segment demographics to understand what different groups of customers want. You also want to determine what rival businesses are currently offering these potential customers and create a unique platform.
4. Update company image
Make sure that the company branding reflects the business and its USP. Update the store premises or re-design company business cards to make the business look more modern and appealing to customers. It's also important to have a social media strategy in place so you can engage with customers online and boost awareness of your brand. For example, a business may hold live video sessions to allow consumers to answer questions and get to know the people behind the brand. This makes the business appear more honest.
5. Implement new marketing techniques
Businesses are transcending traditional marketing methods and capitalising on modern techniques to promote their brand. Stay updated and implement new marketing techniques to help consumers understand what the business sells and why they should buy from it. Include general information about the brand so consumers can trust it. Some of these new marketing methods, like social media, are a cost-effective way to promote a business.
Make sure that your marketing messages are consistent across various campaigns to increase brand association and awareness. This makes it more likely that customers remember the brand over competitors and consult it when they're ready to make a purchase.
6. Retain talent
Businesses are only as strong as the employees who work to promote them and sustain their operations. Employers can retain talent by motivating their employees and providing them with opportunities to thrive or grow their skill set. Some other ways to attract talent include paying significant wages, fostering a healthy work environment and offering flexible working hours. Happy employees are more likely to put in effort when recommending the business to consumers.
7. Focus on existing customers
Consumers who have already purchased from a business have demonstrated an active interest. These same customers are those competitors aim to target to increase their own customer base and detract from your business. Be more responsive to the needs and expectations of your existing customers. It's much cheaper to retain these customers than it is to attract new ones. Operate good customer service and put initiatives in place to increase customer retention rates. Some potential initiatives include special discounts, improved credit terms and loyalty programmes.
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