Looking at the competition must be healthy, in order not to diminish it, but to use its strengths and weaknesses to improve its own business. Knowing the competition does not only mean knowing that they sell something similar to what you sell, but also understanding their position in the market, how they do their marketing actions, how they prospect, what are the profiles of the owners, product portfolio, average prices, etc.
A simple way to identify some of these things is the hidden client. A legal and widely used practice where, through a pre-defined questionnaire, a person goes to the store or calls the company, as a customer, and identifies the issues described in the questionnaire.
Another widely used practice in the business environment is benchmarking, a process of observing the best practices in the industry where you operate. Through a visit to another company (which does not necessarily have to be a competitor), previously agreed between the parties, one seeks to understand what that company is doing best and how it is gaining prominence.
It's not exactly a competition analysis, but it's a way to identify factors that contribute to improving your business. The real estate market is extremely aggressive, competitive and sometimes cruel. Many brokers and real estate agents are wary of opening their information, but this is more conservative thinking. Contributing, working in partnership and being humble about one's shortcomings is a fair and healthy way to improve the market.
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Porter's 5 Forces
The best known method of doing a competition study is through Porter's 5 Forces. The model developed by Michael Porter in 1970 is widely used in the business environment.
It's a simple model that involves some analysis complexity and allows you to have a more comprehensive view of the competition. All for you to be able to position yourself better and dominate the market.
See the model design below and then we'll understand each step.
To use this model, managers must have a broad view of the business, knowing each sector and level of involvement.
1. Rivalry between competitors
Who are your direct competitors? And more than that: are they really your competitors? Sometimes a company can sell the same product/service as you to different audiences. Assess how you can set yourself apart from direct competitors and how they are grouped together.
- When it is necessary to acquire something, do these large groups gain negotiating strength?
- Do your competitors have admired brands? Are they recognized and established in the market or are they new?
- How is their sales strategy? How do they use the sales funnel?
- What competitive advantages does your competition have?
Make a comparative list between your advantages and theirs.
2. Bargaining power between suppliers
The real estate agent may consider clients who leave their properties for rent and sale as their suppliers. If you don't have many, your portfolio is limited and your offer is poor to your consumers.
A good example of this are small repair service providers. If you only have one person working for you, you are dependent on them and put the quality of your care at risk.
Focus on partner relationships with suppliers and build solid networking to have a greater variety and be able to negotiate better.
3. Customers' bargaining power
How's your wallet doing? Is it diverse?
Is your prospecting for customers daily? What is the profile of customer groups?
Great deals come from your customers and/or suppliers. And if they decide to close a partnership with another real estate agency?
Have a diversified portfolio, treating everyone with attention and a high standard of quality to be able to trade better.
4. Threat of entry from new competitors
Stop and think about the latest big changes in the housing market. Were there new “players” that emerged and reduced your business?
The entry of online direct selling platforms is also a form of competition, as are sales groups on Facebook. Did you foresee this with new technologies? Prepared to face?
Think about how you can prevent new competitors from affecting your business. Creating exclusive products, exclusive contracts or proprietary brands are some of the ways to keep new entrants away.
5. Threat of substitute products
The market is so dynamic that you invent something new today and tomorrow there are people doing it better. Remember the time when the only options for renting a property were to have a guarantor or surety? Now, there are investment bonds, surety insurance in different ways and even exemption from the rent.
The real estate agency that came out ahead and put these services first gains a great competitive advantage. However, as innovative as you may be, your offer must solve a problem that exists and must be improved all the time to stay in the market.
Now that you know the method, you can go after the answers to analyze your business in relation to these factors. From this analysis, it is interesting to define what will be your competitive positioning.
Porter says there are three general strategies for working this analysis:
- cost leadership
- Leadership strategy through product differentiation and new marketing strategies
- Lots of market knowledge to focus on specific niches.
They must be reflected in the posture and speech of your team, in your sales strategy and in your marketing actions in the real estate market.
Get your team together, have a big discussion on how you can improve to dominate the real estate market, and let us know your experiences!