What are the most effective ways to forecast the impact of a new competitor?

1 Analyze the competitor

The first step is to understand who your new competitor is, what they offer, how they position themselves, and how they communicate with their target audience. You can use secondary sources, such as industry reports, media articles, social media, and online reviews, to gather information about their background, goals, strengths, and weaknesses. You can also use primary sources, such as surveys, interviews, mystery shopping, or focus groups, to get direct feedback from their customers or potential customers. By analyzing the competitor, you can identify their value proposition, differentiation, and competitive advantage.

2 Segment the market

The second step is to segment the market based on the characteristics and preferences of your customers and potential customers. You can use variables such as demographics, psychographics, behavior, or needs to divide the market into distinct groups. By segmenting the market, you can understand how each group responds to your offer and your competitor's offer, and how likely they are to switch or stay loyal. You can also identify the most attractive and profitable segments for your business.

3 Estimate the demand

The third step is to estimate the demand for your product or service and your competitor's product or service in each market segment. You can use quantitative methods, such as trend analysis, regression analysis, or scenario analysis, to project the future sales volume and revenue based on historical data, market trends, and assumptions. You can also use qualitative methods, such as expert opinions, Delphi method, or market testing, to elicit opinions and feedback from industry experts, stakeholders, or customers. By estimating the demand, you can measure the potential impact of your competitor on your market share and growth.

4 Assess the risks

The fourth step is to assess the risks associated with your competitor's entry and your response. You can use tools such as SWOT analysis, PESTEL analysis, or Porter's five forces analysis to evaluate the internal and external factors that can affect your performance and position in the market. You can also use tools such as risk matrix, risk register, or Monte Carlo simulation to identify, prioritize, and quantify the possible risks and their consequences. By assessing the risks, you can prepare contingency plans and mitigation strategies to minimize the negative effects and maximize the positive opportunities.

5 Monitor the performance

The fifth step is to monitor the performance of your business and your competitor's business in the market. You can use metrics such as sales volume, revenue, market share, customer satisfaction, retention, loyalty, or referrals to track and compare the results and outcomes of your actions and your competitor's actions. You can also use tools such as dashboards, reports, or feedback systems to collect, analyze, and communicate the data and insights. By monitoring the performance, you can evaluate the accuracy and validity of your forecasts and adjust them accordingly.