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Blue Ocean v Red Ocean

In the startup world you’ll hear the phrases BLUE OCEAN and RED OCEAN tossed around a lot. I’m pretty anti-jargon, but the concept of blue and red oceans is a sound one.

A BLUE OCEAN is an open market in which you are CREATING demand for an innovative product that doesn’t currently exist.

A RED OCEAN is a highly competitive market flooded with businesses just like yours, all fighting over the same customer base.

Obviously it sounds like a blue ocean is the dream, but you then also have the uphill struggle of convincing people that they need your product, whereas in a red ocean – let’s say, a coffee subscription service – at least your predecessors have done all the hard work in convincing people that subscribing to a weekly delivery of freshly roasted beans is a reasonable thing to do – all you have to do is reach people, convince them that your beans are better for X, Y and Z reasons and they’ll switch to you… right?

Most of us are operating in a red ocean. Even if you are lucky enough to have a “blue ocean” idea where there there is literally nobody else doing what you are doing, you will still need to understand what is out there that is currently luring your potential customers away from your innovative product.

Learning What To Compare

Let’s stick with the coffee bean subscription model. To do this – or any other red ocean product – you need a killer product AND a killer marketing strategy, so you need to examine what your competitors are doing in these two areas.

Identify 6 competitors selling coffee bean subs. They don’t necessarily have to be selling into your exact geographical area – there could be someone on the other side of the world completely killing it, so although they’re not strictly a competitor, there’s no harm putting them in too so you can observe their tactics.

  • Website first. What is the user experience like? Is it super clear and obvious how to order your beans? Does everything look polished?
  • What happens when you click Get Started/Subscribe or whatever?
  • Things you are looking out for are:
  • Their calls to action
  • How tempted you feel to buy
  • How easy it all is (if even the cleverest checkout process takes too long, they’ll lose customers)
  • Have an effective (or any) abandoned cart process? 
  • Who are they catering for with their price points?
  • What happens when you sub to their mailing list? 
  • What happens when you buy their product (confirmation/thank you email, follow-ups etc)?

You can’t always do all of this for all your top competitors, but you can certainly assess their website brutally, and check out their sales funnel by subscribing to their emails and seeing what happens.

Is their social media good, bad or indifferent? Do they respond to enquiries in their Instagram or FB comments or leave them unanswered? Are they engaging people? You can measure this comparing their follower numbers to their likes and comments in Instagram and Twitter (although Twitter is increasingly irrelevant for many brands).  Obviously it’s impossible to measure how a fantastic Instagram campaign actually converts into real live sales though, so feel free to take a rock star campaign with a pinch of salt – it’s notoriously hard to convert social media into sales.

Nearly all of this can apply to any kind of business, whether you are selling life coaching or birthday balloons, so start making a killer spreadsheet now to record all of this info to get a feel for what is working, and what you can realistically apply to your own campaign.

A Word Of Warning

However think about something else. When you go on Instagram are you seeing heaps of validation for your brilliant idea… or a completely saturated market? Are you seeing winners or thousands and thousands of people just scraping by with a indistinguishable feeds and low margin products?

There are lots of industries that seem like they present a brilliant opportunity, but the reality can be all but impossible. For every Dollar Shave Club, there is at least a thousand entrepreneurs  with boxes and boxes of unsold shaving kits in their garage.

Competitor analysis isn’t just to help you validate that you have a great idea – it’s also to WARN you when steer clear of that red ocean and strike out for blue waters!

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