Lesson 2: Researching Customers and Competitors

Before you start

This course gives general information only. It is not legal, tax or financial advice. For decisions about your own situation, check GOV.UK or speak to a qualified adviser.

In Level 1 you described a problem, a likely customer and a cheap test. This level checks those guesses against evidence. You will find out three things:

1. Who will buy. Real people, not "everyone".
2. What they pay now. The price and effort of how they solve the problem today.
3. Who already serves them. Your competitors, including the less obvious ones.

Worked example: Sam bakes celebration cakes at home and wants to sell them locally. The guess from Level 1 was: "Busy parents want a personalised birthday cake but don't have time to bake one."

Task 1: Write a neutral interview script

People are polite. If you ask "Would you buy my cakes?", most will say yes to be kind, and that tells you nothing. Rob Fitzpatrick's book The Mom Test gives a simple rule: ask about specific things people did in the past, not their opinions or what they might do in the future.

Do this: Write 6 to 8 questions that follow these rules:

• Ask about the last real time the problem came up.
• Ask what they did and what it cost them in money and time.
• Don't mention your idea until the end, if you mention it at all.
• Avoid yes/no questions and questions that hint at the answer you want.

Sam's script:

1. "Tell me about the last birthday cake you got for someone."
2. "Where did it come from?"
3. "Roughly how much did it cost?"
4. "How did you choose where to get it?"
5. "What, if anything, was annoying about it?"
6. "What did you do the time before that?"
7. "Who else should I talk to about this?"

Leading version to avoid: "Wouldn't it be great to have a local baker make a personalised cake?" This invites a polite "yes".

Task 2: Run five short conversations

Do this:

1. List 10 people who match your customer, not just close friends. Sam asks parents at a school gate, a local parents' Facebook group and a toddler group.
2. Ask for 10 to 15 minutes. Say you are researching, not selling.
3. Ask your questions in order. Listen more than you talk.
4. Write down facts ("paid £25 at a supermarket") apart from opinions ("I'd love that"). Facts carry more weight.
5. Keep your notes free of names and contact details unless you really need them. Data protection rules come in a later level.
6. Stop after five conversations and look for patterns.

What Sam found (example figures): Four of the five had bought a supermarket cake. Three said the design was "generic". Two had once paid a local baker over £60 but found it hard to book at short notice.

Task 3: Do desk research

Desk research means using information that already exists. Most of it is free.

• Search engines and maps: search "[your product] near [your town]" to find local sellers, their prices and their reviews.
• Google Trends (trends.google.com): free. It compares how much people search for different terms over time and by UK region, for example "custom birthday cake" against "cupcakes".
• Marketplaces and social media: look at Etsy listings, local Facebook groups and Instagram hashtags to see prices and what customers complain about.
• Companies House register: the free "Find and update company information" service shows the public details of UK limited companies, such as their status and filed accounts, and you don't need to register. Sole traders won't appear on it.
• Business & IP Centres: the British Library and a network of partner libraries around the UK give free access to market research databases (such as Mintel) and free workshops.

Task 4: Build a competitor comparison table

Competitors include direct rivals (other home bakers) and alternatives (supermarket cakes, or baking at home). Leaving out the alternatives is a common mistake.

Do this: List at least three competitors in a table with these columns:

Where you can, fill each cell from evidence: a price you saw, a review you read or a comment someone made in an interview.

Task 5: State how you will be different

Look for a gap where your interviews and your table agree. Then write one sentence:

"For [customer] who [problem], I offer [difference], unlike [competitor] who [weakness]."

Sam's statement: "For busy local parents who want a personal cake without weeks of planning, I offer personalised cakes that can be booked with 5 days' notice, unlike local studios that need 3 weeks."

This is backed by evidence: two interviewees mentioned short notice, and the table shows the studio's lead time. Being different only works if customers care about the difference.

Checklist

• Script written with 6 to 8 neutral, past-focused questions
• Five conversations completed, with facts and opinions noted separately
• Desk research done using at least two free sources
• Comparison table with at least three competitors, including one alternative
• One difference statement, linked to specific evidence

Key takeaways

• Ask what people did, not what they would do.
• Facts such as amounts paid and real choices outweigh compliments.
• Count alternatives, like supermarkets or doing it yourself, as competitors.
• Compare competitors on price, offer, reach and weaknesses.
• Your difference must fill a gap your research actually found.