Analyse your dropshipping business with 5 marketing theories
However, most of the dropshipping company are failed to apply marketing theories to understand their current situation and forecasting the trend.
In this article , we are going to reveal 5 well-established marketing theories for you to analyse you business.
1. SWOT Analysis (Strength, Weakness, Opportunity and Threat)
First of all, let’s talk about the most common marketing knowledge, SWOT analysis which is a marketing technique to let you understand the Strength, Weakness for your internal competency. Also identifying the opportunity and threat of the external market.
The following is an great template for you to doing your SWOT analysis.
There is no right or wrong answer for the SWOT, but using SWOT analysis gives you implications. Turning your SWOT analysis result to an actionable strategies :
Strength – Opportunity : Leverage your internal strengths to take advantage of your opportunities
Strength – Threat : Use your internal strengths to minimize the treats from the external market.
Weakness – Opportunities : Improve your weakness by taking advantages from the external opportunity
Weakness – Threat : Improve your weakness and avoid threat
SWOT analysis is an general analysis technique, for every business and it can be used for person as well, to understand your personal SWOT.
2. POP & POD (Point of Parity & Point of Difference)
Learning from your competitor is a good way to build and replicate their success. However, should you offer something similar or something different from your competitor ?
It is related to POP (Point of Parity) & POD (Point of Difference) concept. This concept would help you to win the market share from the existing players.
Think in this way, POP is the “admission ticket” to the market, which represent the core need of the market, whilst, POD is your unique benefit to help you capture the market.
It sounds a little bit complicated , right? Let’s move to an real life example :
Halo Top the new rising star in Ice-Cream market, they beats the industry-giant – Ben & Jerry by offering a low-calories ice-cream.
POP : the ice-cream (core product) and POD : low-calories
The concept of POP & POD are not only for the product itself, it could be something intangible , for example brand image, feelings towards customers.
Knowing the POD can help you to leverage
After knowing the concept of POP & POD, we are going to introduce a great tool called – Venn Diagram
Venn diagram is everywhere, it is not only applied to Marketing, but also lots of different situation, mathematics, psychology…
However, the Venn Diagram used in marketing has a little bit different, which must be 3 circled.
The 3 circle represents Company (You) , Customer and Competitor
You should decide your positioning and stay away from Fail, Unsafe and Doesn’t matter Zones.
Moreover, get your company into Safe Zone, so-called “Unique Selling Point”, let’s move forward !
4.USP (Unique Selling Point)
Let’s get back to USP, USP is the factor that differentiate your product from your competitors, such as unique product benefit, quality, patent technology. Something that you have, but your competitor don’t, and it’s hard to copy.
It can also be a service or a guarantee, for example lifetime warranty like Rolex, which offer a complete premium level of service to your customer.
Keep asking three questions in your mind :
- Does your consumer want it?
- Does your competitor do it better?
- Are your competitor doing as well as you?
If the answer is , Yes, No , No then you are in the USP zone and you are in a compete safe zone.
5. 5 Forces Analysis
The last and the most advanced one, 5 Forces analysis is letting you to understand the competitiveness of the industry, rather is an low or high-competitive market.
When your business is going to a new market, you should use 5-Forces analysis to understand the market force and decide to enter the market or not.
5-forces are referred to
Threat of new entrants :
-Is there any entry barrier in your industry ? Is it easy to be overcome or not ?If the entry barrier is high, then you can have a favorable position in this industry.
E.g : printing company, you will need to invest money on printing machine, and it is has a high barrier for new entrants.
The high entry barrier can gives you a favorable position in the industry, without letting the new comer to enter your market easily. However, if the entry barrier is low, then the treats of new entrant should be considered to avoid the weak position in the industry.
Bargaining Power of Buyers :
– How easy it is for buyer to control your pricing? Do they need to take a high switching cost when they are switching from your company to others ?
A typical example is the FMCG product, the consumers are having low-switching cost towards different brands as FMCG products are relatively harder to provide POD (the product price is low, and the differentiation is low), most of the FMCG brands invest a lot on marketing to make sure their customer remember their brands.
Think about this, if you are buying Coke, as a fan of Coca cola, will you switch to Pepsi easily, or vice versa. However, when Pepsi is lowering their price, will you switch to Pepsi ? For B2B company, if you are dealing with few big B2B customers, they might have more bargaining power, but
Bargaining Power of Suppliers :
This is the crucial factor in Dropshipping business , most of the dropshipping suppliers are having high bargaining power.
– Your supplier can increase their price ? How unique is their product ? Would you need to “pay” a high switching cost if you switch to their competitor ?
Indeed, the bargaining power of supplier in Drpshipping ecosystem is very high, as they fulfill the order for you. Of course, you can switch to another supplier, however , you might need to pay a high “switching cost”.
Most of the B2B partnership is not based on price, but in dropshipping, a lot of dropshiping tools always give you “the best offer”, which means you are stick with price rather than the partnership. The high switching cost is referred to whether your new supplier can handle your dropshipping orders in a professional manner or not.
Threat of Substitutes :
-Is your product can be replaced by an other product with similar benefit ?
The meaning substitutes are not your competitor, but some products that can offer same result or benefit. For example, the substitute of camera is mobile phone, the current camera market is shrinking, because of the substitution of mobile phone.
The substitution that offer easy and cheap solution, will weaken your competitive position and threaten your market.
Degree of Rivalry :
-How many competitors do you have ? Are they stronger than you ?
The degree of rivalry refers to the number of competitors and their capabilities to undercut your company.
When you have a lot of competitors and they have strong power or better product to offer. Then, your company is having less power in the industry.
By summarize the degree of rivalry, you can come up with high intense degree of rivalry or low intense degree of rivalry. This is direct affecting your supply chain, as suppliers and buyers are looking for strong partner, that could offer a better deal.
Most of the dropshipper overlooked the foundation of business and marketing, which lead they are completely LOST in the business world. Without knowing what to do and how to do.
Understanding yourself and analyzing your business are mandatory to achieve your goal, by well-planning to avoid the risk and leverage your strength.
Do not rush to do something without knowing the market and competitiveness of your company.
We hope that more dropshipping business can gain their success by using the 5 useful marketing theories to grow their business.