Guide On How to Conduct An Effective Competitor Analysis
Competitor analysis needs to be done regularly and not once a year. It is extremely important to add competitive analysis in your effective marketing plan to demonstrate to your investors that you are very much aware of the competition.
It is important to analyze your competition at various stages of your business to ensure that you are providing the best possible product or service at the right price for your customers.
In this blog post, you will learn how to conduct a competitive analysis: understand market trends, identify your competitors, evaluate opportunities, analyze threats to your organization, and adjust your go-to-market and positioning strategy accordingly.
What is Competitive Analysis?
A competitive analysis is a process of identifying your competitors and evaluating their strategies to determine their strengths and weaknesses relative to your own business, product, and service. The goal of the competitive analysis is to gather the intelligence necessary to find a line of attack and develop your go-to-market strategy.
Keywords: A competitor analysis is an in-depth examination of your competition's strengths and weaknesses to see how your business compares.
Why is a competitor analysis important?
It is important to conduct routine competitor analyses throughout the lifecycle of your business to stay up to date with market trends and product offerings. A competitor analysis can reveal pertinent information about market saturation, business opportunities, and industry best practices. A competitor analysis will:
- Enable your team to build better marketing tactics
- Find opportunities in the market that are under-served at present
- Help to make the most advantage of your competitors' weaknesses so that you can gain market share
- Allow to make informed decisions about your marketing strategy and ensure to create a sustainable competitive edge
- Help to make proper planning for future investments
Keywords: A competitor analysis teaches you important information about your market that empowers you to make well-informed business decisions.
What are the benefits of conducting a competitor analysis?
Analyzing your business against your competitors can help you in many ways. For example, it will reveal which areas of your business, product, or service need improvement. With this knowledge, you can adjust your processes to better serve your target market and increase profit. It can also show you some new strategic opportunities to enhance your products or services and grow your business.
"Understanding one's competitors allows one to distinguish oneself from the competition, focus on the underserved market opportunities, determine the services to offer, identify the best practices to employ, and isolate the worst practices and rotten players," said Taffet.
Once you conduct a competitor analysis, you can use it for benchmarking and measuring future growth. Routine analyses will reveal market trends to keep track of and new players to be aware of. It will also help reveal who your current competitors are throughout every stage of business. Be sure to keep your analyses up to date.
Keywords: A competitor analysis can help you improve your business, satisfy your customers' needs, and increase your profit.
What should be included in a competitor analysis?
Conducting a general SWOT analysis and PEST analysis is a good place to start, but there are several other components to consider in competitor analysis. It is important to include as much information as possible to create an accurate assessment of how your business compares to others. You will need to collect information on potential competitors and their features, pricing, service quality, strengths, and weaknesses. You can either build your competitor analysis or use a competitive analysis template.
The following items should be included in your competitor analysis,
- Feature matrix: Find all the features that each direct competitor's product or service has. Keep this in a competitor insight spreadsheet to visualize how companies stack up against one another.
- Market share percentage: This helps to identify who the main competitors in your market are. Do not exclude larger competitors completely, as they have much to teach about how to succeed in your industry. Instead, practice the 80/20 rule: 80% direct competitors (companies with similarly sized market shares) and 20% top competitors.
- Pricing: Pinpoint how much your competitors charge and where they fall on the quantity vs. quality spectrum.
- Marketing: What type of marketing strategy does each competitor employ? Look at competitors' websites, social media presence, what kind of events do they sponsor, their SEO strategies, their taglines, and current marketing campaigns.
- Differentiators: What makes your competitors unique, and what do they advertise as their best qualities?
- Strengths: Identify what your competitors are doing well and what works for them. Do reviews indicate they have a superior product? Do they have high brand awareness?
- Weaknesses: Identity what each competitor could be doing better. Do they have a weak social media strategy? Do they lack an online store? Is their website outdated? This information can give you a competitive advantage.
- Geography: Look at where your competitors are located and the regions they currently render services to. Do they operate a brick-and-mortar concept, or is the bulk of their business done online?
- Culture: Evaluate your competitors' objectives, employee satisfaction, and company culture. Are they the type of business that advertises the year it was established, or are they modern startups? Read employee reviews for insight into the company culture.
- Customer reviews: Analyze your competitors' customer reviews, recording both pros and cons. In a 5-star system, look at 5-star, 3-star, and 1-star reviews.
Keywords: In your analysis, include competitor information such as features, market share percentage, pricing, marketing strategy, differentiators, strengths, weaknesses, geography, culture, and customer reviews.
What are the steps to writing a competitor analysis?
When you are writing a competitor analysis, it is important to be as objective and honest as possible. Competitor analysis is a useful tool that can help you improve your business and better serve your audience, so intentionally understating the strength or success of your competitors will only be doing yourself a disservice, as it will yield inaccurate results.
- Identify the products or services you want to evaluate.
- Identify every direct and indirect competitor for those products or services.
- Research all competitors in person (if applicable) and online (to get a sense of their online presence – or as the sole research method if the product or service is only sold online). Use a group, if possible, to get a variety of opinions on competitor products or services.
- Document your research in a written analysis. This can vary depending on the product or service but often includes comparison charts, graphs, and written text. Make sure your document is substantive and actionable, but not so long that no one will read it.
- Identify areas to improve your competitiveness. For example, could you improve the quality of your products or services by changing a feature, lower the price of your products or services to be more competitive, or develop a new product or service that addresses the area for improvement?
- Make the improvements you deemed appropriate or necessary.
- Measure your sales and profit based on the changes you made to determine whether they were successful.
After conducting a competitive analysis, use the information and best practices, you have learned from it to improve your business. Put your newfound knowledge into action to distinguish yourself from your competition and better serve your customers. Conduct competitive analyses routinely to stay up to date with market supply and demand and to increase your competitive intelligence.
Keywords: To write a competitor analysis, list the product or service you want to evaluate, identify and research your competitors, document your research, evaluate your results, and identify the ways you can improve your competitiveness.
The idea of a competitive analysis is not to overly focus on the competition but to understand where your company stands in the marketplace and identify opportunities to further differentiate. At the end of the day, a focus on the customer will serve your company far more than a focus on the competition. Done well, a competitive analysis can help you find ways to outplay the competition by better serving customers — theirs and yours.