Competitive analysis involves examining and evaluating the strengths, weaknesses, opportunities, and threats of your competitors. By understanding their strategies and activities, you can identify ways to differentiate yourself in the market, uncover new business opportunities, and develop effective marketing plans.
A competitive analysis is the study of competitors to learn more about their strengths, weaknesses, products, and marketing strategies.
When conducted correctly, competitive analysis can provide data that supports your strategy and business decisions. Depending on your company, you can analyze your competition in various ways.
This includes how to:
Owners of small businesses typically have to juggle many tasks simultaneously. However, even with a packed schedule, it's worthwhile to take the time to conduct a competitive analysis.
By examining how your competitors are perceived, you can draw conclusions about your own brand's strengths and weaknesses. Understanding your company's strengths can provide insights into your market positioning—that is, the image you want your target audience to have of your product or service. It's crucial to clearly communicate to potential customers why your product or service is the best choice among all available options.
Just as important for your company's growth is knowing its weaknesses. Knowing where you're falling short of your customers' expectations allows you to identify areas where you should invest your time and resources.
You might find that your customers prefer your competitors' customer service. Study your competitors to find out what they're doing right and see what you can apply to your own business.
When identifying your competitors, you might come across companies you weren't aware of or hadn't previously considered as part of your competition. Knowing who your competition is is the first step to outperforming them.
A thorough evaluation of your competitors' offerings can also help you identify areas where your market is underserved. If you find gaps between your competitors' offerings and customer needs, you can take the first step and expand your own offerings to address these unmet customer needs.
Studying your competitors can also help you understand the overall direction of the industry. However, you should never do something simply because your competitors are doing it. Copying the competition without truly considering your own position in the market rarely, if ever, leads to success.
If you see your competitors doing something you're not, don't rush to copy their offerings. Instead, consider your customers' needs and how you can create added value for them.
When conducting competitive analysis, you should include both larger and smaller companies than your own. Examining established companies in your industry provides a model of success and a benchmark against which to compare your future growth. Conversely, examining new market entrants in your industry reveals which companies could threaten your market share in the future.
It can be difficult to figure out what to focus on when conducting a competitive analysis. The following points will help. You 6 stepsThese will help you get started. Before you begin your competitive analysis, consider what you want to achieve. Add any other research areas that align with these goals.
To create a list of potential competitors, consider where your customers would go if they didn't buy from your company. A simple way to start is to search for your product or category name on Google or another search engine and examine the results. You can also survey or interview existing customers to ask them what alternatives they considered before deciding on your product or service.
When finalizing your list, ensure you include a diverse range of companies to gain an accurate understanding of the market. You should consider companies that operate in each of the... 3 categories of competitors: fall.
Direct competitors sell a similar product or service to a similar target audience. These are probably the companies that first come to mind when you think of your competition. McDonald's, for example, likely considers other fast-food burger chains like Wendy's and Burger King to be its direct competitors.
Indirect competitors sell a different product or service in the same category but target a similar audience. Takeaway pizza restaurants, for example, are indirect competitors of McDonald's.
Substitute competitors exist outside your product category but satisfy a similar customer need. In McDonald's case, substitute competitors could be any solution consumers turn to when hungry, including products like frozen meals. Of the three types of competitors, substitute competitors are the most difficult to identify.
When conducting a competitive analysis, you should primarily focus your attention on direct and indirect competitors. However, it is also worthwhile to briefly assess potential alternative competitors that could jeopardize your business prospects.
Before you begin analyzing your competitors, take a moment to organize yourself. A competitor matrix, also known as a competitive grid, is a table or worksheet where you can summarize your research. This will make it easier to compare your findings with those of other competitors and identify broader trends.
Start by dedicating a row or column to each competitor you've identified. On the opposite axis, list data points or information categories you want to find out about each competitor. Don't worry if you're not sure what to look for at this stage. You can always add more categories as your research progresses.
Once you have a list of competitors you want to research, you should learn about their companies. Start by looking for the most basic information, and then work your way up from there. Begin by looking at the companies' websites, their social media pages, and any news articles published about them. Below is some basic information you should look for.
This includes information such as the founding date, sources of funding, and any mergers or acquisitions the company has been involved in. You can often find this information in the "About" section of the website or in past press releases from the company. Understanding how your competitors got to where they are today will give you a more comprehensive picture of their businesses.
This depends heavily on your industry. If you're in e-commerce, you might be competing with companies that sell their products globally. For traditional brick-and-mortar stores, your competition is likely highly localized. In any case, it's helpful to know where your competitors are located and where they sell their products.
How many employees does your competition have? LinkedIn and Glassdoor are helpful sources for this type of data. You should also look at how many customers your competitors have and how much revenue they generate. This information is likely readily available online for larger companies. For smaller and privately held businesses, you may have to rely on rough estimates. Knowing the size of your competition will help you better understand the other data you collect.
A company is nothing without its customers. Understanding who your competitors sell to will reveal a great deal about their businesses. To identify a company's target customers:
Use this information to create a profile of the customers your competitors are trying to reach with their products or services. These customer profiles will likely resemble your own target customers—after all, they are your competitors—so pay attention to even the smallest differences.
Now that you have identified the target customers of each competitor, you should examine how they reach this market segment. To do this, you need to thoroughly analyze these companies' marketing strategies.
The marketing mix, also known as the 4 Ps – product, price, advertising, and placement – encompasses the most important elements for launching a product. As part of your research, ask yourself the following questions for each of your selected competitors.
You will likely find a lot of information. Try summarizing your findings into short bullet points that you can easily refer back to later. If possible, add quantitative data if you can find it.
Using the information you have gathered, analyze the strengths and weaknesses of your chosen competitor. Ask yourself why the consumer prefers a particular company's product or service over other available options. Record your conclusions on your worksheet.
Finally, consider your own company's strengths and weaknesses. How does your company compare to the competitors you've researched? Knowing what differentiates your company from the competition and where it falls short of expectations will allow you to better serve your target customers.
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