How to Conduct Competitor Analysis
Your competitors have successful businesses - or at least the ones that you care and worry about do.
They have customers who buy into what they do and are loyal to them, they are respected by other businesses (including yours), and they are almost certainly making proper money.
You look at them and realise that they are already achieving the things you want to achieve, and are doing so in a market in which you compete. In an ideal world, you would approach them and ask them to mentor you. Of course, that is not going to happen but if you analyse what they do and how they go about their business you can learn from them.
Doing the right kind of research into your competitors will help you to understand the following;
- what they are doing better than you, so that you can make improvements to your own business
- what marketing strategies and tactics are working for them - if they work for them, why wouldn't they work for you?
- what mistakes they have made - there is no reason for you to repeat them
- what you are doing better than them - don't assume that the competition always does things better than you do
If you put these insights together you can create a competitive strategy. It does not have to take the form of a formal document but can simply exist within your overall business plan. Make no mistake though - you need a strategy.
Who are you competing with?
There are two kinds of competitors to consider – those who provide similar products and services as you, and those who have different products or services but which compete for the same market as you.
Netflix is a prime example. On the face of it, you may think they simply compete with other streaming services, but they actually do so much more - they compete with cinema, cable TV, YouTube, and other forms of on-screen entertainment such as social media and gaming. Take a broad approach when you consider your competition.
What is competitor analysis?
These are the questions you should be asking:
- Who are the major players serving this market?
- Roughly how is the market split up between them?
Then dig a little deeper, with more specific questions such as:
- How does the market think about these competitors?
Is someone the young person’s brand? Is someone else the cheap brand?
- What experience do they offer?
How does their product or service look and feel? How does it work?
- How do they deliver?
What do they charge? How do customers order? What reviews do they get?
Then ask yourself if your own business could differentiate itself in some way.
Competitor strengths and weaknesses
As you learn about your competitors, you will soon work out which one provide the greatest challenge to your business. They might operate in the same region, or they might target the same market as you. It is important to know their strengths and weaknesses if they are competing against you.
Strengths will include areas such as:
- great distribution – their products are in all kinds of shops, all over the country
- brand awareness – they have been around for years, have established a great reputation and people trust them
- excellent networks – they have superb relationships with buyers
- low price point – they make you feel that you cannot compete on price
Weaknesses might include:
- a boring reputation – consumers don’t get a kick buying from them
- cheap packaging – their offering lacks polish
- bad reviews – customers are not impressed with the quality of their products
- poor customer service – consumers don’t feel valued
By understanding your competitors’ strengths and weaknesses, you can figure out what differentiates you, where you can stand out and where you fit in the market.
What are your strengths?
When doing a competitor analysis, it’s important to consider your advantages. There may be things about your business that others can’t replicate:
- Are you the only business that can deliver your product or service?
- You are exclusive. You are the only business in your area that can sell certain products.
- Special processes: You have a way of doing things that others don’t know about.
- Lower costs: You can deliver quality products or services for less money.
It's important to know where you have advantages so that you can play to your strengths in your marketing.
How is the future shaping up?
Keep an eye on the future when doing your competitor analysis. If you’re in a hot industry, or you start doing really well, you might find a lot of new competitors enter the market.
- How hard would it be for somebody to launch the same product or business and take customers away?
- How easy would it be for an established business to change their service or products to take away my competitive advantage?
The harder it is for competitors to replicate what you’re doing, the more comfortable you can feel.
Start your competitor analysis
Competitor analysis will help with your business planning, your product or service development, and your marketing. An honest review of who is out there and what they do well will help you find a part of the market you can dominate and make your own.
Find out who your competitors are, what niche they serve, and where their strengths lie. Use the information to figure out where you fit in the market, and how you can maximise that position.
If your rivals are selling the same product as you for less than you can afford to do, find out why? Is it because they are using inferior materials? If so, then you need to advertise and emphasise the quality of your products. Have they managed to negotiate better deals with your suppliers? If so then you need to go back to your supplier and speak to them about renegotiating your terms.
Whether you’re a new business or have been established for years, it’s never too soon to get a competitive strategy together.
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