What exactly is a competitive analysis? It simply means assessing and having a good handle on who your competitors are, what value they provide, understanding their (and your) strengths and weaknesses, and where your business fits in. Do you really need to do this? Yes! We know you’re strapped for time, but this exercise is worth every minute you’ll spend on it. Competitive analysis is one of the key areas you need to understand in order to succeed.
According to Fleisher & Bensoussan’s, Methods and Techniques for Analyzing Business Competition, “Competitor analysis is an essential component of corporate strategy. It’s argued that most firms don’t conduct this type of analysis systematically enough… As a result, traditional environmental scanning places many firms at risk of dangerous competitive blindspots due to a lack of robust competitor analysis.” Sounds formal, but true. However, thorough competitive analysis is not hard to do.
The priority order/steps to competitive analysis goes something like this:
- Define and know your industry
- Know your customers and potential customers
- Know specifically what type of customer needs your product or service
- Know who your competitors are
Wikipedia’s competitor analysis page also suggests adding the following steps:
- Determine what the key success factors are in your industry
- Rank the key success factors by giving each one a weighting – The sum of all the weightings must add up to one.
- Rate each competitor on each of the key success factors
- Multiply each cell in the matrix by the factor weighting.
Spending time really looking at your competition and where you fit can help you target your marketing efforts, but you need to answer the following questions first to get started. Based on your particular business, you might want to add others:
- Who are my top competitors? There are likely other companies in your area who provide similar services. Are you continually competing against the same companies for business? These are your biggest competitors and you should focus your efforts here first.
- How does my product or service stack up to the competition? Take an honest look at their offerings. Is your quality commensurate? Do you have similar offerings? If you have a niche product that your competition doesn’t, can your competitors actually become a source of referrals for you? What is the unique value you provide that competitors don’t or can’t? Emphasize these benefits in your marketing. Remember that these benefits might not be the product itself, but could be something like a longer warranty or free replacement.
- Is my pricing high or low for the market? If your pricing is too high, you could be losing customers; too low, and you’re leaving revenue on the table. This doesn’t mean you have to price exactly the same as your competitors, it just means you should be able to justify your price based on the value consumers get from it. If your product is 100% organic, or you have stellar customer service, customers may be willing to pay more.
- Who else am I competing with? Most businesses have a host of indirect competitors as well direct. Start to think more broadly about your business. If you operate a movie theater, you are indirectly competing with anyone who offers entertainment. A house painter might be competing against a landscaper for home improvement dollars. While this seems overwhelming at first, these indirect competitors can be good marketing partners. Can you strike a deal with the house painter to recommend your landscaping company to his clients?
By evaluating yourself against your competition, you’ll likely find new ideas for your business. Want 4 simple ways to monitor your competitors’ marketing strategies? Read our blog post here. How do you keep tabs on your competitors? What have you learned from it regarding your own business? Share away!
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