Stand Out from the Competition! A Primer on Conducting a Competitor Analysis
No matter how good the business is, your efforts can be eclipsed by a formidable competitor. Consumers like to compare products and services, and they base their buying decisions from that comparison.
As a business, it pays to invest in a strategy that will allow you to stand out or leap over your competition. More often than not, that strategy begins by gaining enough knowledge about your competitors and what they offer to the market. A competitor analysis is an exercise you must learn to do well to get those information and act based on the recommendations contained therein.
What’s a Competitor Analysis?
A competitor analysis is an assessment and evaluation of the competitor’s products or services, their strengths and weaknesses as they relate to your own brand.
Whether you’re an emerging brand or an established one looking to maintain or improve your share of the market, you should undertake a comprehensive competitor analysis at least once a year.
The Importance of Competitor Analysis
For startup brands, it might be daunting to hear the term competitor analysis. You might think that one has to hire a professional market intelligence firm to acquire the information you need to make strategic decisions. What you don’t know is that simple research, especially if done right, can make you unlock some valuable insights and pave your way to market domination.
A competitor analysis indicates that you are proactive, rather than reactive. There are many entrepreneurs who rely on gut feel about their competition. Most of the time, their judgements - which ultimately inform their business strategy - are based on inaccurate or outmoded data. An effective competitor analysis is one that gives you a complete, timely, and accurate picture of the landscape you and your competitors are in. You know where you and your competitors stand; you can see your and their advantages, as well as your and their barriers to success. All these key insights will help you fine tune your marketing approaches and make executive decisions that will strengthen the overall fitness of your company/brand.
A full competitor analysis makes you challenge your assumptions, clear perceptions about your brand, and identify gaps in your current strategy.
Steps to Do Competitor Analysis
If you’re ready to start differentiating your brand from its competitors, you must take the following four key steps in conducting a competitor analysis:
- Identify your competitors
List all your competitors and classify them into three sub-groups: direct, indirect, and substitute competitors.
Direct competitors are businesses that provide the same or similar set of products and services AND operate within the same locality. For example: If you own a wellness spa, the spa across the street can be considered a direct competitor. If your establishment is closed or provides an unsatisfactory service, your target customers are likely to switch to another nearby spa.
On the other hand, secondary competitors are those that offer similar products or services but target a different clientele or operate in the same industry. For example: more hair salons now offer massage as part of their service menu. If you just had your hair and nails done, you might be tempted to avail of their massage service. Going back to the wellness spa example, while massage isn’t the main service offered in hair salons, they can still threaten to pull away your customers even if they’re not your direct competitors.
Lastly, a substitute competitor is any product or service that takes a different form but still targets the same customers in your locality or in the industry. For example: A wellness spa can lose market share to more convenient products/services like massage chairs, essential oils, home spa kits, meditation music subscriptions, and many others.
- Gather information
At this stage, you must gather all relevant information about your competitors, regardless of their classifications, but with more research time spent on direct competition. To introduce a system, research about them using the 8Ps of marketing mix: Product, price, place, promotion, people, positioning, process, and performance.
If you can create a matrix for the above 8 dimensions, the better. More importantly, the above approach can provide structure for the next step, which is the analysis phase.
Research is difficult. If you work at a large enterprise, you can enlist the help of other departments like sales, marketing, and customer service so they can give you the data needed for this activity. There are a thousand ways to organise your data and a thousand ways to supplement the way you present the data (like empathy maps, buyer persona, SWOT analysis, customer journeys, etc.) so be sure to employ these tools so you can have a 360 degree profile of your and the competitor’s business.
- Analyse their strengths and weaknesses
Once you’ve gathered the relevant details about your competitors, begin ranking them according to the dimensions you’ve set. If you’re not using the 8Ps marketing mix model, you’re free to use other frameworks like SWOT analysis, perceptual map, Porter’s 5 forces, business model canvas, and many others.
Ideally, the end product should give you a summary of the strengths and weaknesses of your competitors, including your own brand.
- Determine your UPV or competitive advantage
Now that you’ve profiled your competitors in some key criteria, you’re in a better position to identify your unique value proposition or UPV. What makes you different from the competition? What do you offer that other businesses do not? Your answer to this question could form your competitive advantage, which is something you can focus on to attract more customers and buy your product. You can build around your UPV by injecting it to your brand messaging, as well as in other promotional strategies.
Take the first Step!
In other areas of our life, we must not lead our lives according to other people’s opinion of us, or be swayed by what others are doing with theirs. This is simply not the case in business. In order to stay and thrive on the market, you must always keep tabs on the competition. The market will move without your business if you lack the foresight and the skill to change your strategy in the direction the market is headed. A full, comprehensive competitor analysis will help you locate where you are and adjust your sails accordingly.
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