Competitor analysis is a process of systematically comparing your company, products and services against significant competitors within your industry. This is an important part of strategic planning, which is used to establish company goals, strategies and tactics.
To build a successful business, you have to come up with products and services that stand out among your competition. But to create those unique offerings, you need to know who your competitors are and what they bring to the market. You must also know what they are doing, which includes how they are thinking about the market, what tactics they are using, and how they are creating their messages and projects.
Who are your Competitors?
To do a competitor analysis In any industry, you have to know your competitors. They are those companies that offer similar products and services, or those that offer different products but similar services compared to yours. If you have one or more competitors, it can affect the prices of your products or the rates of your services.
When you know the products/services/strategies used by your competitors, you can make all the difference in the battle for the customers’ mind share and conversions. You can create new strategies and replicate some of theirs to enjoy benefits such as:
- Avoiding bad assumptions
- Finding opportunities you missed
- Improving your offering
- Learning from competitors’ mistakes
- Planning market entry
- Spotting a market gap
Here are 5 steps you can follow to conduct your own competitor analysis, while identifying their attributes, objectives and approaches.
1. Identify Your Competitors
A competitor is someone who targets the same market segments as you with a similar product. Generally, competitors are divided into three types:
- Direct competition – These businesses offer the same products and services to the same clients within the same territory as your business.
- Secondary or indirect competition – Businesses that offer slightly different products and services or target a different clientele within the same territory.
- Substitute competition – Businesses that offer different products and services to the same clients in the same territory.
2. Gather Information About Your Main Competitors
As soon as you have identified your main competitors, you need to put yourself in the shoe of your competitors as well as in the perspective of their customers. You will want to gather as much information as possible about them, and ask yourself the following questions:
- Which companies are major players in this market?
- What are their target markets?
- What is their unique selling proposition?
- What are the segments that each competitor dominates?
- What are their product prices and sales figures?
- How many segments can I easily conquer if I reduce my prices?
- What do customers, suppliers and distributors know about my competitors?
3. Conduct a Thorough Market Research
While you are carrying out market research, it is important to conduct professional marketing research, such as focus groups and questionnaires to provide you with valuable information about your competition. When the market segment breaks up into niches, you should implement niche marketing as it allows you to offer specialized products within a narrow market segment. Your firm would gain a competitive advantage from its bigger market share as well as its expertise products and services.
Before you begin seeking out various sources, you need to obtain answers to the following questions:
- Who are my top three competitors?
- Are my competitors profitable?
- What are their positive attributes in the eyes of customers?
- What are their negative attributes in the eyes of customers?
- What is their percentage of market share?
- Do they have a competitive advantage; if so, what is it?
4. Approach Your Competitors Directly
Without a doubt, it’s normal for two companies to compete sometimes and co-operate at other times. Knowing and understanding your competitors on a personalized basis is the best way to talk to them directly. You should take this first step because it often initiate a mutually beneficial relationship.
For example, a competitor may be willing to refer customers to you if they don’t serve a particular market niche. However, to achieve this, they have to know, trust and like you. Even if you can’t come to an understanding with your competitors, talking to them can still help you gather important information to help you differentiate your business in the market.
5. Compare Your Products/Services Against Your Competitors
Your business can gain competitive advantage by examining the extent to which your services are positively or negatively differentiated with your competitors. You should jot down all the features as well as the benefits of your products and services from the most important/unique to the least important /unique.
When comparing your products/services against your competitors, these features and benefits help you to improve and strengthen yours. You can make your product or service look good by highlighting its solution to problems. In the end, it all boils down to brand trust but ensure you keep your comparison clean.
Conducting competitor analysis for your firm can help you gain insight into your competitors’ strengths and weaknesses. This helps you make well-informed decisions to fight competition by modifying your own marketing strategies to attract potential customers. Once you know your top competitors, you can effortlessly come up with a viable marketing strategy based on your findings to help you reach your target market and maximize company sales.