What is Competitor Analysis?
Competitor analysis consists of identifying your competitors and evaluating the strategies that they use to determine their strengths and weaknesses relative to your own.
Competitor analysis is an essential element of any effective marketing strategy, as it enables companies to better understand the business landscapes that they operate in, and ensure that they are allocating resources and efforts in the most efficient ways possible.
By conducting competitor analysis, companies can identify the strengths and weaknesses of their leading competitors. Not only can these companies better understand their competition, but a competitive analysis provides insight into the value proposition of their own products and services as well.
Why Should Businesses Conduct Competitor Analysis?
Competitive analysis is most effective when conducted on a consistent basis.
Markets are always evolving, so it’s imperative to proactively measure the business landscape that your company operates in routinely.
Another factor that can add value while performing competitor analysis is the scale at which it is conducted.
While most companies perform small-scale, informal competitor analysis without a truly defined process in place, the companies that build a large-scale competitor analysis program into the foundation of their marketing strategies will be the ones that are able to capitalize on the weaknesses of their competitors, and hone in on their own unique strengths.
The focus of competitor analysis should center on tracking products, prices, staffing, research and development, as well as other factors. This provides granular and actionable insights into the current business landscape.
Companies that conduct large-scale competitor analysis on a routine basis will unlock the following benefits:
- A better understanding of the market that they operate in
- The ability to better target customers and identify prospects
- Informed forecasting of the potential for the market
- Insights into how the economic climate affects the market
- A better understanding of what products and services competitors are offering
- Insights into how competitors are pricing products and services
Performing competitor analysis and leveraging the benefits outlined above allows organizations to take informed action and boost their bottom lines.
How to Conduct Competitor Analysis
Step 1: Create a Framework to Base Your Research on
In order to get the ball rolling with competitor analysis, it’s best practice to first create a framework for your assessment.
For example, a standardized competitor analysis framework would account for the following aspects of the competitors in a market:
- Name of company
- URL of company website
- Elevator pitch
- Mission statement
- Products and/or services offered, with pricing
- Most noticeable strengths
- Most noticeable weaknesses
- Key brand differentiators – What sets the competitor apart from the rest of the market?
One of the simplest ways to take the first step of conducting a competitor analysis is to create a spreadsheet with these competitor attributes, and begin to fill it in with the information you already have access to.
As you continue to conduct competitor analysis over time, and iterate on the process accordingly, you’ll most likely uncover other valuable attributes that are relevant to your industry or market that should be accounted for in your competitor analysis spreadsheet.
Step 2: Select Target Competitors to Investigate
Using the spreadsheet that you’ve created in the previous step, you can begin to start filling in details about the organizations that your company competes with.
Another way to start filling in this spreadsheet is to put yourself in the shoes of the prospects of your target market. How do they see the market? What options do they have in terms of vendors or product providers?
This list could include direct competitors, those vendors who sell the same product that you do, or indirect competitors, those vendors who sell products similar to yours.
Select your targets by evaluating what findings you’d like to uncover. Would you like to know about your direct competitors only, or should you consider how indirect competitors are approaching the market as well?
If your company operates in a crowded market, your list of competitors in your spreadsheet can easily become daunting. If you’re feeling overwhelmed, consider narrowing down your target list of competitors depending on the attributes or factors that you deem most significant to your market, or particular question.
Step 3: Gather Data
By gathering data, you can continue to build out this spreadsheet and use it to inform and guide your overall marketing strategy.
One way to collect this data is by distributing a survey to an audience of interest. By anonymously surveying real-world prospects about how they perceive the various brands in your market, you’ll be able to receive tangible evidence that speaks to why people choose the vendors that they do, and how you can solidify your business at the top of that list.
Your survey should include questions that inquire about how your respondent perceives each of the competitive brands you are investigating. Ask them if they’ve ever purchased from each competitor, what they thought of the experience, and try to determine where the respondent’s loyalties lie.
By analyzing this survey data at a large scale, you’ll be able to identify trends that speak to why certain people lean towards giving their business to a specific brand. You can then try to emulate the aspects that are bringing in customers in your own brand.
It’s important to note that while surveys are an effective mean for gathering data to inform competitor analysis, secondary research is another viable option that should be considered.
In this scenario, secondary research entails the purchasing of reports on your industry or market from third party firms. These reports often contain thorough and insightful profiles of the competing businesses in a specific market.
While surveys require resources dedicated to building, optimizing, and distributing the survey to vetted respondents, by performing secondary research you are able to avoid these processes.
For a business looking to thrive in a marketplace, it’s essential to perform routine and consistent competitor analysis. By building out an arsenal of documentation that outlines how your business is performing in the market, you can educate your entire team about the company attributes you should be focusing on in order to capitalize on available opportunities.