What’s a Competitive Analysis & How Do You Conduct One?
According to statistics, 90% of Fortune 500 companies practice competitive analysis to improve their performance in the market. So regardless of your business’s size and industry, learning about your competitors and how they perform should be the backbone of your marketing strategy.
But how can you do a competitive analysis? How can the company use all this information about its competitors to improve its market share? Keep reading to learn more about this topic.
What is a Competitor Analysis?
Competitor analysis is the process of researching your significant competitors in the industry. You get to collect data about their sales, marketing strategies, strengths, weaknesses, products, and services to offer something better to your target customers.
Once you’ve gathered enough information about your competitors, you’ll be able to design and implement better business strategies, so you can perform better. You can focus on improving your services or offer something that your competitors lack.
This analysis also helps you identify the latest marketing trends in the industry. You’ll be able to predict the upcoming challenges and identify any potential opportunities to act ahead of your competitors.
When Should You Do a Competitor Analysis?
A competitor analysis should be an ongoing process. It’s a fundamental part of your marketing strategy regardless of the age or size of your business.
Your business doesn’t operate in a bubble, and the decisions and actions taken by your competitors will influence the whole market and, eventually, your performance. Whether you’re new to the market or have been operating for years, you should be able to do a detailed competitor analysis to achieve these goals.
- Identify your business’s strengths and weaknesses
- Understand the market
- Identify gaps in the market
- Observe your competitors’ strengths and weaknesses
- Spot market and industry trends
- Set a plan for future marketing plans
Your competitor analysis should be periodically evaluated and adjusted to cope with the new changes in the market.
How to Do a Competitor Analysis?
To do a competitor analysis, you need to effectively gather information about your industry, the market you operate in, and your main competitors. By analyzing this information, you’ll be able to make more informed decisions that eventually enable you to offer better products and services and increase your overall sales.
Yet, this should be done according to a detailed plan with thoroughly studied steps, so you can gather the right data and be able to use it efficiently.
Identify your Competitors
The first step of this analysis is to identify your direct and indirect competitors in the market. Your direct competitors are the companies that sell the same products or services that you offer. Your indirect competitors are the companies that offer the same digital content.
Both direct and indirect competitors affect the industry you operate in and will have an influence on the market trends. Therefore, your goal should be to outgrow them.
You can identify your competitors using several tools like marketing surveys, customer feedback forms, polls, online forums, social media communities, looking at Google’s search results, studying paid data, and keyword research.
You should also be able to identify and keep an eye on your replacement competitors. These are the competitors that don’t offer the same products or services but may be able to satisfy the same needs of your customers.
Create a Competitor Matrix
A competitor matrix or grid is a table or spreadsheet that allows you to organize all the information you gather about your competitors. With organized data, you’ll be able to easily access this information whenever needed. Moreover, the matrix will allow several interested parties to study this data and edit it in real-time.
Your competitor matrix can be as simple as a table with a column for each competitor. Then you can list all the types of information that you’d like to include, like sales, latest products, and services, marketing budget, best-performing product, or any other information that you might be relevant. Of course, you can also add more information as you continue your research.
Gather Background Information
After identifying your competitors and the information you’d like to gather, it will be time to do some research to know who you’re competing with. You can start by visiting the company’s website and social media pages to gather information about its history, size, and location.
You can also study marketing newsletters and articles that discuss your industry and main competitors to be able to track their performance. Some information will be more difficult to obtain, but you can, for example, hire experts to analyze your competitors’ performance in search engine results.
Profile your Competition’s Target Customers
As you study your competitors, it’s important to identify their target customers. By creating an accurate profile for the audience your competitors are targeting, you’ll be able to understand more about the company’s performance and decisions.
You can identify the target customers by studying the company’s profile, its mission statement, the message it sends, its logo and marketing campaigns, interaction on social media, and the influencers it hires to promote its products and services.
Focus on the 4 P’s
After identifying your competitors’ target customers, you need to identify their marketing mix. This explains the factors that the company considers to bring its product or service to the market, and it’s made of the 4 P’s.
- Product: This simply refers to what the company is selling and the main features it includes.
- Price: The pricing model that the company follows, how the price reflects the quality, and how the company changes its prices.
- Promotion: The marketing channels that the company uses to promote its business, the unique selling proposition, and how the company implements storytelling to sell its products.
Place: Whether the company sells from brick and mortar stores or does its business online and whether it sells directly to customers or through third parties.
Analyze Strengths and Weaknesses – Yours and Your Competitors’
With this information, you can identify your strengths, weaknesses, and those of your competitors. Ask yourself if your competitors are not performing as impressive in one aspect and how you can improve your business operations to fill this gap.
You can study the market to identify the points that your competitors are missing. By being able to set your business apart from your competitors, you’ll be able to achieve a competitive advantage that can help you secure more sales.
Competitor analysis is an ongoing process of collecting and updating data. It should be the fundamental aspect of your marketing strategy as it helps you identify what you’re doing right and how you can perform better in a highly competitive market.
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