When was the last time you reviewed your competitors? No matter what size your business – from solo entrepreneurs to large corporations – it’s important to understand your key competition. Before we delve into why it is so important to understand your competition, what is a competitor analysis?
What is a competitor analysis?
A competitor analysis compares your business to several other businesses in your industry – your rivals. Rivals who are focused on a similar geographic location, that may also target similar customers, that may have similar products, services and marketing strategy to your own business – anywhere that you and they are competing for marketing share.
Here’s why you should do a competitor analysis.
1. Understanding your competitors helps you understand your business better. By understanding your competitor’s strengths and weaknesses you begin to understand what works and what doesn’t work, how to make better decisions and avoid mistakes. As a result, you also learn your own businesses strengths and weaknesses.
2. A competitor analysis will help you grow your industry knowledge – knowledge that you can share. You become an expert and an authority that you use to build trust with your customers. You can also use this knowledge to share with your staff, which helps build their learning and appreciation for your business.
3. A competitor analysis helps you understand and identify gaps in the market whether that be in a specific geographic location, in product offerings or in pricing or selling to a particular target market. For example, a competitor may be targeting younger generations whereas none of your competitors are tweaking the product to target an older demographic.
4. A competitor analysis identifies your Unique Selling Proposition (USP) – by analysing and assessing your competitors (and yourself) you can identify what is different about what you offer vs what your competition offers. It begins to answer the customer question “Why should I buy from you rather than your competition?”
5. Understanding your competition is not only about looking at the businesses that are the same size as yours. If your busines objectives are to grow you may want to observe larger competitors to emulate their wins or to avoid their costly errors. You can identify opportunities for growth and areas of internal or external development. Likewise, this works for smaller businesess – those businesses that you think are too small to be a threat. You may want to keep an eye on businesses smaller than your own as they are wanting to climb the same tree, to get the same fruit, that you are after.
6. A competitor analysis can help structure your marketing. Do you know what keywords or marketing channels your competitors are using? By understanding where the competition is spending, you can begin to understand the cost of their marketing and how much they spend to acquire new customers. For example, you can determine whether you should directly compete or use more affordable keyword alternatives. You may identify a marketing channel gap, enabling you to target a totally different market and in a different way.
7. Apart from understanding the strengths and weaknesses of your competitors, it gives you the opportunity to learn what not to do. I recently did a competitor analysis for a residential builder. Looking at customer reviews, this particular competitor received a few poor ratings and negative feedback. The competitor did not take the customer offline to discuss and rectify the problem, instead having a very public tit-for-tat debate about what was correct/not correct with the build and who was to blame. Whilst the competitor may have been in the right (and who knows) the visible slanging match did not project a great image as to why the builder was in that negative position in the first place. The arguing can create negative assumptions about trust and transparency.
8. With further competitor analysis you may unearth a new competitor plan or strategy – eg a news stories of expansion, changes of location, staff recruitment, redevelopment etc., This aids you to prepare your marketing plan to offset any of their marketing tactics.
9. A thorough competitor analysis can identify industry trends. It is important to understand where your competition and industry is heading. Look at the Threats and Opportunities that can present and what you (and your competitors) are doing about these trends. You will be considered forward thinking and agile, a market leader and an authority rather than an industry laggard.
10. Can a competitor analysis provide cost savings? Definitely! If you are looking at penetrating a new market, doing a competitor analysis is essential. It provides a wealth of key data as to how crowded the market is, the market size and potential for profit or loss. Ultimately saving you time and money.
11. Going a step further, a very detailed competitor analysis can include customer feedback and customer research. It is possible to do an online survey or undertake focus groups of your competition’s direct customers. You can look at the most loyal and steadfast to the more disloyal and irresolute customers and cover a range of questions around customer satisfaction including what they like/don’t like with the product offering, service levels etc. Detailed research can identify consumer trends and changes across brands and industry.
In a recent competitor analysis, my client had been conducting detailed research over a few years that included a competitor benchmark. The detailed research focused on a few larger competitors who were well established brands. The results showed a trend that one of the competitor’s customers were increasingly disgruntled by that particular brand’s arrogance, seemingly stemming from a lack of customer service.
Some of these customers (of the well-established brand) had been loyal supporters and customers for years, their lives were intertwined with this brand but the lack of service had seen a shift in attitude and shift in feet – they were walking straight to the door of their competitors…which potentially was an opportunity for my client.
How to do a competitor analysis?
To undertake a competitor analysis, it doesn’t need to get too complicated. You can do a basic SWOT analysis of each competitor as well as your own business. Most of the analysis is understanding each rival’s Strengths, Weaknesses, Opportunities and Threats. Research and review such areas as their product lines, target customers, branding and advertising, company size and geographic location.
There are plenty of places to gain publicly available competitor information. Here’s a starting list of where to look: website and social media pages, customer reviews, company reports, articles and posts published, PR, sponsorships, marketing, job ads, industry news, Australian Bureau of Statistics and various media tools such as Owler to gain further industry and competitor information. You may find industry specific reports from associations, or research firms.
Steps in a Competitor Analysis:
- Who will you analyze? Carefully consider who to choose and select 3-5 potential rivals.
To choose, consider:
- A rival with a similar company size,
- Their location/s,
- Their products offerings,
- The customers they target.
- Choosing one smaller and one larger competitor than yourselves – perhaps those you admire, or feel may be an upcoming threat.
- Analyse the good and bad of your competitors. Undertake a SWOT analysis for each competitor.
- Assess the comparisons and gaps against your own business and marketing objectives.
- Assess impacts of adding any new opportunities to your own business plans.
- Update your business and marketing strategy.
- Develop future plans and timings.
With this outline you will be well equipped to undertake a competitor analysis for your business. You can undertake an analysis at any time and should keep it updated regularly. Larger businesses may do so weekly or monthly and smaller business six monthly to an annual basis.