Competitors vying for your customers? Perhaps they are simply offering a better product or service - or maybe not. How do you find out if that’s the case? When did you last complete a competitor analysis for your business?
What is it and why is it important for your business?
A competitive analysis is the process of identifying potential competitors by comparing yourself to other businesses that offer a similar product and/or service to you. It identifies the competitors you know you have along with the ones you didn’t even realise you had. It gives your business an understanding of where you rank amongst similar companies by comparing each others strengths and weaknesses.
By carrying out a thorough analysis, you will be able to identify what differentiates your business from others and why customers are choosing to go to one over the other. This particular analysis is important because it allows you to adjust your strategy to combat competitors, grow your market share and maintain a competitive advantage.
How do you conduct a competitive analysis?
- Determine your customers
This is where you will perform a simple customer analysis to get a better understanding of who your current customers are. It involves asking questions like:
- - What is the demographic of our customers?
- - What is the age range of our customers?
- - Where are our customers located?
- Directly compare your products or services
This will outline the distinct differences between you and your competitors and will give you a better understanding as to why your customers are choosing one business over another. Using the 5P’s Marketing Mix and comparing each component - product, price, promotion, place and people - will allow you to see these differences clearly. All of these components impact the customer decision making process so comparing these are necessary. Additionally, you need to consider the service you are delivering. 67% of customers WILL pay more for a better experience (Genesys, 2018), so ensure whatever it is that you are bringing to the table is above the rest.
- Compare your target market
This will outline who is and who isn’t in direct competition with you. While two businesses may offer a similar product/service, they could be marketing to a completely different segment. If that is the case, they may not be a direct competitor and may not pose much of a threat. However, it’s still worth keeping an eye on their activity should they adjust their target market. Perhaps there’s even an opportunity for you to diversify into their market.
- Compare your location
The geographic segmentation of your customers is usually determined by the location of your business. However, depending on the industry you operate in, location will play a different role when comparing yourself to your competitors. For example, if you sell products or services online, location may have less impact than if you provide a service in a location e.g. real estate agency. This will be up to you to determine if location makes a business a direct or indirect competitor to you. To come to this conclusion, you should be asking questions like:
- - Are they located more conveniently for our customers?
- - Do they operate close enough to lure our customers away?
- - How many products/services similar to ours are offered in this location?
- - Is our target market located in close proximity to our location or theirs?
- Compare marketing strategies
It’s obvious you don’t have the benefit of knowing the inner workings of a competitor’s business so you won’t know exactly what their marketing strategy is. However, with a little bit of research, you will be able to piece together some understanding of it by finding out the following:
- - What channels to market do they use?
- - Are they producing content? What format? What’s the tone? Are people engaging?
- - What are their call to actions? Inbound? Outbound?
With this information, you will be able to make some assumptions about their strategy. You will be able to compare this to your marketing strategy and see which attracts more attention.
Okay, you have all of the info; so now what?
It’s time to lay it all out. This can be easily done by creating a SWOT analysis for your business and each competitor. Now that you know a little bit more about your competitors, you can identify what their strengths and weaknesses are which will then allow you to see where your opportunities and threats lie.
Once that is done, you can then review your strategies (customer strategy, marketing strategy, pricing strategy, etc.) and adjust accordingly. Each business is different so don’t be alarmed if it takes a while to find what works for you; continuous change and adaptation is the norm for anyone in business. With the ever-changing demands from customers, you’ll find that you’ll be adapting quite a lot. Because of this, it’s crucial that you keep monitoring and reviewing your strategies to align with these demands. Keeping up with customer demands is the key to success. And don’t forget about your competitors. Never take your eye off them - reviewing their activity on a regular basis is a wise move. The competitive landscape can change quickly, so frequency is important.
Now that you know who your competitors are, learn more about how to supercharge your marketing strategy by reading this blog.