A competitive analysis is a name for researching the business’ primary competitors in the market to obtain valuable information about their products and services, sales and after-sales services, and marketing tactics. It is one of the most widely practiced activities in businesses looking to ward off competitors and capture a more significant portion of the market share.
The analysis is advantageous because it allows you to comprehend the ins and outs of market competition. You can always recognize and target innovative opportunities of outperforming them. By engaging in regular competitive analysis, you can stay on top of the industry standards and be the market leader in fulfilling industry standards.
The Need for Regular Competitive Analysis
Conducting a regular competitive analysis is crucial to the success of the business. It provides opportunities to revolutionize, transform, and promote the business while outshining the market competition. Competitive analysis on a wider spectrum may be conducted once a year, and every quarter on a smaller level.
It is common for new businesses to conduct competitor analysis sometime early in the business and then pay attention to it after establishing the foundations. It should be noted, however, how industries are swiftly changing. Every time a new competitor enters the market space, a competitor analysis is conducted on your company too. Hence, it is integral to evaluate the competition regularly to stay in business and ahead of the competition.
The Steps to Complete a Competitive Analysis
Follow the steps below to conduct a competitive analysis and find valuable insights about the industry competition and what you are doing right.
1. Recognize the products and services which require evaluation
For most competitive analysis activities, these products are the ones that are deemed to have the greatest potential for future growth or generate the greatest revenues currently.
2. Seek the business’ direct competitors.
Direct competitors for the business are other businesses that operate in the same market and sell almost similar products and services.
3. Highlight the business’ indirect competitors.
Indirect competitors come with different products and services compared to your business but target the same market segments as yours.
4. Closely observe any replacement competitors.
Replacement competitors try to satisfy an identical customer need as your products and services but fall outside your business category. These types of competitors are the most challenging to recognize
5. Determine which parts of your competitors' businesses are worth investigating.
Some striking features of the competitors’ business that you may want to investigate are their market shares, pricing strategies, the potential launch of new products and services, distribution and delivery strategies, after-sales services, and the marketing channels opted by them.
6. Research all identified competitors.
While it may be a little challenging to extract operational and accounting records for most competitors in the market, you could always conduct rigorous research in terms of easily accessible information such as their price points, prominent product features, target consumer segments, and so on.
7. Document your research in a written analysis.
A competitive research document should be an actionable and utilitarian but manageable document that is easy to read. Try to incorporate graphs, comparative charts, and revenue data visualization to assist your team in better evaluating the company’s market position in the light of various competitors.
8. Identify areas to improve and execute the changes.
While conducting the analysis, try to find ways to ameliorate product and service quality. You could focus on possibly becoming more affordable for the consumer by inculcating a price-lowering strategy or including a new feature. Try to find out information about the prevailing trends in the market region so you can also come up with better-investing decisions.
9. Track your results.
Track the overall results by measuring and analyzing the company sales and revenues with the period-wise income statement to evaluate the general success of the incorporated changes.
Factors your competitive analysis should include
Here is a list of some essential factors for your next competitive analysis.
Feature matrix
A feature matrix contains all possible features of the direct competitors’ products and services. This information can be visualized into a spreadsheet to envisage how the companies compete against one another.
Market share percentage
Determining the market share percentage allows you to recognize the dominant competitors in the region. Investing 80% of your attention in direct competitors and 20% in indirect competitors is advisable.
Pricing
Pricing is significant to understand how much the competitors charge for their products and services and the standard of quality and quantity they achieve.
Marketing
Gain an understanding of each competitor's marketing plans and tactics for the business by evaluating their taglines, social media marketing techniques, SEO, websites, and existing marketing campaigns.
Differentiators
Obtain current and relevant information about the competitors' most unique and inimitable features, which are most commonly marketed as their ‘best features.
Strengths
It is also important to note the areas where the competitors perform adequately in factors like high brand awareness or possessing a top-notch product.
Weaknesses
Alternatively, try to recognize some of the shortcomings of the competitor and areas where they could be performing better than the current scenario.
Geography
Focus on the competitors’ physical or non-physical locations and the possible areas they service.
Culture
It is also suggested to gain insights regarding the competitors’ organizational culture, main aims and objectives, the rate of employee satisfaction, and so on.
Customer reviews
Customer reviews on competitors’ websites and social media pages should be analyzed closely, including positive and negative ones. Keep an eye out, especially for the more honest reviews.
Benefits of carrying out a competitive analysis
A competitive analysis is worthy of your time, energy, and resources, even if you don’t expect a revolutionary change within your industry sector. It provides highly useful information regarding the features which fuel your competitors’’ decision-making processes.
By conducting a competitive analysis, you can remain timely aware of any alterations to your competitors’ existing product lines, making them more appealing.
You might gain an understanding of the complimentary products and services which they are offering to customers, and you could tailor accordingly.
The analysis further reveals strong threats posed by new entrants in the market or through the presence of revolutionary products.
How often should you perform a competitive analysis
A competitive analysis should ideally be conducted before the business launch and whenever the company is looking forward to making a strategic change. Otherwise, competitive analyses are strongly suggested to be done at least twice a year. You could alternatively conduct monthly and quarterly analyses if you feel the need to do so.
How competitive analyses help small businesses
Stay in touch and ahead of the competition to ensure your currently successful business remains successful in the future. When you conduct true and fair research, you gain a clearer understanding of your standing against the competitors. Small businesses can take advantage of this prized technique to make necessary adjustments whenever needed and continue to thrive and prosper.
Frequently Asked Questions
What is a competitive analysis template?
A template provides a simplified, easy-to-use version of competitive analysis when working on so many companies and products in the same instance.
What is competitor analysis?
Competitor analysis is a technique to evaluate the kind of products and services the competitor offers and their key marketing and selling strategies.
Why do competitor analysis?
Competitor analysis is important to find the best industry practices, obtain a greater market share and exploit your competitors’ shortcomings.