What to include in a
Competitor Analysis
Competitor
analysis is the process of evaluating your competitors’ companies, products,and marketing strategies.
To make your analysis truly useful,
it’s important to:
- Pick the right competitors to analyze
- Know which aspects of your competitors’ business are
worth analyzing
- Know where to look for the data
- Understand how you can use the insights to improve
your own business.
Which brings us to why competitor
analysis is worth doing in the first place.
Competitor analysis is
an essential component of corporate strategy. It is argued that most firms do
not conduct this type of analysis systematically enough.
Instead, many
enterprises operate on what is called “informal impressions, conjectures, and
intuition gained through the tidbits of information about competitors every
manager continually receives.” As a result, traditional environmental scanning places many firms
at risk of dangerous competitive blind spots due to a lack of robust competitor
analysis. It is useful to think of the various components of industry and
competitor analysis as a linked series of steps leading to the building of
competitive advantage.
Industry analysis is a way of looking at the relative power of all the players in the chain of supply through to consumer. The purpose is not just diagnosis, but should lead to strategies to improve the position of the company.
Value chain
analysis is an approach to help the organisation identify its sources of
competitive advantages. It is thus as much about identifying differentiation
compared to competitors, although not restricted to market differentiation, as
about the company in relation to its markets. Benchmarking is one of those
activities that need not be restricted to competitors. It may be desirable for
a bank, for example, to compare its counter service with that of competitors.
More
frequently benchmarking may be used to lift a level of activity to the best it
can be compared with, inside and outside the industry. Thus a study of customer
service by one type of retailer might cover many non-competing retailers. Total
quality management might be benchmarked against the leaders in the field
regardless of industry. An aim of benchmarking is usually to seek excellence in
performance by reaching world-class performance in any area of activity which
is relevant.
Steps in Competitor Analysis
It can be helpful to
conduct a SWOT analysis, in which you evaluate your strengths, weaknesses,
opportunities, and threats. This can help you sift through the information you
collected during your competitor analysis and identify actionable next steps
for your business.
Using a competitive
analysis as part of your strategic planning is an ongoing process. You can
always refer back to your research whenever you need to make an important
decision for your business. To stay ahead of the competition, you should
regularly revisit and update your competitor analysis.
When you conduct a thorough competitor analysis, you're more equipped to improve your business. To create a comprehensive analysis, include the following information:
1. Competitor identification
Before you create a
competitor analysis, you need a profile for every one of your brand's
competitors. Include any companies that offer the same products and services
within the same market. A competitor analysis needs to include your biggest
competitors, potential competitors that may enter your market and relevant
start-up companies that plan to emerge in the next year.
There are 3 main types of competitors:
·
Direct competitors:
“A
direct competitor offers the same products and services aimed at the same
target market and customer base, with the same goal of profit and market share
growth. This means that your direct competitors are targeting the same audience
as you, selling the same products as you, in a similar distribution model as
you.”
·
Indirect competitors:
"An
indirect competitor is another company that offers the same products and
services, much like direct competitors; however, the end goals are different.”
·
Substitute competitors:
“Another
company offering a product or service to your customers that you also provide.”
Once what sort of competitors you
would like to be compared against has been considered, it is important to
understand how you stand out.
2. Create a competitor
matrix
Before you dive into your competitor analysis, take a moment to get organized. A competitor matrix,
also known as a competitor grid, is a table or spreadsheet you can use to
compile your research. This will make it easier to compare your findings across
competitors and spot larger trends.
Start by devoting one row or column to each competitor
that you’ve identified. On the other axis, list data points or categories of
information you’d like to find out about each competitor. Don’t worry if you’re
not sure what you should be looking for at this point. You can also always add
more categories as you progress through your research.
Competitor Profiling combines each of the applicable
sources of competitor analysis into a single framework in the assistance of
effective and efficient strategy development, implementation, monitoring and
optimization.
3. Gather background information
Once you have a list of competitors to research, start
learning about their businesses. Look for the most basic information first, and
then build your way up from there. Start by looking at company websites, social
media pages, and any news articles that have been published about them. Here’s
some basic information that you may want to look for.
Company history
This includes information such as founding date, funding
sources, and any mergers or acquisitions they have been involved with. You can
often find this information by reading the “About” section of their website or
browsing past press releases from the company. Studying how your competitors
got to where they are today will give you a more complete understanding of
their businesses.
Location
This will vary greatly based on your industry. If you’re
in the e-commerce business, you could be competing against companies that sell
their products worldwide. For traditional brick-and-mortar businesses, your
competition is likely highly localized. Either way, it’s always smart to know
where your competition is based and where they sell.
Company size
How many people do your competitors employ? LinkedIn and
Glassdoor are helpful resources for this kind of data. You’ll also want to look
into how many customers your competitors have and how much revenue they
generate. This information will likely be easily accessible online for larger
companies. For smaller and privately held companies, you might have to make do
with rough estimates. Knowing how large your competitors are will help you
better contextualize the rest of the data you collect.
Competitor information
Once you know who your
competitors are, obtain information that can help you conduct a thorough
analysis. Make sure to have the following information for each of your
competitors:
4. Profile your competition’s target customers
A company is nothing
without its customers. Getting an idea of who your competitors sell to will
tell you a lot about their businesses. To pinpoint the target customer for any business:
- Read
their mission statement.
- Look
at what kind of messaging they use.
- Track
who they interact with on social media.
- See
if they feature any existing customers in their content.
Use this information to construct a profile of who your
competitors are trying to reach with their products or services. These customer
profiles will probably resemble your own target customers—these are your
competitors, after all—so make note of even small differences.
5. Focus on the 4 P’s
Products and services
Not only do you need to
know what your competitor offers, but you also need to identify both the
strengths and weaknesses for each of their products and services. Understanding
both can help you create products or services that are better than what they're
offering.
Pricing
This refers to how much
your competitor's products and services costs. If they charge $50 for a
product, for example, you may consider charging $45 for a similar product.
While the item costs less from your company, it may help you achieve a higher
profit margin since more customers may want to take advantage of your better
price.
Finances
Make sure to have your
competitor's share prices and their earnings reports. This allows you to
determine their financial health.
Customer experience
Understand the customer
care they provide. This allows you to determine if your own company has room
for improvement in this regard.
Intellectual property
Determine if they have
any copyrights, patents or trademarks. Having this knowledge can help you
anticipate any future products they haven't officially announced yet. It can
also let you know if they have the rights for a product.
Marketing efforts
Get to know your
competitors' events, promotional activities, social media accounts and their
marketing campaigns. If they're successful, consider how you can adjust your
own marketing efforts to better align with their strategies.
Brand awareness
Determine how much of
your target market is aware of your competitor. If you find that your
competitor is more recognizable than your own company, you can devise
strategies to improve your brand awareness.
Location and distribution
Identify where your
competitor is located and where they distribute their products. Consider the
regions or countries they cover. When you know this information, it can help you
determine if it's worthwhile to reach out to these areas, too.
Objectives
Identify the goals of
your competitor to better predict their future actions. To do this, consider
looking into their management incentives, their risk tolerance and their organizational
structure.
Their organizational
structure, in particular, can help you determine which functions they value the
most. For example, if a certain function reports to the chief executive
officer, they may place priority over that department as opposed to another
function that reports to a senior vice president.
Resources and capabilities
This refers to what
your competitor is doing or what they can do. Consider how quickly they may be
able to react to certain situations such as market changes or customer needs.
To do this, take a look at both their strengths and weaknesses. If they have
low cash reserves, for example, they may not be able to respond as effectively.
Strategy evaluation
Your competitor
analysis also needs to include your assessment of their strategies. Identify
their strengths and advantages and how each can pose a potential threat to your
business. Also, determine their weaknesses. For example, consider what they're
doing poorly that you can do better. Based on the information you gather,
predict their behavior and make well-informed decisions to help elevate your
brand.
6. Analyze strengths and weaknesses—yours and your competitors’
Using the information you’ve
collected, consider the strengths and weaknesses of each of your selected
competitors. Ask yourself why consumers choose a particular company’s product
or service over the other available options. Record your conclusions in your
spreadsheet.
Last, consider your own company’s strengths and
weaknesses. How does your business compare to the competitors you’ve
researched? Knowing what sets your business apart from the competition—and
where it falls short of expectations—can help you better serve your target
customers.
How
Often Should one Conduct a Competitor
Analysis?
To stay ahead you
will need to continue to understand your customer requirements while keeping up
with the latest industry trends. Whilst this can differ depending on the
industry, it is recommended conducting a competitor analysis anytime from oncea quarter to once a year. This gives you time to react to your discoveries and
benchmark your progress. If you have never conducted a competitor analysis or
the last analysis you ran is outdated or not detailed enough, it may be time to
create a new one. Certain pitfalls must be avoided while doing competitor
analysis. These include:
·
Focusing on current and known
competitors while ignoring potential entrants.
·
Concentrating on large competitors
while ignoring smaller players.
·
Assuming that competitor behavior
will not change with time.
·
Misreading signals that may indicate
a shift in the focus of competitors or a refinement of their present strategies
or tactics.
·
Excessive focus on the tangible
assets of competitors, while ignoring their intangible assets.
·
Assuming that all the firms in the
industry have the same constraints and opportunities.
·
Getting too obsessed with
outsmarting the competition, instead of focusing on customer needs and
expectations.
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