How thoroughly do you know your competitors? Is there anything new they’re working on? Do you have any idea what their success strategies are? If you don’t, perhaps you should. Conducting a competitor analysis is critical for matching and outperforming your competitors.
Regarding competitor analysis, being proactive rather than reactive is critical to your company’s success. A practical competitor analysis can help you find new growth opportunities while keeping an eye on your competitors.
What Is the Purpose of Conducting a Competitor Analysis?
The goal of a competitor analysis is to assess your competitors’ weaknesses and strengths in comparison to your own, as well as to identify a market gap.
Competitor analysis is helpful because:
- It will assist you in determining how to improve your business strategy.
- It will tell you how to outperform your competitors in these areas to keep your customers’ attention.
- As a result, you will have a competitive advantage over others in your industry.
The Significance of Comparing Yourself to Competitors:
Before you begin, you must first recognize your competitors. But how do you go about doing this? The best way to determine whether another company is a key competitor is to ask yourself:
- What kind of service do they offer?
- Are you aiming for the same demographics?
- Are they operating near you?
You’ll have local competitors, but you’ll also have competitors competing for the same search terms as you. There are three kinds of competitors:
Direct Competitors:
Such competitors offer the same products and services to the same customer base and target market, with the same goal of market share growth and profit. This means that your direct competitors are addressing the same audience as you, selling similar products to yours, and following a similar distribution model.
Indirect competitors:
An indirect competitor is another firm that offers similar products and services as direct competitors but with different end goals.
Substitute Competitors:
Another company that provides a product or service to your consumers that you also do.
After deciding which competitors you want to be compared to, it is critical to understand how you will stand out.
Factors To Include In Your Competitor Analysis:
The following ten components should be included for a practical competitor analysis:
- Feature Matrix:
Determine all the features that each direct competitor’s service or possesses. Keep this data in a competitor insight spreadsheet to see how companies compare.
- Pricing:
Determine your competitor’s pricing and see where they stand on the quality versus quantity spectrum.
- Market share percentage:
Assessing the market by percentage allows you to identify the major competitors in your area. Don’t dismiss larger competitors completely, as they can teach you a lot about how to succeed in your industry. Instead, follow the 80/20 rule: keep an eye on 80% of your direct competitors (businesses with similar market shares) and 20% of your top competitors.
- Marketing:
What kind of marketing strategy does each competitor use? Examine your competitors’ websites, social media strategies, the types of events they sponsor, SEO strategies, taglines, and current marketing campaigns.
- Strengths:
Determine what your competitors do well and what works for them. Check if the reviews indicate that they have a better product. Do they have a strong brand awareness? Can you assess a competitor’s products yourself to see where they excel?
- Weaknesses:
Determine what each competitor could do better to give you a competitive advantage. Is their social media strategy lacking? Is there no online store? Is their website up to date?
- Differentiators:
What distinguishes your competitors, and what do they promote as their best qualities? What distinguishes them from others?
- Geography:
Examine your competitors’ locations and the regions they serve. Are they physical businesses, or are most of their business conducted online?
- Culture:
Consider your competitors’ goals, employee satisfaction, and company culture. Are they the type of company that advertises the year it was founded, or are they new businesses? Read employee reviews to gain a better understanding of your competitors’ culture.
- Customer feedback:
Examine your competitors’ customer reviews, both positive and negative. Examine both the best and worst reviews.
Advantages Of Conducting A Competitive Analysis:
In the era of digital innovation, no business can expect to survive by remaining preserved in time. Companies that do not notice new trends can go out of business overnight.
Even if your industry is not susceptible to seismic change, it is worthwhile to understand what motivates your clients’ decision-making processes. By conducting a competitive analysis regularly, you will be aware of the following trends:
- Changes to existing competitors’ services or products that make them more appealing.
- New complementary products or services from your competitors that you may offer or modify.
- The danger posed by new market entrants or transformative products.
How Often Should You Perform A Competitive Analysis?
It is essential to conduct regular competitor analysis. You should complete the analysis on a large scale once a year and on a smaller scale quarterly.
Too many businesses conduct a competitor analysis early on and then abandon it once their brand has become well-known. Industries are constantly changing, and every time a new firm enters your space, they conduct a competitor analysis on you. It is critical to assess your competitors continually.
Analyzing your company against competitors regularly will reveal opportunities to improve your products, effectively serve your target customers, and increase profitability. You might also think about using other models to analyze the competition further.
How Competitive Analysis Can Benefit Small Businesses:
If you don’t analyze the competition, your successful business today may not be successful tomorrow. Using competitive analysis, you can assess the current market and where you stand compared to your competitors. With that information, you can make changes to position your company for long-term success.
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