(Read Time: 8 minutes)
Let’s face it: chances are there’s someone in your market offering a similar product or service as you. Of course, as a business owner or marketer, your job is to ensure that people put their hard-earned cash in your bank account, and not your competitors. If this isn’t your goal … you might want to consider a career change!
Logically, knowing exactly who your competitors are, what they sell, and how they conduct business gives you the best chance of beating them in the marketplace. So, one of the most important exercises that you should complete regularly is a competitor analysis.
If you’ve never done one before, it might sound a little intimidating. But don’t worry, you don’t need an MBA or a degree in marketing to do one … Everything you need to know is right here …
So what are you waiting for … let’s dive in!
What is a Competitor Analysis?
In short, it’s an overview of the strengths and weaknesses of your competitors. By comparing their marketing, sales channels and offers with your own activities, you’ll discover where you need to improve, the best way to position yourself in the market, and where there is an opportunity for you to shine.
Luckily, today’s technology makes it easier than ever to gather information about your competitors. Using the might of your Internet browser, you can dig up a ton of information on what they’re up to. You just need to know where to look.
Why Conduct a Competitor Analysis?
First and foremost, a competitor analysis helps you make better marketing and development decisions.
For example, let’s say you own a car dealership, and so does the bloke up the road. He’s obviously selling more than you because you see the cars regularly driving off his forecourt. What is he doing that you aren’t? Is he using a form of advertising that you haven’t thought of? Is it because he has a slick website that performs better than yours? Are his prices lower? Why should people buy from you instead of him? Without knowing the answer to these questions, you’ll never be able to match his level of success.
A competitive analysis will not only give you a better understanding of what the bloke up the road is doing … but you’ll gain key intel that will give you a better understanding of your customers. You’ll know precisely what resonates with them and what is of no interest to them.
Who is Your True Competition?
Do you actually know who your real competitors are? This might seem like a strange question … but you would be surprised how many business owners we speak to that can’t confidently answer this question!
Is someone out there providing exactly the same product or service as you, or are they catering for an entirely different target audience?
Competitors are usually grouped into two distinct types … direct and indirect. Let’s look to our car salesmen again for an illustration.
Say you sell new and used Toyota 4wd’s, and the guy nearby sells 4wd’s from all brands, he’s a direct competitor. He offers products that are similar to … or the same as yours, within the same geographical area.
However, if you sell 4wd’s and he sells classic cars, he’s an indirect competitor. While the products fulfil a similar need or solve the same problem (they get you from A to B) they’re actually quite different. Sure, there’s always a chance that your potential customer might buy a classic car instead of a 4wd for everyday use … but, not if he’s a farmer with very specific offroading needs.
So let’s take a look at some more direct and indirect competitors:
Pepsi vs Coca Cola
Both sell brown fizzy sugary beverages. Something like Berri orange juice might be classed as an indirect competitor… while it is also a liquid that quenches your thirst, you wouldn’t be able to substitute it for a cola if you were aiming to mix up a Cuba Libre.
Elle vs Vogue
Two womens glossy fashion magazines, sold at similar price points with almost identical content. An indirect competitor might be Take 5. Its focus is on life stories, recipes, and competitions. You wouldn’t turn to it to see what appeared on the Paris catwalks this season.
Adidas vs Nike
Both sell mid-range sports footwear and clothing for men, women, and children at around the same price. An indirect competitor might be LuLu Lemon, a high-end sports clothing retailer focused on yoga and running gear for adults only.
It’s useful to have indirect competitors on your radar and look them up occasionally because their product ranges could change at any time. But for the purposes of our analysis, we’ll be looking at direct competitors only.
What Should You be Looking at?
Okay, take a deep breath … this may look like a lot of work initially … but I promise it will be worth it. After identifying your direct competitors, pick 3-5 of the most relevant, or strongest ones. It’s time to take a closer look at their products and services.
The Business – What do They Offer?
Go online, or to their store, and check out your competitor’s complete product line and the quality of the products or services they offer.
You should also take note of their pricing, or if they offer any discounts to their customers.
Some questions to consider include:
- Are they a budget or high-end provider?
- Do they aim to sell in bulk or are they more geared towards one-off purchases?
- What is their market share?
- What are the characteristics and needs of their ideal customers?
- How does the company differentiate itself from its competitors?
- How do they distribute their products/services?
Once you know what they sell, take a closer look at how and where they sell it …
Sales – What Does Their Sales Process Look Like?
Runnings a sales analysis of your competitors is a little tricky and requires some digging. In some cases it may involve talking to customers you’ve recently gained (or lost) to understand what prompted them to make the switch. You may even need to implement a new system to start recording which of your competitors customers might be considering and why. If your competitors are public companies life is a little easier, and you can probably find a lot of information in their annual reports.
- You’ll want to track down the answers to questions such as:
- What does the sales process look like?
- What channels are they selling through?
- Do they have multiple locations and how does this give them an advantage?
- Are they expanding? Scaling down?
- Do they have partner reselling programs?
- What are their customers’ reasons for not buying? For ending their relationship with the company?
- What are their revenues each year? What about total sales volume?
- Do they regularly discount their products or services?
- How involved is a salesperson in the process?
Now that you know what they sell, as well as how and where they sell it, it’s time to get an overview of their marketing activities.
Marketing – What is Their Marketing Strategy?
These days, it’s easy to check out a competitor’s marketing by sending a few words to the Chief Detective … Google. And with the way web browsers collect information these days, chances are once you start examining your competitors, their adverts will start appearing in the online content you consume. Now you don’t need to examine every bit of online communication that every single competitor has published since the year dot. Just choose a small handful of samples to review to keep it more manageable.
Examples of content you’ll want to touch on include:
- The website
- The quality of content and its engagement (are people liking, sharing, or commenting?)
- If they promote their content
- What’s their email marketing like? (hint hint – get on their mailing lists!)
- How does their SEO stack up?
- What are their social channels like?
- Where are they advertising? (Facebook paid posts, Adwords, display advertising, YouTube videos, are they retargeting you, etc.)
- Is their marketing message strong, effective, and clear?
Once you’ve collected this information, grade it to discover which of your competitors is outstanding in which areas, and in which areas they perform poorly. Which brings us nicely onto the next step …
Now it’s Time to SWOT the Competition
A SWOT analysis is a lot more fun than it sounds. If you haven’t heard of it before, it’s an acronym which outlines a process for evaluating organisations:
An overview of what advantages a business has and what it does best
What is its unique selling point? (you’ll find more on this here)
What are the brand’s strengths in the market?
What resources can it draw on that others can’t?
What could the business improve?
What should it avoid doing?
What are its customers likely to see as weaknesses?
What factors lose it sales?
What opportunities are there for this business? (e.g. its global size and scale, recent changes in technology, changes in social patterns, etc.)
What obstacles does the business face?
How does it stack up to its competitors?
What are its quality standards like?
Now … run through the process of doing a SWOT for each of your competitors in each of the three areas: business, sales and marketing. Create a spreadsheet with clear columns and fill in the information for each. Make sure that you only offer verifiable and precise statements, for example: ‘Classic Car Emporium sells cars for 10% cheaper than its nearest competitor’ rather than ‘good value for money’
Got it? Great … now it’s your turn!
How Does Your Business Stack Up?
Using the same method as you applied to your competitors, it’s time for you to look at your own business. Note down how you conduct your business, sales and marketing and conduct a SWOT analysis.
No cheating now. Be completely objective and honestly record where your business is right now … not where you would like it to be.
Use This New Information to Your Advantage!
Now we need to analyse all of the information together. Look for areas where your competitors are clearly outperforming you, and start thinking about how you can put together a strategy to bridge the gap.
Look at what your brand’s weaknesses are compared to your competitor’s. Review your notes to see how they’re doing so well in that area and jot down ideas or strategies that you could use to bring yourself up to the same level.
Next, come up with the specific steps you’ll take to improve your current position. You’ll want to break this down into three-month and monthly goals, and eventually into specific weekly and daily tasks. If you need a little help with goal setting, we’ve got an epic blog about it right here.
You should now be able to answer:
- What marketing, sales, or product/services improvements need to happen?
- How should we change our strategy?
- What changes do we need to make internally to evolve?
- What materials, campaigns, and processes need to be updated to help us gain a competitive advantage?
It Doesn’t Stop There …
Remember … this is not a one-off thing! The marketplace is constantly evolving, competitors are always improving – or disappearing altogether. New competition might join the market, a competitor might change their product range, or get new technology that gives them an advantage.
Keep track of how you stack up against the competition and if you’re progressing in all areas … be it positive or negative. It gives you a clear indication of what your business needs to focus on.
Now … Enjoy the Results
By regularly performing this analysis and keeping tabs on the results, you’ll always have a solid strategy to help you stand out in the marketplace and beat your competitors. And who doesn’t want that? Best of all, this is not some hare-brained concept. We’re not reinventing the wheel. This tactic has been tried and tested by businesses all over the world and it continues to be used … because it’s the easiest way to get the best results.
If you don’t have much time, or you’d like some help to identify most efficient way to analyse the competition, we’re happy to discuss the tools and processes we use. Get in touch with us to book yourself a time in our calendar to do a 30-minute strategy session and we’ll walk you through how we work!
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