Identifying your competitors and understanding their strengths and weaknesses will help you to carve out your own niche in the market, identifying opportunities to significantly grow your business.
For many, competitor analysis is only considered when launching a new product or service, but if you routinely analyse what others in your market are doing then this will give you valuable insight into what works, what doesn’t and what your customers are ultimately interested in.
Regularly exploring how others in your industry do business can help you to identify gaps in the market or to uncover market trends. This, in turn, can then lead to you developing new products or services, or marketing and selling your products and services differently, to take advantage of the insight you’ve discovered.
Identifying your competitors
Work out who you’re really competing with so that you can compare the information you find accurately. Divide your competitors into two categories: direct and indirect.
Direct competitors are businesses that offer the same product or service as yours, operating in the same geographic area.
Indirect competitors provide products or services that aren’t the same as yours but could solve the same problems or satisfy the same needs for your customers.
For example, a steakhouse would be direct competitors with another steak restaurant, but would be indirect competitors with an Italian bistro. All solve the same problems and could satisfy the same needs as alternatives, but only those who offer the same (or satisfactory substitute) options for your customers are your direct competitors.
For the purposes of analysis, concentrate on your direct competitors - but keep your indirect competitors on your radar, as these brands could shift their focus at any time and cross over to become direct competition for your business.
Profiling your competition
Use our competitor analysis tool to evaluate your direct competitors according to specific categories. For each of the key players in your market, consider the following aspects of their work. Some of the answers to these questions can be tricky to find, but at this stage it’s important to gather as much intelligence as you can.
- What is their market share?
- How would you describe their ideal customers and those customers’ needs?
- What does the company do to differentiate itself from others?
- Products and services
- Are they low-cost or premium products and services?
- Are they targeting volume sales or one-off purchases?
- How are the products and services distributed?
- What channels are they selling through?
- What does their sales process look like, and how involved are salespeople?
- Do they regularly discount their products or services?
- Take a look at their website – how often is content updated? Consider the quality, accuracy and variety of their website content too.
- Do they offer an email newsletter or update service? How do they encourage people to sign up and what questions do they ask in their sign up forms?
- What types of their content is shared or linked to most often? Who is sharing and linking to their content?
- What social media platforms are they active on? How effective is their content engagement on each platform (likes, comments, shares, retweets)?
Now that you’ve considered the some of the most important aspects of how your competitors operate, the next step is to perform a simplified version of a SWOT (strengths, weaknesses, opportunities and threats) analysis on each of them to pinpoint your findings. This will help you to better examine the threats that each competitor could pose to your business and any opportunities for your business when comparing your operations with others.
Develop an action plan
Carrying out competitor analysis in this way should show you how other businesses in your market operate and how they pursue the same customers. It’s important to use this insight to drive your business forward and help you to scale up.
Consider what your brand’s weaknesses are when compared with your competitor’s strengths. Use the insight you’ve gathered to think about how they’re doing well in that area and come up with some ideas as to how you might improve in those aspects. Reflect on possible changes to any aspect of your analysis, from your product or service to your sales and marketing.
Use these ideas to come up with specific tasks and goals to help you to improve, and include timescales for those actions.
It’s important not to try to copy exactly what your competitors are doing. Take cues from some of your competition’s successes, such as content types or social media platforms that work well for them, but you won’t see the same success – and will most likely attract criticism – for doing identical things.
Think about how you might differentiate your business, but in a way that would be appealing to customers. Look at your target audience and try to carve yourself a niche or a type of messaging that will resonate with specific customer needs – just make sure there’s a market for what you’re selling and how you’re selling it.
Monitor and repeat
Revisit your action plan after 3-6 months (although if you’re in a particularly fast-moving industry, you may need to adjust) and analyse the impact your changes have made. Which actions have made the biggest impression? Can you expand on those areas even further? Evaluate honestly what has worked well and what hasn’t, then create an updated action plan to continuously improve.
Using the same competitor analysis tool, revisit and review your closest competitors again. Answer the same questions but look closely for any changes. Have they improved on any areas specifically? Have they changed their focus in terms of pricing, sales or marketing? Have they introduced any new products or services? What are they doing particularly well now, and is this the same as last time you analysed them?
Now is also the time to include your indirect competitors in the mix. Have any of your indirect competitors shifted their focus and are now competing directly with a similar product or service to yours? If so, include them in your revisited competitor analysis and examine what their position is in the market.