How to Do a Competitive Analysis: A Business Owner’s Guide
Knowing how to do a competitive analysis may not be your top priority as the owner of a startup or growing business, but the reality is that competition is inevitable, and the better you know them, the more prepared you are to compete.
A competitive analysis is the best way to access in-depth information that can determine how successfully you compete in the hunt for new customers, what makes people come back, when they choose your business over another or why they decide to go somewhere else. For any startup or growing business, what’s more important than that?
Benefits of a Competitive Analysis
The core purpose of a business is to sell your products or services, but it’s possible to focus on that while still keeping an eye on factors that might affect the industry landscape. That’s made easier by the numerous benefits of a competitive analysis:
- Forecast a competitor’s probable response when you enter their market.
- Evaluate how customers will judge your product, compared to what the competition offers.
- Understand a competitor’s relative strengths and weaknesses.
- Know the best time to enter a market and estimated time necessary to establish a foothold.
Without this kind of knowledge, the challenges for a fledgling business can feel insurmountable.
Getting Started on a Competitive Analysis
Your analysis is no good if your information is inaccurate, so the first step is to seek out reputable sources. Start with a simple search of products or services similar to your own, which will likely highlight several competitors in your area.
Once you’re familiar with the various players, broaden your search by reading what local media writes about these businesses. It’s also helpful to check out databases offered by Standard & Poor, the U.S. Securities and Exchange Commission and news outlets like PR Newswire.
Research Competitor Websites
You can learn a lot simply by looking into your competitors’ websites. There you’ll find information about their history, range of product lines, pricing policies, customer service strategies and the names and profiles of senior executives. This should give you a broad picture of how a competitor’s business operates and can serve as an inspiration for what to include — or not include — on your own site.
Another idea is to navigate through a competitor’s site as if you were a prospective customer. Is the point of sale experience similar to what you offer? Does the competition offer mobile payments or one-click purchasing that you don’t? Try shopping all the way up to clicking “Order” and see how seamless the process really is, especially in comparison to your own company’s online customer experience.
Study Competitors’ Marketing Strategies
How well does the competition market products or services similar to your own? There are a couple ways you can build a more well-rounded answer:
- Subscribe to their newsletter or mailing lists.
- Investigate the discounts or special sales they feature.
- Scrutinize their advertising campaigns.
- Read their promotional materials.
Once again, you’ll acquire valuable knowledge about marketing, with lessons that are applicable to your own efforts.
Follow Competitors on Social Media
Social media platforms offer a treasure trove of competitor-focused information. Become a friend or follower of these companies on Facebook, Twitter, Instagram, LinkedIn and other industry-related networks. Examine the types of posts they generate on a regular basis, whether they are blogs, articles, short videos or white papers. Pay attention to how people respond in comments or which content they choose to share on their personal pages. After all, those people might be your future customers.
Examine Competitor Financials
Finding specific data in this area is likely easier said than done, but with diligent research you can achieve a better understanding of how and why competitors price their products and how well their approach works in the marketplace. If they launch a product upgrade, is the price significantly higher than the previous iteration? How frequently do they feature online discounts or other promotional events?
Once you better understand how your competitors work, you can use their successes and shortcomings to refine your own strategies. What competitor weaknesses can you leverage to gain a stronger hold in the marketplace? Look for customer segments in a particular region or demographic that have so far been neglected and determine if there are features or benefits missing in your competitor’s product line that your business can address more successfully.
Look in the Mirror
Finally, for businesses that are recently established or have something of a steady track record, do a little self-research. Take, for example, your own customer service approach. Do you employ dedicated support representatives? Is it easy for an unsatisfied customer to make contact with one of them? How often do you survey customers to understand how you can better serve them?
Analyze what might happen if a valued customer walked away. Think about why you might lose them and what your competitors could do to take them away. You can be sure your competitors are doing their best to understand you, and the last thing you want is for them to know you better than you know yourself.
Putting the Pieces Together
These days, it’s not enough to boldly enter the marketplace with your great new idea. You also need to know how to do a competitive analysis so you can quantify existing and potential competitors and build a strategy that capitalizes on their shortcomings. This is only possible by conducting the type of research that paints a picture of the whole landscape — before you make the big leap.