The purpose of conducting a competitive analysis is to evaluate your company’s unique aspects relative to your target market. By knowing what your advantages are, you can capitalize on these opportunities to produce successful business operations in the most efficient way. Learning about the different aspects of competitive analysis is a great way to help your business get ahead.
Competitive analysis begins by identifying potential competitors. Some competition will be easy to identify. For example, if your small business is a restaurant specializing in pizza, other pizza restaurants will be your competition. However, there are other questions to consider. For example, what about other Italian restaurants? What about all restaurants? What about gyms that will “steal” your customers? Competition should not be defined by what your business offers. Instead, it’s based on the benefit perceived and received by the customer. In the example above, a gym could be identified as competition because it decreases the perceived benefit offered by your pizza shop.
Barriers of Entry
An industry with a high barrier to entry will reduce the risk of competition. Alternatively, industries reliant on raw materials will face more bargaining power from suppliers. Finally, high upfront costs or startup expenses can prevent additional companies from entering the market. Analyze these high-level items in relation to competition to gauge not only current businesses in the market, but the competition you will likely face in the future.
Depending on your business, the location of your brick and mortar store makes all the difference. How easy is your business to get to in comparison to other physical stores? Are there sidewalks that promote foot traffic? Is parking accessibility more favourable in your business? Is your business located along public transit lines? The entire purpose of having a physical location is promote accessibility to your goods or services, so analyze this element in relation to other physical businesses.
For stores that do not have a physical presence, a major element to analyze is your online presence. First, how does your content online compare to other market participants? This includes information on your business, products, services, history, and other related content. Use search engine optimization tools to make sure customers can find your content through keyword searches on search engines and links from other sites. In addition, gather information regard customer user trends based on how your online presence is accessed. For example, will your customers use mobile websites, applications, or desktop websites? Do your competitors offer these options, and how do their information pages relate to what you offer?
Before researching specific communication channels, learn how your customers use them. For example, are your customers more likely to check an email or a Facebook update? For emails, investigate email distribution sizes or frequencies from similar businesses. For social media, analyze competitor presence and profiles relating to Facebook, YouTube, and other major platforms. This includes establishing a profile on Foursquare and Yelp, and analyzing feedback from your competition.
The approach that your company takes in reaching out to customers should be based around how other businesses perform their advertising. Do competitors offer eBooks, issue blog postings, have video advertisements, perform surveys or research, or print newsletters for distribution? Do competitors offer webinars, conferences, or interactive tools? Gain insight about how competitors reach customers.
In addition to the marketing tools used by others in the market, learn about the style of marketing your competitors use. Do other companies emphasize the scarcity of its products, focus on building relationships, or embrace a presence in the community? Does your competition rely heavily on word-of-mouth marketing, mass marketing, outbound marketing, or direct marketing? Know how your competition approaches the market and gauge your strategy accordingly.
A full competitive analysis is not complete without a comparison of products or services offered. What does your business offer, and how does this relate to your product line? How is the product delivered to your customers? Are there upgrades or improvements available? How does your pricing strategy — offering a high quality good for higher prices or targeting a more affordable alternative — fit into what your competition does and how the market will respond? The goal of analyzing your products relative to your competitors is to determine what you do differently and how your offerings fill a need that is currently being unfilled.
Strengths and Weaknesses
Ultimately, the intention of an overall competitive analysis is to determine where your strengths and weaknesses are in comparison to the overall market. Therefore, when contemplating the items above, collect information on external parties in relation to what you offer. By comparing these items, you will gain a better sense as to what already exists in the market, what your competitor’s strengths are, and how you can position yourself in the market to achieve the greatest success.