One thing standing between you and your goal to gain as much market share — and revenue — as possible is your competitors. When you have a thorough understanding of how they operate, it will help you develop better marketing strategies, identify underserved geographical areas and product lines, plan future expansions, and pinpoint competitors’ weaknesses so you can leverage your strengths. Here is a five-step plan for creating a competitive analysis on your key competitors.
1. Identify and Narrow Down Your Key Competitors
You will first need to create a list of all the competitors in your area so you can pinpoint those that pose the greatest threat to your sales. Look for the obvious competitors, like the store down the street, as well as the businesses that sell products or services like yours as only one part of their offerings. For example, if you run a bakery, all other bakeries in your area would make the list, but so might the grocery store around the corner with a great bakery department. Now narrow down that list to the three to five competitors you feel you are losing the most sales to.
2. Gather Information
Now that you’ve identified the competitors that pose the greatest threat to your sales, you will need to gather as much information about them as you can. There are four ways to do that.
- Gather information from newspaper articles, press releases, company brochures, company websites, copies of presentations and speeches, and annual reports if they are a public company to learn about their profits and products. Make it easy to track this information by using services like Google Alerts and Talkwalker.
- Track information you can readily observe, such as in-store pricing, promotions, social media activity, customer reviews, product quality, blog postings, and advertising campaigns. Try services like Prisync to easily track your competitors’ online pricing.
- Talk to people who are familiar with the competition, such as shared suppliers and distributors, the company sales reps at trade shows, shared or ex-customers, and ex-employees.
- Use paid services to gather financial information about your competitors, even if they are privately owned. Services like Hoovers, Dun and Bradstreet, AnnualReports.com, and Ward’s Business Directory USA typically charge a fee, but many public and university libraries provide free access to these directories.
3. Define Your Competitive Advantage
Next, you will need to identify what advantage you have over your key competitors. For instance, you may learn that your cash flow is healthier than your fiercest competitors, and that would be an indication they might not compete with you in an aggressive marketing campaign. You may also find they aren’t using social media to attract local business, and you can use that to your advantage. Analyze each key competitor and identify what advantage you have over each of them.
4. Define Their Competitive Advantage
Just as you pinpointed what you do better than your competitors, you will also need to identify what they do better than you. Some may offer faster delivery, lower pricing, greater selection, better customer service, or other things that would cause customers to choose them instead of you.
5. Do SWOT Analyses on Your Business and Theirs
Now that you have a better understanding of what makes your competitors tick, it’s time to use all of that information to increase your market share. You can use a SWOT (strengths, weaknesses, opportunities, threats) analysis to assess your current business status — and you can create one for your competitors to better understand their current position and help predict their future strategies. To do this, use all the information you have gathered and apply it to each area of the SWOT. For example, one of your competitors’ strengths may be their easily recognizable brand, while their weakness may be poor-quality products. In that case, you should devise a marketing strategy that highlights your products’ quality.
Creating a competitive analysis takes some time and effort, but it can pay off in increased market share. When you better understand how your competitors operate, you can better predict their next moves, and play up your strengths against their weaknesses.