A Practical Guide to Carrying out a Competitor Analysis.
Your boss has requested that you carry out a Competitor Analysis. Or maybe you are a business owner and want to be sure that you are as competitive as you can be. This article is a step by step guide to carrying out a Competitor Analysis that will enable you to enhance your competitive position. . You do not need to be the cheapest to be the best.
What is a Competitor Analysis & Why Bother?
Competitor analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context to identify opportunities and threats.
Another definition from www.entrepeneur.com:-
Competitive Analysis is….identifying your competitors and evaluating their strategies to determine their strengths and weaknesses relative to those of your own product or service. A competitive analysis is a critical part of your company marketing plan.
So you get the picture? Competitor Analysis is linked to a Company’s strategic marketing plan. Basically, you want to know how your business compares to your competitors. How are you better than them? In what ways are you worse than them? Can you make more of your strengths? Can you exploit their weaknesses? And most importantly, what can you change to improve your competitive position?
“Remember, you do not have to be perfect to be better than your competitors”
Be aware that any Competitor Analysis has a limited life span. Depending upon how quickly things change in your industry a Competitor Analysis that is three years old, may be as useful as a Stone Age tablet. Do not to wait too long to translate the results of your competitor analysis into action, otherwise you could find yourself batting balls on a court where all the other players have gone home.
Step 1 – Identify Your Competitors.
One of the most significant consequences of the world wide web is that it has opened up a vast portal of opportunities for prospective purchasers. At one time, if you wanted to buy a dog lead, you would go to your High Street, compare a few shops and make your purchase. Today, you could spend hours on line, searching out the cheapest, the most durable, the longest, the most colourful, the most fashionable. In practise, prospective buyers want instant answers, so the chances are that your competitors will be on the first page or two of google.
But looking on the first page of google may not identify your real competitors. If you are running an expensive Italian restaurant, your competitor is not your local Pizzeria take away. If you sell silk lingerie, your competitor is not an eBay shop selling three thongs for a £5. If you are selling stationery to businesses on the other hand, your competitor may well be Amazon and its affiliates. Sometimes, a competitor is actually selling a substitute product, where two completely different products might actually meet the same need. Coca Cola found this out when they launched Zero Coke, only to find that it did not attract a new customers, it simply took business from its Diet Coke sales.
“Your real competitors are those who are selling either the same or similar type of product to the same target customer as you.”
Try a google search with as much definition as possible to obtain the names of your competitors. ‘Fashionable dog leads ‘in google generates 5.2 million results. Change the search term to ‘fashionable chain dog leads’ and the results drop to 2.5 million. Include a location i.e. a characteristic of your target customer and the numbers will drop again.
Alternatively, there may be names of competitors that crop up again and again when you make visits to customers. You may be aware that you have lost business to certain companies. Talk to the people in customer facing or sales roles in your company to find out who they think are your competitors. In theory, you can compare as many competitors as you like. In practise, between 3 & 6 will give you sound practical information that you can use to improve your competitive position. But before you start your competitor analysis, check that the competitors you have identified are selling into the same target market as you are.
“As the white noise on social media increases, market segmentation becomes ever more important”
Step 2 – What do I include in a Competitor Analysis?
A useful guide here is to only collect information that is useful to you and can lead to action to improve your competitive position. The information needs to be obtainable and comparable across companies. As there are so many possible aspects to compare, you will need to select a few. It can be useful to start with what you think are the Unique Selling Points of your product or service. This might be to do with features of the product i.e. durable material, hand stitched or service i.e. 3- 4 week lead time. The following variables tend to influence buying decisions:-
- Price – remember that price is just part of the overall package and is rarely considered in isolation.
- Suitability of product for buying need – so if you think ‘recyclable’ is an important feature of your product, you would include this.
- Service – might include technical support, after sales care, customer service
- Delivery – might include lead time, time of delivery, method of delivery.
In addition to being as specific as possible about the criteria for comparison, also think about how potential customers find out about you. Do they use google search or do they look in a local directory or on the High Street? The impression that your advertising, website, social media, shop window and promotional material gives, is as important as your actual offering. If you are comparing websites for example, some variables for analysis might include:-
Ease of navigation
Clarity of content
Calls to action
Publication of prices.
Quality of photographs.
Communication of USP.
If your customers mainly find you on the High Street, you might be comparing window displays, special offers, state of paintwork, etc.
Step 3 – How to carry out a Competitors Analysis
Once you have identified your competitors and decided what aspects you want to compare, you are ready to get started. One cautionary word. It can be very easy to get bogged down in the detail of an analysis; see all the trees and completely lose sight of the wood. This is even more likely if you are emotionally attached to the outcome of the data. If you are a business owner, it is recommended that you get an impartial outsider to conduct the competitor analysis on your behalf. If you are working within a company and doing the analysis for your boss, you will need to be very careful about saying what you think the boss wants to hear. It can help if you separate fact from opinion when you record the information.
The main ways of obtaining information about competitors is to:
- Carry out desk top research, i.e. study websites, brochures, on line presence on social media.
- Visit competitor premises and sample their products.
- Purchase their products
- Make telephone or email enquiries, posing as a potential customer.
Record the information in a format that works for you, but remember that you will probably want to summarise the information in a matrix of some kind. Where feasible, record actual transcripts of conversations, take screen shots of websites and collect brochures; these can be included in the Appendices. You may need to supply evidence to support your comparison judgments. Your boss may think you have arrived at the wrong conclusion or judgement about your competitors, but s/he should be unable to argue with you about the information that you have sourced.
Step 4 – How to Set Out a Competitor Analysis Report
Your Competitor Analysis report needs to explain what you did and how you did it. Preliminary headings might include:
- Background to the Competitor Analysis
- How competitors were chosen
- How variables for comparison were selected.
- The method(s) used to carry out the Competitive Analysis.
- The data obtained.
- Summary of comparisons across the variables.
- Comparison of strengths and weaknesses (see note below).
- Suggestions for strategic action
- Appendices including raw data.
The most used sections of any report will be the ones that summarise the information in an easily digestible format. A matrix is a good way of presenting comparables quickly, but be sure to include a column whereby the reader can see at a glance how they compare to the other competitors. For example, for each criteria, you might use a rank of 1-5. Alternatively, you could use your own company has a benchmark and rank the other competitors as ‘same’, ‘better’, ‘a lot better’ , ‘worse’, ‘a lot worse’ on any particular criteria. This kind of ranking helps to focus attention on what action to take to help achieve a competitive edge. These judgements will generally be your conclusions (opinions) based upon a fair and unbiased assessment of the criteria for comparison that you have selected.
Another essential part of the report is to consider Strengths and Weaknesses. Some of these will be factually based, but others may be your opinion.
“Strengths and weaknesses are only interesting in the context of how they can be exploited for competitive advantage”.
When you set out your report, be sure to consider whether the competitors’ strengths and weaknesses present an opportunity or a threat to your business.
Step 5 – Translating your Competitor Analysis Assessment into Strategic Action
If you are a business owner, you now need to decide whether you need to take action. What does the information in the Competitor Analysis tell you? Is it good news? Is it worrying? Is your competitive advantage increasing or declining? And most importantly should you be doing things differently to enhance, secure or increase your competitive position?
You do not need to be the best on every criteria, but you do need to compare well on the criteria that are important to your customer. If you are weaker than your competitors on all the criteria that are important to your customer, you will be one of the first to go when times are hard. If you are strong on all criteria, you will be able to outlast even a prolonged downturn, as long as there is some demand for your products. If you are already the best, you are in a great place, congratulations, but don’t be complacent as you will be a target for strategic attack.
In practise, you will probably be good at some things and not so good at others. Consider if there are some quick wins that will immediately improve your position. This might include some changes to your website or to your delivery patterns. Next, you may want to consider whether you want to make changes to your product, price, service or delivery. Even small changes can have a big effect.
Thirdly, you may want to consider how you might exploit your knowledge of the competitor’s strengths and weaknesses in your website or sales calls.
“Your strengths, relative to the competition, and your competitor’s weaknesses, relative to you, are opportunities for you to exploit.”
So your strategic action could include:-
- Some quick wins.
- More fundamental changes to your price, product, service and delivery
- A rethink of your USP.
- A reframing of information on your website to reflect what you have found out.
- More comprehensive training for your staff in handling objections and closing sales.
A Competitor Analysis, carefully executed with sound preparation, research and unbiased analysis will help you to know exactly how you compare to your competitors and how to use that information to your competititive advantage.
“Even having a Competitor analysis, puts you streets ahead of the competition!”
SkillsforSale hope you found this article useful. Please post any comments or suggestions in the box below. And of course, if you would like us to carry out a Competitor Analysis for you, just buy it on line or call 07562 191 263.
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