What Is a Competitor Analysis? (And How to Conduct One)
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Being able to evaluate how well a business' products or services perform in a competitive marketplace can help marketers refine a company's commercial offering and marketing strategies for success. Creating a competitor analysis is a common strategy for companies to compare their business with that of their competitors in the marketplace to strengthen their own marketing. Understanding what a competitive analysis is and how to conduct one is essential to gaining market share and achieving success. In this article, we define competitor analysis, explain why it's important, list what to include, and provide steps for conducting one.
What is a competitor analysis?
A competitor analysis, or competitive analysis, is the process of comparing the relative success of a business to that of its competitors. This type of analysis helps marketers determine where the business succeeds, where it can improve, and profitable trends to follow. Analyzing competitors involves identifying which companies in a marketplace may present a threat and evaluate their strengths, weaknesses, products and services, market position, and opportunities they may have missed. Competitive analysis also helps a business gain a deeper understanding of the marketplace in which it operates, and the determining factors for success within it.
These analytic processes also help marketers to identify popular market trends, which strengthens their ability to provide competitive offerings. The more detailed an analysis is, the more insightful it can be for marketers. For instance, a comprehensive competitive analysis can reveal the precise margins of improvement a business requires to outperform its competitors. Just as these analyses can reveal the strengths and weaknesses of the competitor's market position, they can also offer insights into your own.
Why competitor analysis is important
In many aspects of marketing, actionable insights allow businesses to improve their strategies, products or services, and public image. Competitive analysis is a highly effective process for gaining information which can offer a brand essential perspective, context, and guidance to strengthen their approach to the marketplace. Conducting a comprehensive analysis of the marketplace and the company's direct competitors can also help you identify opportunities other businesses are currently taking advantage of. Competitive analysis also helps businesses to find opportunities to:
Promote their business
Improve commercial offering
Compete more aggressively
What to include in an analysis of competitors
Although the approach for every company's competitive analysis may be different, there are a few fundamental pieces of information these analyses require. Some relate to the external considerations which allow businesses to dominate, while others focus on performance factors. Here's a list of the essential components in an analysis of a company's competitors:
Market share percentage: This is the relative ownership a business takes of the marketplace in which it operates represented as a percentage. Comparing your brand to a ratio of 20% top competitors and 80% direct competitors who are a similar size can ensure a balanced view of the marketplace.
Marketing: Evaluate your competitors' marketing efforts across sponsored events, websites, SEO focuses, and social media. You may find it informative to determine which communication channels work best for them.
Weaknesses: It can be insightful to assess how each competitor may improve their marketing strategy. Determining ways in which they can make their marketing more effective can offer you direction for your own channels.
Strengths: Finding ways in which your competitors succeed can offer you guidance for ways to improve your own marketing strategy and product or service offering. You can review the commercial aspects that determine your competitor's success and consider whether to adopt these tactics.
Culture: Evaluating your competitors' market success important, but their internal measures for success, such as a healthy company culture, can be helpful to assess as well. You can find employee reviews or read their job listings to gain some insight into this aspect of their business.
Feature matrix: This is a list of all the features of a competitor's products or services. Comparing features across products, including the one you market, can indicate why competitors occupy their market position.
Customer reviews: Assessing product or service feedback from customers can demonstrate a company's quality and the public's opinion of them. Consider all kinds of feedback, positive or otherwise, to better understand the competitor's offering.
Geography: The geographical locations of businesses can impact their success, so this is a valuable consideration when analyzing your competitors. This also includes whether a business established their trade predominantly online or in physical establishments.
Key differences: It can be wise to consider the most obvious and outwardly advertised differences in your competitors' offerings. Analyzing what makes your competitors unique can help to identify what appeals to consumers.
Pricing: One of the most important factors to compare within a marketplace is pricing, as this determines the value of a product or service in relation to a business' consumers. Consider which competitors offer higher and lower value for each price point and how this compares with that of the product or service you market.
How to conduct an analysis of your competitors
Here are some helpful steps for conducting a competitive analysis to help you evaluate your market position and strengthen your marketing strategies:
1. Identify competitors' products or services to evaluate
Many practical competitive anaylses focus on the key products or services a business offers. These are usually the ones which produce the highest sell-through rate or generate the highest revenue. Forecasting may also reveal the products or services which might have the highest potential for growth in the market. It can be helpful to identify which products or services compete most directly with the commercial offering you market, and also those which represent the market leaders.
2. Determine your direct competitors
Identifying which of your competitors are your most notable or direct competition can help you determine your focus. These are the brands you compete with for similar products and services in a comparable price range. For example, a mid-range jewellery brand's direct competitor may be another jeweller with a comparable range of products which target the same demographic with a price range which matches theirs.
3. Identify indirect competitors
Indirect competitors are those which target the same demographic, but offer different services or products. For instance, accountants and bookkeepers may share a target market, but their services are intrinsically different. Even though these competitors don't compete directly with their product offering, they still compete over the same consumers.
4. Evaluate replacement competitors
The last type of competitor to assess is your replacement competitors. These are competitors which offer different products or services to the ones you market, but theirs serve the same market demand. An example of a replacement competitor for a grocery store brand may be a meal kit delivery service. The meal kit service delivers a product which is different to the grocery store's offering, but provides products which may replace a consumer's groceries.
5. Decide on the parts of your competitors' business worth analyzing
Whether it's your competitors' distribution, ranging, pricing, market share, innovation, or consumer base, choosing the most fundamental aspects of a competitor's business to analyze is vital to gaining information which benefits your processes. You may consider which of these aspects compare to the strengths and weaknesses of your own marketing strategies. For instance, if you wish to grow a brand's market share, analyzing this aspect of your competitors' offering can help you better understand other aspects of their business that result in their higher market share ranking.
6. Conduct additional research
Once you've identified which competitors are the most beneficial to focus on and the aspects of their marketing which warrant comparison, you can begin the necessary research. Some information is easy to discover through public channels, such as your competitors' pricing, associations, retailers, and product features. More discreet or nuanced information is available through third-party data aggregators or market research services, which can provide highly detailed market insights on most competitor businesses, such as their market share.
7. Complete a written analysis
To best make sense of your research, a written analysis document can make your findings actionable and communicable to other departments and stakeholders. Graphs and charts are one of the best ways to present business data in such a way that makes these insights easier for others to interpret and visualize the brand's market position. You can complete a single market insights document with which to deliver your findings. Presentation slides to present the information in person is also an effective way to share the results of your competitive analysis.
8. Determine your areas for improvement
The final step in creating and using a competitive analysis is to turn the information gained into action. If you've identified any trends in your research, consider ways for your marketing strategies to take advantage of them. Constructing a list of the threats and opportunities which exist in the marketplace can be a helpful indicator of how the company can respond to insights in ways that strengthen the business. Consider if improvements to the product, changes to pricing, or new approaches to marketing may grow the brand and its products or services.
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