How to do a Competitive Analysis: How-To Guide
To maintain a competitive edge, evaluating your competitors regularly, preferably at least once a year, is essential. This lets you know their strengths and weaknesses to make strategic decisions and remain ahead of your competitors.
It would help if you stood out from the competition to build a successful business. That requires knowledge of your competitors and what they bring to the market.
Gone are the days when you have to spend a fortune on hiring a professional services market research firm to gain valuable information about your competition. With the power of the internet, you can conduct your research and learn a great deal about your competitors. This informative article will provide a step-by-step guide on completing a thorough competitive analysis, enabling you to stay ahead.
What is a competitive analysis?
Conducting a competitive analysis to evaluate your competitors’ products, services, and sales strategies is crucial. This comprehensive research enables you to identify their strengths and weaknesses and compare them with your own. Regularly conducting a thorough competitive analysis at least once a year is an innovative business practice that can provide valuable insights for your company’s growth and success.
What is the purpose of a competitive analysis?
Conducting a thorough competitive analysis can provide valuable insights into your business’s strengths and weaknesses compared to your competitors. By identifying potential obstacles to growth and evaluating your unique advantages, you can develop effective marketing strategies to support your business in staying ahead of the curve. Avoid making assumptions about your competitors or market landscape, as these can be misleading and outdated. Instead, remain proactive and informed by conducting periodic competitive analyses.
Decide the appropriate time to conduct a competitive analysis.
Conducting a comprehensive competitive analysis will help you and your leadership team enhance your understanding of market dynamics. Doing competitive analysis research when establishing a business, scaling operations, seeking funding, or updating your business strategy is generally appropriate.
To stay updated with the latest products, features, and marketing strategies in the industry, it is a good idea to repeat the competitive analysis as your business expands. Additionally, running regular reports can help you assess how your company responds to broader trends. Whenever your business or industry experiences significant changes, update your competitive analysis. A sudden increase in product demand or a Google algorithm update are excellent reasons to reassess your competitors’ activities.
When deciding how often to revisit your competitor analysis, consider the pace of your industry. Will your data be outdated in a month, quarter, or year? Always remember that new competitors will likely analyze your activities, too.
Performing a competitive analysis can be broken down into five simple steps.
There are five essential stages to a competitive analysis:
1. Identify your primary competitors.
When considering competition, it is essential to understand that not all competitors are the same. There are various types of competitors to consider, such as direct competitors, secondary or indirect competitors, and substitute competitors.
- Direct: Direct competitors are companies that offer comparable products and services and likely target the same customer base within the same geographic area as your company does. For example, you may be a website designer in a major city. However, you will likely know a few website designers targeting SMEs. Suppose they niche on the industry focus, perhaps on SaaS startups. If you have an “SME general” focus, this will differentiate their proposition from yours.
- Secondary or Indirect: Secondary or indirect competitors offer different products and services but compete within the same category. For example, a winery and a brewery are secondary competitors because they sell alcohol.
- Substitute: These businesses offer products or services that can replace yours. For instance, McDonald’s provides burgers, whereas Domino’s offers pizzas. Substitute competitors offer different products and services but still target the same customers in your area. To illustrate, considering the previous scenario where a website designer is compared to an accountant, while both professionals may serve small to medium-sized businesses, their services are usually distinct and unrelated.
Understanding the different types of competition can help you develop a more comprehensive strategy to stay ahead in the market.
Primary competitor industry codes
It can be crucial to identify your competitors, and sometimes, it’s necessary to make this information explicit. One way to do this is by looking up the Standard Industrial Classification (SIC) codes assigned to companies registered with Companies House in the UK. These codes consist of five digits and classify businesses based on their activities and the industries to which they belong. You can gain insights into your competitors’ business activities by checking the UK SIC codes. For instance, Noirwolf’s SIC code 70229 indicates they are in the management consultancy industry, offering consulting services other than financial management.
Suppose you are a business operating in the United States. You can conveniently access comprehensive information using the North American Industry Classification System (NAICS). Federal statistical agencies use this classification system to categorize businesses and gather, scrutinize, and publish statistical data related to the US business economy. This will help you access data tables related to your SIC or NAICS code, providing information such as the average company size, operating expenses, and employee wages for your specific field.
By comparing your business with others in the industry, you can make informed decisions to help your business thrive.
Unsure of a competitor for analysis
To understand your competitors, you can try putting yourself in the shoes of a customer and performing a Google, Bing, Amazon, Etsy, or Shopify look for products or services related to your company or value proposition. Pay attention to companies that:
- Offer similar products
- Share a similar philosophy or mission
- Target your audience
- Are newly established in the market
- Have an established presence in the market
By creating a diverse list of competitors, you can gain valuable insight into how different companies address your market’s challenges.
2. Gather information about your competitors
To remain at the forefront of your industry, you must comprehensively understand your rivals – their strengths, weaknesses, strategies, and market positioning. One effective way to do this is by evaluating them centered on the four Ps of the marketing mix: product, pricing, place, and promotion. By analyzing these areas, you can gain valuable insights into their strengths and weaknesses, letting you develop a winning strategy that outshines the rest.
Marketing Mix – Four P’s
Keep your competitors from getting the upper hand – take action now and start assessing them with the four Ps today!
- Product: To assess your product’s competitiveness, comparing it with your competitors’ products is crucial. One way to do it is by purchasing and trying them out yourself. This will give you an idea of the quality and features of their products, which in turn can help you make informed decisions about your product’s strengths and weaknesses. Please take note of the features you like and dislike about their products, and use this information to improve your product accordingly.
- Pricing: Could you provide insight into the company’s pricing strategy? Specifically, if their products and services are priced differently for B2B partners, one-off, and regular customers. Additionally, see if they have any particular discount policies that would be advantageous for you to adopt. Finally, do you have any estimates on their overall cost structure?
- Place: How does their business’s geographic coverage or service area compare to yours? Do they offer a local service or cover a large geographical region (perhaps by postcode, town, or region/ state)? For global companies, do they operate in the same areas as you?
- Promotion: Can you provide details about their methods to establish and retain a connection with their customers through marketing? Additionally, what are their activity level and influence on social media platforms? How often do they post? Do they have many followers?
The “four Ps” concept – product, price, promotion, and place – has significantly changed since its inception. Therefore, it is crucial to consider other factors besides the four Ps when analyzing marketing strategies.
Other Areas to Consider
These factors may include but are not limited to positioning, reputation, people, and partnerships. Other areas could be consumer behavior, market trends, and technological advancements.
- To better understand their business, reviewing their websites, social media accounts, product documents, brochures, and catalogs would be beneficial. By doing so, you can identify their target markets and customer segments. Determine what sets their products or services apart from the competition. What is their USP? This information can prove valuable in creating effective marketing strategies and improving overall business performance.
Reputation (Brand or Company):
- Have you checked the online and social media reviews of your competitor’s products and services? Knowing what people say about them is essential, especially compared to your business reviews. Understanding the feedback and opinions of your competitors’ customers can provide compelling insights and help you make informed decisions about your offerings.
People (Leadership Team/ notable employees/ length of service):
- Can you provide some information about the size and structure of their organization? Additionally, check portals like LinkedIn about the general profile of the individuals they typically employ. This information would be beneficial to understand their company and what they do better.
Partnerships visible on their marketing channels:
- Could you complete a comprehensive inventory of the company’s current suppliers and strategic partners to conduct a thorough competitor analysis? It would be great if you could also mention if any of these entities are gold partners or if they specialize in any particular software or product.
For those new to this process, we suggest spending an hour on each competitor to understand their offerings thoroughly. As you gain experience, you will become more proficient in gathering data. After obtaining all the necessary information on your competitors, we suggest creating a matrix and scheduling a two-hour strategy session with your leadership team to analyze the findings and chart the outcomes.
Refreshing the data every few months, in addition to the detailed annual analysis, is beneficial. It’s better to be proactive rather than reactive; this method will help you achieve that.
3. Examining your competitors’ strengths and weaknesses is crucial.
To make the most of your two-hour session with your team, it’s essential to have a straightforward and precise method of evaluating your company’s progress compared to your rivals. This will ensure that you and your team can rapidly find areas that need improvement and obtain effective strategies to stay ahead of the competition. Begin by evaluating your competitors based on the above measures on a scale (perhaps 1 to 5 or 1 to 10). A straightforward grid or table in Microsoft (Word or Excel) can present the information, which can help you better understand how your company stacks up against the competition. It should be a simple format that you can easily update over time and, if needed, easy to copy into other documents.
For instance, an example of a competitive analysis table below can be used as a guide to structure your analysis:
Consolidate your competitor’s research findings
After thoroughly analyzing the competition, preparing a comprehensive written evaluation of each competitor’s strengths and weaknesses is crucial. This evaluation should include factors such as the competitor’s growth strategies, location, brand visibility, staff quality, pricing, promotional plan, and product/ services. By summarizing all the relevant information, one can better understand what influences a consumer’s decision to choose or avoid a competitor taking market share.
Shopify also suggests using competitive analysis tools (i.e., SEO, Semrush) when analyzing websites. Check out their article here: Shopify Blog – Competitive Analysis Guide.
4. Discover what sets you apart from your competitors.
As a business owner, you have access to a wealth of information that can help you determine how your business stacks up against the competition. Analyzing this information is crucial to identify your company’s strengths and weaknesses relative to your competitors. Focusing on your competitive sweet spot can establish a clear strategy for standing out in the market.
One effective way to do this is to analyze the competitive landscape. This will help you pinpoint your competitive advantage, which could be a unique strength that sets you apart from the competition. By leveraging this strength, you can build your brand image and messaging around it. Alternatively, suppose you identify a weakness in the competition. In that case, you can capitalize on the opportunity by lowering prices and launching new promotions.
However, it’s important to remember that while keeping an eye on the competition is crucial, you shouldn’t let it dictate your entire strategy. Staying true to your brand and focusing on providing value to your customers rather than solely reacting to your competitors’ actions is essential.
5. Additional advice on performing a competitive analysis.
When conducting a competitive analysis, it is crucial to maintain accuracy and attention to detail. However, having a deep understanding of the competitive landscape and the overarching trends that shape your market is even more critical. Go deeper than analyzing pricing and products and take a comprehensive view of everything that affects your competitors’ position, including changes in their customer base, investments in their businesses, and other factors. A complete understanding of your competitors will provide valuable insights for decision-making and enable you to develop effective strategies for staying ahead in your industry.
Find yourself in a situation where you’re the only business offering your product or service in your immediate area. It can be challenging to conduct a competitive analysis. This is particularly true if you serve a niche market. However, you can still gain valuable insights by thinking creatively and considering substitute competitors that may divert your customers’ spending elsewhere. Furthermore, you can broaden your horizons by looking beyond your local area to other regions or cities that offer options comparable to your target audience. Doing so can establish a benchmark for your business and better understand your competitive landscape.
For example, it’s crucial to monitor and assess your performance compared to the pet store in the neighboring town, even if your pet food store is the sole provider in your small community. Keeping a watchful eye on your competitor’s strategies and understanding how you stack up against them can be highly beneficial.
Align your business strategy with your competitor’s insights
To stay ahead of your competitors, aligning your business strategy with the insights you gain about them is essential. This may lead to new opportunities in your current or new marketplace. You may discover a potential “sweet spot” that your business can dominate or a gap you can fill to take your business to the next level.
A company’s competitive advantage distinguishes it from its rivals in the perception of its customers. These advantages enable a company to attain and sustain superior profit margins, a more favorable growth trajectory, or stronger customer loyalty.
Do you need guidance on conducting a competitive analysis to support your business growth strategies? In that case, Noirwolf is here to assist you with practical solutions and advice. Our team can equip you with the necessary knowledge and tools to confidently manage all aspects of your business.
Noirwolf – How we work with you on strategy development
Noirwolf assesses the company’s site and market at the beginning of each client engagement. Our evaluation helps us understand the current performance and identify improvement areas. Once we have this information, we conduct an extensive diagnostic analysis covering a company’s strategy, network, processes, organization, systems, and people. Based on our findings, we have created a comprehensive implementation plan that we can also assist in executing.
Let’s connect and chat about your growth strategies! You can schedule a free consultation with us, and we can help you grow your business.