In the cut-throat business world of today, standing out from the competition is crucial for success. To gain a competitive edge, businesses must have a clear understanding of their rivals and their strategies. That's where a competitive analysis comes in. It's a powerful tool that can help you identify your competitors, assess their strengths and weaknesses, and develop a winning strategy to outperform them.
In this beginner's guide, we'll take you step-by-step through the process of conducting a comprehensive and effective competitive analysis. So, get ready to learn how to gain a strategic advantage over your competition!
Identify Your Competitors
The first step is to identify your competitors. Your competitors could be direct, indirect, or potential. Not sure what that means? Here’s a breakdown of every competitor type:
Direct competitors are those companies that offer the same products or services as your business. These companies may target the same customer base and compete for the same market share. For example, if you run a pizza restaurant, your direct competitors would be other pizza restaurants in the same area.
Indirect competitors are companies that offer products or services that are similar to yours, but not identical. These companies may target the same customer base but offer different products or services. For example, if you run a pizza restaurant, your indirect competitors could be fast-food restaurants that serve burgers and fries.
Potential competitors are companies that do not currently operate in your market but could enter in the future. These companies may be looking to expand into new markets, or they could be startups that are developing products or services that could disrupt your industry. Identifying potential competitors can help you prepare for future competition and stay ahead of the curve. For example, if you run a taxi service, potential competitors could be ride-sharing companies like Uber and Lyft.
Analyze Their Strengths And Weaknesses
The second step is to analyze your competitors' strengths and weaknesses. This will help you understand what they're doing well and where they're falling short. You can use a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) to identify their strengths and weaknesses. Here are some questions to ask:
What are their unique selling points?
Unique selling points (USPs) are what set a company's products or services apart from the competition. By identifying your competitors' USPs, you can understand what they are doing well and where they are excelling.
For example: Your competitor's USP could be offering a wider range of product options, faster delivery times, or higher quality products.
What are their strengths in marketing, pricing, or customer service?
Marketing, pricing, and customer service are three key areas that can give companies a competitive edge. By analyzing your competitors' strengths in these areas, you can identify what they are doing right and how you can improve.
For example: Your competitor's strength in marketing could be their ability to reach a wider audience through social media or their use of targeted advertising. Their strength in pricing could be offering competitive prices, while their strength in customer service could be their ability to provide personalized support.
What are their weaknesses in terms of product quality, marketing, or customer service?
No company is perfect, and every business has areas where they could improve. You may determine where your rivals are falling short and how you can do better by focusing on their deficiencies in product quality, marketing, and customer service.
For example: Your competitor's weakness in product quality could be their lack of innovation or poor production standards. Their weakness in marketing could be their inability to effectively communicate their value proposition, while their weakness in customer service could be their slow response times to customer inquiries.
Analyzing your competitors' strengths and weaknesses can gain you a better understanding of their business and how you can differentiate yourself in the market.
PRO TIP: While a SWOT analysis is a useful tool to help you identify these factors, it's important to also consider other factors such as market trends, regulatory changes, and emerging technologies.
Understand Their Marketing Strategies
The third step is to understand your competitors' marketing strategies. This will help you identify what's working for them and what's not. Here are some questions to ask:
What channels are they using to market their products or services?
Marketing channels refer to the various methods your competitors use to promote their products or services. These could include social media, email marketing, paid advertising, print media, or events.
Advantages: You can identify which channels are most effective for reaching your target audience and tailor your marketing strategy accordingly.
What messages are they conveying through their marketing campaigns?
Messaging refers to the content and tone of your competitors' marketing campaigns. You may determine the main advantages and value propositions they are utilizing to draw clients through scrutinizing their message. This can assist you in locating opportunities to stand out from the competition and create your own distinctive messaging.
For example: If your competitors are emphasizing their low prices, you may want to differentiate yourself by emphasizing your higher quality products or better customer service.
How are they positioning their products or services in the market?
Positioning refers to how your competitors position their products or services in the market. This could include emphasizing the quality, convenience, or affordability of their products. You may spot opportunities to set yourself apart and create your own distinctive posture by examining how they are positioned.
For example: If your competitors are positioning themselves as a low-cost provider, you may want to position yourself as a provider of premium products or services.
Analyze Their Pricing Strategies
The fourth step is to analyze your competitors' pricing strategies. This will help you understand how they're pricing their products or services and what price points they're targeting. Here are some questions to ask:
What are their pricing models?
Pricing models refer to the methods your competitors use to set prices for their products or services. These could include cost-plus pricing, value-based pricing, or dynamic pricing.
Advantages: You can understand how they're determining their prices and whether there are any opportunities for you to adjust your own pricing strategy.
What are their price points?
Price points refer to the specific prices your competitors are charging for their products or services.
Advantages: This can help you determine whether you need to adjust your prices to be more competitive or whether you can justify charging higher prices based on the value you provide.
Are they using any discounts or promotions?
Discounts and promotions refer to any temporary price reductions or special offers your competitors are using to attract customers.
Advantages: You can identify what incentives they're using to drive sales and whether there are any opportunities for you to offer similar promotions. For example, if your competitors are offering a discount for first-time customers, you may want to consider offering a similar promotion to attract new customers.
Know Their Customer Service Strategies
The fifth step is to understand your competitors' customer service strategies. This will help you identify how they're satisfying their customers and where they're falling short. Here are some questions to ask:
What kind of customer support do they offer?
Customer support refers to the methods your competitors use to help their customers with questions, issues, or problems they may have with their products or services. These could include phone, email, live chat, or self-service options.
Advantages: You can figure out how they communicate with their clients and how quickly they respond to their questions or concerns.
How responsive are they to customer inquiries or complaints?
Responsiveness refers to how quickly your competitors respond to customer inquiries or complaints.
Advantages: By seeing how quickly they can fix problems, you can tell if they prioritize customer satisfaction. You may use this to assess whether your own customer service needs to be better in order to be more competitive.
Do they have any loyalty programs?
Loyalty programs refer to any incentives your competitors offer to reward and retain their customers. These could include points systems, discounts, or exclusive offers.
Advantages: You can identify what incentives they offer to encourage repeat business and how effective those programs are in retaining customers. This can help you determine whether you need to develop your own loyalty program to compete.
Keep in mind that customer service is often a key factor in customer retention and loyalty, so it's important to continually monitor your competitors' customer service strategies.
Identify Opportunities and Threats
The final step is to identify opportunities and threats in the market. This will help you devise a strategy to outperform your competitors. Here are some questions to ask:
Are there any untapped market segments?
By identifying untapped market segments, you can find new customers who are not currently being served by your competitors. This could involve targeting customers in a specific geographic location, demographic, or industry niche. You can then use this information to develop marketing strategies and products that cater to these underserved segments, giving you a competitive advantage.
Are there any emerging trends in the market?
Identifying emerging trends in the market can help you stay ahead of the competition by offering innovative products or services. For example, if a new technology is becoming popular, you can develop products that leverage that technology to appeal to customers who are looking for the latest and greatest. Keeping track of industry publications, attending conferences and trade shows, and monitoring social media can help you identify emerging trends.
Are there any regulatory changes that could affect your business?
Regulatory changes can affect your business in many ways. For example, new laws or regulations could require you to modify your products or services, which could affect your pricing and competitive position. By keeping up with changes in regulations, you can identify opportunities or threats that could affect your business.
A competitive analysis is a crucial step in developing a successful business strategy. It helps businesses understand their competitors and devise a strategy to outperform them.
With the step-by-step guide outlined in this beginner's guide, you can conduct a thorough competitive analysis and position your business for success. So, don't let your competitors get ahead - start analyzing them today and take your business to new heights!
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