Here is a question that every business owner and entrepreneur should ask themselves often: Do you truly know your competition?
How can you compete in an increasingly crowded and competitive market if you don't even know who is in the race with you? To better position yourself for success in your industry or market, you need to complete a competitive analysis - and often.
A competitive analysis tells us what our competitors are doing right and wrong, how they compare to us based on various metrics and helps identify potential threats from new entrants into the market.
Knowledge about your competitors will help grow your business and save it when major market shifts occur. This article will take a closer look at competitive analyses, why they are essential to complete, and how you can run one yourself.
What is a competitive analysis?
A competitive analysis is a process of gathering information about what your competitors are doing right and wrong in your industry and market. Competitive analysis can be as simple or complex as you need it to be - but most will include a formalized document that summarizes key findings from the research phase.
The goal should always be to identify strengths and weaknesses for both your company and the closest competitors. With your competitive analysis in hand, you can make a strategic action plan to
When are competitive analyses necessary?
While most companies and entrepreneurs should complete a competitive analysis regularly, there are several times when a competitive analysis should be conducted.
Plan a competitive analysis when your company is in the process of launching a new product or service. Another valuable time is when the market is undergoing a massive shift or change, such as the move to digital-first marketing during the COVID-19 pandemic.
How to complete a competitive analysis
So how do you complete a competitive analysis?
There are many ways to complete competitive analysis. Still, the most common method includes researching your competitors at a high and low level to get a feel for how their business operates at nearly every level.
Take a look at their products and services as both a customer and business owner. Note what they offer their customers that you don't (and vice versa), and identify strengths, weaknesses, opportunities, and threats.
This data should be qualitative and quantitative. You should undertake surveys and market research that gains both hard numbers and data and opinions from customers.
Once the research is completed, you can create a formalized document that summarizes key findings from the competitive analysis phase of your business plan.
What to do with your competitive analysis
Once you have completed your competitive analysis, you need to know how to strategically use the data you collected. Knowing what your competitors are doing well isn't helpful unless you find a way to put that information into action.
There are several things you can do with your competitive analysis results:
Enhance your customer service
You can use your competitive analysis to tailor your products and services to meet customers' needs more effectively (and vice versa).
What are your competitors doing that causes consumers to choose their services over you? The more you can upgrade your customer service to engage your market better, the more you will win business over your competitors.
Identify areas of needed improvement
Your competitive analysis will bring up areas of improvement that your business or company is facing. Don't let these results scare you - identifying areas that need improvement and acting accordingly is crucial for helping grow and scale your business successfully.
Rebuild your customer avatar
You should constantly update your unique customer avatar - that type of high-value customer who is most likely to purchase your services. Your competitive analysis will help you hone your customer avatar to ensure that your products, services, and strategy reach the most valuable customers quickly.
Adjust your business strategy
You can use competitive analysis to determine how your company should position itself to be profitable. What's the best way to compete with your competitors? How do you create strategic advantages and leverage opportunities within competing markets or industries?
Create a strategic plan for growth
To increase your customer base or grow your business, you need to know what strategies are most likely to succeed. While there are no one-size-fits-all approaches, a competitive analysis can help you pinpoint where and how best to spend time and money on marketing campaigns.
Consider partnering with a competitive analysis expert
There are many ways that you can complete a competitive analysis on your own, but you may wish to hire the services of an agency to give you the best data.
A team with experience and resources to complete robust competitor analyses can help you save time and money over trying to complete one yourself and give you the best possible data upon which to act.
Complete your competitive analysis as often as needed and use the invaluable data to adjust your business strategy to make the most significant difference in your company and your market!