Why is Competitor Analysis Important? & How to Conduct a Competitor Analysis?
If you operate a small business, you probably think about your competitors a lot. But what should you concentrate on, and what should you do with that knowledge? This is when a competitor analysis could come in handy. It is worthwhile to analyze your competitor at any stage of your business. To put competitor analysis in a few words, you will identify competitors, analyze their marketing strategies, and evaluate their strengths and weaknesses.
Let me describe this with a small analogy. – A smart sports team will study their opponent before every big game. Coaches will conduct research, study game films, and compile a scouting report on each opponent. Competitor analysis is similar to a scouting report for your company—it is a tool for developing a game plan that will help your business find new avenues and succeed.
What is competitor analysis & Why is it Important?
The approach of researching similar brands in your sector to get insight into their offers, branding, sales, and marketing strategies is known as competitor analysis. Knowing your competition is essential for business analysis if you are an owner, marketer, start-up founder, or product creator.
Your business competes for the same clientele as its rivals. You both provide equivalent products or services. But you’re not clear why you win certain orders while losing others.
How do Conduct A competitor analysis?
A competitive study about your competitors can provide you with the roadmap you need to increase your sales and better understand the upcoming trends that will affect your industry. Regular competitive evaluations of your competitors will help you identify chances to innovate, advertise your brand, improve your services or products, and outperform your competitors.
You can completely understand a competitor’s business or brand by
- Find out who your competitors are.
- Researching and creating a competitive matrix.
- Finding what kind of marketing strategies works for them.
- Conduct a SWOT analysis.
- Identify areas to improve and execute the changes.
- Track your results.
Find out who your competitors are.
Consider where your consumers might go if they didn’t buy from your business when developing a list of possible competitors. To begin, enter your product name or category into Google or another search engine and browse the results you will find a list of brands you are competing against.
The next step is finding which products or solutions you intend to analyze. I suggest picking at least five direct competitors and three indirect competitors and two replacement competitors.
Who are direct, indirect, and replacement competitors?
- Direct Competitors
These businesses compete in the same market with similar products or services. For example, Pizza Hut’s direct competitors are likely to be other fast-food pizza franchises such as Domino’s and Papa John’s.
- Indirect Competitors
Indirect competitors provide a different product or service in the same category, but they target a similar consumer as you. For example, other fast food restaurants, such as McDonald’s and Burger King, are indirect rivals.
- Replacement Competitors
Replacement competitors are outside of your product category, yet they meet comparable customer demand. For Pizza Hut, replacement competitors might be an option that people turn to when they are hungry, including items such as frozen foods.
Creating a competitive matrix.
Once you’ve decided on your competitors, you should create a competitive matrix for each of them. A competitor matrix often called a competitor grid, is a table or spreadsheet that you can use to organize your research. This will allow you to compare your data with competitors and identify wider trends.
Try gathering information like
- Competitors’ sales tactics and results.
- Competitors’ USPs
- Competitors’ products & pricing
- Product analysis
- Competitors’ company history, locations they serve
- What channels do they sell through?
- Do they frequently provide discounts on their products or services?
- What are their clients’ reasons for not purchasing? For severing their ties with the company?
- How big is the organization in terms of leaders and employees?
- Do they sponsor events or take part in events?
- Are your competitor offering any perks? How is that working out for them?
- What is the shipping cost, if any?
- What tech stack do they use?
- What type of content do they usually use? Is it research-based or not
- Who is responsible for creating their content? (In-house group? Only one person? Multiple contributors?)
These useful pieces of information will help you understand how competitive the sales funnel is and what information you should provide your sales agents in order for them to compete during the final purchase stage. Annual reports for publicly traded firms may be found online, but you’ll have to do some digging to locate similar information for privately held businesses.
Research what kind of marketing works for them.
The quickest approach to measure your competitor’s marketing efforts is to analyze their website. Make a note of any of the following elements and save the URL for future reference.
- Do they run ads?
- Which social media channels are they active on
- What type of content do they usually put out, is it videos or stats, or images
- Do you see press releases?
- What about case studies?
- Are they taking part in any offline activities?
- Do they have blogs or articles?
- Examine the degree of involvement with the competitor’s material.
- Posting frequency and consistency
- The virality of content (How many people share, comment, like, and retweet their posts?)
Conduct a SWOT analysis to understand the competitors’ strengths, weaknesses, opportunities, and threats.
A SWOT analysis is intended to assist a realistic, fact-based, data-driven examination of an organization’s, initiative’s, or industry’s strengths and weaknesses. You can know about SWOT analysis in the video above.
Identify areas to improve and execute the changes.
Could you enhance the quality of your products or services by adding or changing a feature, decreasing the price to make them more affordable, or providing better after-sales support? Could investing in a more sophisticated CRM for better lead handling help you obtain a higher ROI on your marketing budget?
Track your results.
Completing a competitive analysis is only the beginning of your strategic planning. Don’t let your efforts go to waste. Use the information you’ve gathered to help you make smart decisions.
Competitor Analysis – Summing up
- Examine your brand, sales, marketing strategies and data objectively using the same measures you use to analyze your competitors. Write this information in the same way you would with a competitor and use it as a baseline to compare across the board.
- You must first create a baseline before you can fairly compare your competitors.
If you don’t keep an eye on the competition, your successful business today may not be successful tomorrow. Using competitive analysis, you may assess the present market and where you stand in comparison to your competitors. With such knowledge, you may make changes to position your organization for long-term success. Conduct a competitive analysis today to position your company for success.