The value of competitor analysis

Competitors come in all shapes and sizes. The important thing is to identify the most potent threats and compare their strengths and weaknesses with your business.

This isn’t always as obvious as it sounds. Thorough research can correct assumptions you may have about your competitors and the market, which can empower you with new insights that can lead to more informed strategic decisions. Being informed also means you can assess the value of a future idea or a new investment by comparing it with what you know about the competition, rather than just navigating blind.

Identify your competitors

Chances are you already know some of your competitors – especially in your local area. But a wider regional, national and even international assessment of your competitors is worthwhile. There may be more competitors than you imagined.

Try researching:

• Your target market – ask customers (and potential customers) who they currently shop with and why. You might uncover a few hidden competitors. You could do this through an incentivized survey or just an informal chat.
• Government websites such as:
  • The Industries at a Glance section of the Bureau of Labor Statistics website – for a snapshot of industry health in your area.
  • The U.S. Small Business Administration’s Research & Statistics section.
• The Internet – search engines will give you a broad overview of competitors in the market. This is a quick way of identifying which competitors have a high search engine ranking, probably suggesting they have a sound marketing plan and a well-designed website from which you can learn.
• Industry journals and websites – these can be fruitful sources of information on your industry and its members.
• Networking – joining industry associations or business groups such as your local Chamber of Commerce are great ways to discover more about your competitors.

How to gain further insight

With a list of competitors, you’re ready to deepen your knowledge of their operations. Some ways you can gain further insight into their operations include:

• Collecting competitor promotions and advertising material to assess their pricing and marketing strategies and which media they choose.
• Checking out competitors’ websites and social media pages.
  • Look for competitive features like e-commerce functions, how often the content is refreshed and the kind of opinions shown in social media messages and blog posts. Registering for their e-newsletter or getting a friend to is another great way to keep up-to-date with the information your competitors are putting out.
• Testing competitors’ sales channels by ordering products or services directly from them. Buying in-store, online and over the phone will test service levels and the ease of buying. If you’ll be recognized in-store, consider hiring a mystery shopper or asking a friend to visit them in your place.
• Surveying customers or potential customers.
  • This information might help you to refine or adapt your own tactics to make your business more attractive. For example, other suppliers might be preferred because they keep more convenient shopping hours or offer free delivery.
• Attending a trade fair. Competitors’ stalls at trade fairs and exhibitions are an excellent source of information that’s freely handed out, so collect as much of it as you can.

Always look for opportunities

Make a list of what you’ve learned about your competitors and sort this information into two columns – ‘strengths’ and ‘weaknesses.’ Focus on their strengths first. Decide what they do better than you, and concentrate on the changes you need to make to your business to compete.

Changes which address your weaknesses could be anything from making your website easier to navigate to setting guidelines on the customer service standards you expect from frontline staff. Bigger changes could involve a re-evaluation of your prices or suppliers, or how you target your marketing.

The idea is not to copy your competitors, but to take their best ideas and improve them. For example, you might have discovered your competition has a ‘buy nine, get the tenth one free’ customer loyalty program. You could adopt a similar, perhaps more generous loyalty approach, and expand it by also offering a ‘refer a friend and get a 20% discount on your next purchase or appointment’ approach.

Now turn your attention to their weaknesses. This an opportunity to promote your business's differences.

For example, if you run a garden center, you might have noticed your competition promote themselves as ‘the experts in gardening’ but their frontline employees are poor at engaging with customers. You could train your staff to start asking each customer how their garden is doing and then offer some tips and guidance. This would allow your business to show its expertise and leave customers feeling like you’re genuinely interested in helping them.

Summary

Use a competitor analysis to find out:

• How many businesses offer the same or similar products or services to your target market?
• How you can differentiate your business idea, which will affect how you plan to market your business?
• Are there any competitors using the same suppliers as you?
• What pricing and marketing tactics do your competitors use?