fbpx

Competitive Analysis: The ‘How’

In a recent article, we talked about the importance of conducting a competitive analysis…

 

Whether you’re an entrepreneur, a business owner, an investor, or even just playing a friendly game of poker with friends — getting a rundown on the other players in the game is key to strengthening your advantage!

We discussed a few approaches that people use to analyze their competition. But there isn’t one singular method that works above all others. It’s more important to use a combination of analytical methods so that you don’t leave any gaps in your research.

What we’re going to talk about today is a 7 step approach that will include everything you need to grasp a deeper understanding of the marketplace your business lives in. So, without further ado, let’s get started!

1. List your competitors

This is the most important first step to competitive analysis: determining WHO your competitors are!

Be mindful that your competitors aren’t just people and businesses that do exactly what you do. They are anyone that provides a service or product that could replace your own.

Start by breaking other businesses down into 2 categories, direct and indirect competition.

 

 

Direct competitors are those that operate in the same geographic and demographic area as you, and compete in the same niche.

Indirect competitors offer products or services that could ultimately serve the same function as yours, but don’t have the same niche as you.

 

 

For example, let’s say you run a software company that specializes in accounting software. But there’s another software company nearby who makes video games. They are an indirect competitor.

You might create a similar product (software, in this case), but your customer base is different. It’s not the same niche.

A direct competitor would be another video game company. Or more specifically, one that has the same audience as you (perhaps indie gamers, or retro gamers, etc.).

Only focus on direct competitors. Your analysis should ignore indirect competitors, even though they may appear at first glance to have some overlap with yours.

2. Identify the products and services they offer

You aren’t just competing with other brands, you’re competing with their products and services too!

So in order to understand the strengths and weaknesses of their business, you need to start by getting the details of what they offer.

Make a list of what your competitors are selling, and complete it with information such as:

  • Price
  • Manufacturing costs
  • Customizability options for customers
  • Discounts
  • Availability
  • Distribution options
  • Stock and supply
  • Product quality

Make sure to look for unique details that could be what sets their products and services apart.

3. Look at their sales strategies

It’s not just what they’re selling — it’s how they sell it.

You need to know how your competitors put their products in front of potential customers, how they finalize sales with interested parties, and how they fulfill their orders.

Some points to consider are:

  • What channels do they use to promote and sell?
  • Where are their locations, and how many do they have?
  • Are they expanding their reach? (e.g. buying more stores)
  • Do they allow for reselling or affiliate marketing?
  • What do they do with first party data, such as names and emails of recent customers?
  • How successful are their sales? How much do they sell annually?
  • Do they offer discounts? If so, when?

In some cases, the easiest way to find out is by becoming a customer yourself! For example, if you were competing with another online store that sells the same types of products you do, why not try buying one yourself?

Going through the process will show you exactly what it feels like to be sold by them. How easy is it to buy? Do they give out first time discounts? Or send abandoned cart emails? Will they follow up with you after the sale, or send you new offers?

Don’t just learn so you can imitate. Learn so you can do it better.

4. Decide if you can price-match

You should have a rough idea of what your competitors are charging for products, services, and shipping (or other fulfillment costs).

But you also need to discover what costs they incur to supply their offerings.

The type of overhead they incur should be similar to yours, but the scale of their business may mean drastically different numbers behind the scene.

Look at what suppliers and wholesalers are charging, compared to their revenue, to reverse engineer your competitors margins. Then see what you can do to match your competitors prices, or if it’s even possible for you at this time.

You don’t necessarily have to compete with prices on every product or service you offer. You may find that you cannot offer a significantly more affordable product, for instance, but you might be able to undercut them when it comes to shipping costs.

Pro Tip: shipping costs are the number one reason for online shoppers to not complete an order. Reducing yours could be key to gaining the advantage.

Finding the places where you can balance your costs compared to theirs, or ultimately sell for less, is important. At the very least, you should be able to justify why your prices are reasonable to a customer, even if they are higher.

Be wary that markets fluctuate, and your costs may rise and fall over time. Focus on providing a more consistent and honest price than your competitors, and your customers won’t be upset by a little turbulence.

5. Mind how they market their products and services

We talked briefly about how you should be analyzing your competitors’ sales approach. But don’t forget about their overall marketing!

Brands don’t just push products, or use direct sales tactics to hook customers. They also advertise to raise brand awareness and market their overall business.

When’s the last time you heard Coca-Cola ask you to buy their product? Probably never. Coca-Cola focuses on marketing the imagery of their product and connecting it to an emotional feeling. They aren’t telling you it’s “only $9.99” or that there’s a “sale, today only!”

Instead, they sponsor events that align with their brand persona. They make commercials that show people having fun with friends, and then stick their logo on the end. They market an idea, not a product.

To better understand your competitors’ marketing techniques, consider these:

  • What platforms do they use? (Facebook, Twitter, Youtube, etc.)
  • What type of content do they make? (videos, images, audio, etc.)
  • What is their visual style? (clean/messy, short form/long form, funny/serious, etc.)
  • Do they have a media kit?
  • Do they use testimonials?
  • Do they publish research or academic articles?
  • What offline channels do they use?
  • What other brands do they partner with, and what is their marketing like?

You should also try to determine how much focus they put in each channel, or type of content. Do they focus mostly on blogs, or videos? Do they use Instagram more than Twitter? Do they post memes more frequently than they post product images?

And above all else, what is the quality of their content? Is it well-produced, thoughtful, and engaging? How much so? This will be the benchmark of what quality of content you need to produce in order to stay relevant.

6. Determine what technology they use

Every modern business is made more efficient with the use of tech tools.

These are everything from their sales software, customer management tools, data storage providers, website design platforms — every bit of technology that makes their business run smoothly.

So if you want your business to stay in the runnings with competitors, it’s crucial that you have tools that meet or exceed the abilities of theirs.

A good place to start is with their client-facing tools. Do they have any special widgets on their website? Do they have an app? How does a client contact customer service?

If you can do it, a deeper dive into what systems they use to conduct business internally will give you a deeper understanding of how they operate as efficiently and effectively as they do.

When it comes time to choose your own tools, don’t go based on what specific tool your competitors use. Instead, choose based on what features those tools offer which are necessary to conducting business. You may find an alternative that does the same thing but which works better for your team, or you may find something that has everything theirs has and more!

7. Use a framework to model the competitive field

In our last article, Competitive Analysis: The ‘What’ and ‘Why’, we provided a quick overview of some of the most commonly used analytical models for competitive analysis.

After following the other steps outlined in today’s article, you should have all the info you need to start filling in your own working model!

As a refresher, here are the most common models:

  • SWOT Analysis
  • Porter’s Five Forces
  • Strategic Group Analysis
  • Growth Share Matrix
  • Perceptual Mapping

You can research these individually, and find free templates for them online, as well.

What’s more, you can create your own model! During the course of your analysis, you are likely starting to see which statistics and metrics are highly competitive in your industry. Try to find a way that you can easily represent those metrics for your business, and the competition, so that you can have a clearer view of where you fit in the marketplace.

You’ll also start seeing where the best opportunities are for investing your energy. It’s all about finding untapped angles that will give you a stronger foothold in the market.

Conclusion

Competitive analysis might seem like quite the journey, but it’s only the first step.

It’s designed to give you a better view of the battlefield so you can choose a winning strategy, like being able to see your opponent’s next move in a game of chess.

It’s also something that you should revisit often, especially when new competitors enter the game.

But in the end, the work you put in now will pay dividends for you and your business.

If you’re looking for help with starting your business, planning your next steps, securing funding, or anything related to entrepreneurship, META can help you get there! Why not start your journey by talking to our team about what options are available to give you a competitive edge?

Belleville Office

Unit 8, 161 Bridge Street W. 
Belleville, ON K8P 1K2

Phone: 613-966-9069
Toll Free: 1-888-401-9636
Fax: 613-966-7357

Bancroft Office

Unit 3 124 Hastings St. N
Bancroft ON

Toll Free: 1-888-401-9636
Fax: 1-866-705-4520