Entrepreneur defines a competitive analysis as “Identifying your competitors and evaluating their strategies to determine their strengths and weaknesses relative to those of your own product of service.” By performing a competitive analysis, you’ll better understand your competition and how to compete. So whether you’ve started a new business, launched a new product, or simply want a competitive edge, the following steps will guide you through the competitive analysis process.
Define Your Competition
The first step in a competitive analysis is to define your competition. Depending on the size of your business and target market, you may find this task relatively simple. Use a search engine to find similar businesses and compare how your web pages perform. Check print ads, local forums, and social media sites as well.
Profile Your Competitors
Once you know which businesses operate within your target market, it’s time to learn more about them. If publicly held, their annual reports will reveal a wealth of knowledge. These reports will highlight their financial information, such as revenue and sales volume, and allow you to analyze their market share. In this step of the competitive analysis, you will determine which companies are the most significant threat and which companies to overlook. Rank them accordingly and review them regularly.
Analyze Public Opinion
Read your competitors’ reviews on sites like Yelp to gauge public opinion. If your competitors’ customers complain about poor customer service, improve your own. Blogs, social media comments, and networking events also provide insight into public opinion. This part of the competitive analysis will highlight what your potential customers view as important.
Compare Products and Services
To get a first-hand opinion, use your competitors’ products or services. Do not skip this part of the competitive analysis. Examine each product or service for quality and determine what sets them apart from yours. Capitalize on positive attributes that differentiate you from them. If nothing stands out, perhaps it’s time to update. If both are equal, consider offering a consumer incentive.
Conduct a SWOT analysis for those competitors who pose the greatest threat. Use what you’ve learned from other areas of your competitive analysis to compare their strengths, weaknesses, opportunities, and threats with yours. If you are unfamiliar with the SWOT analysis, read “The SWOT Analysis: What It Is and Why You Should Use It.”
In the final step of your competitive analysis, you’ll review your competitors’ marketing strategy. Do your competitors have a low selling price, free shipping, or a robust marketing campaign? Which marketing vehicles do they use to gain exposure, and what are their unique selling points? Answering these questions may help you tap into new, underserved markets.
A competitive analysis allows you to view your business in relation to other companies with similar products or services. Each step provides much-needed insight into how your business compares. Use this information to make improvements and grow your customer base.