Owning and running a business is similar to enduring a war. You need to have a great strategy to defeat your enemies. However, knowing your enemy is the most important thing. This is where we need to do a competitive analysis. Knowing who you are dealing with will help you know what to do and make better plans. With the prominence of online business and the relatively young age of the industry, competitive analysis is very important to do if you want to succeed. A competitive analysis is very important for new entrants in the market. But it is also still important for businesses already established. If you are a new business looking for ways to create strategies or grow, doing a competitive analysis is important. If you are a business owner that wants to improve your business or grow it, a new competitive analysis is also a good idea. Keep in mind that competitive analysis should be done every once in a while or better yet every year.
Competitive Analysis in a Nutshell
A competitive analysis is when you do research on your competitors and determine your competitive positioning. It is very useful to conduct a competitive analysis because it helps a lot in creating strategies. These strategies are not only to help improve your business, but they will help you compete with other businesses. Competitive analysis is a very flexible concept. Competitive analysis can be very short or it can be an in-depth analysis. However, it is generally better to have a more complete analysis.
In an article by the Harvard Business review, it is said that competitive forces create strategies. This is because the way we cope with competition is to have a good strategy. This article will not discuss the concept of competition, but mainly about one of the ways to start making a strategy to face competition. It may seem redundant to make something this complex about your competitors, but it is actually very important. Having a detailed document about your competitors and market conditions will make planning and strategy making so much easier.
How to Do a Competitive Analysis
Here are the steps to do a competitive analysis. Keep in mind that this is the most basic version of competitive analysis. You can always add more things into these steps to make your results better. These steps are fundamental and skipping some can lead to worse results. You can do these steps out of order since this list is more of a guide than a rule set. Some business types may also find it harder or easier to do a competitive analysis. But most businesses will benefit from doing a competitive analysis.
1 Select the competitors for your analysis
The first thing to do is of course choose the appropriate competitors. You must choose which companies pose a threat to your business. This is not limited to just companies that do the same thing. It also includes businesses and companies that can be an alternative to your business. Try and find at least 3 competitors so that you can have one for each of the categories that we will discuss later. However, the more the better, if you have too much you can always just take them away later. Better to have too much than to have to look again. Also, remember that you should identify a
2 Make a Spreadsheet to makes things easy
Now we need to make a spreadsheet like the one we put earlier. A spreadsheet is essentially an excel document that puts all the important details into a clear and easy-to-read format. You can accompany a spreadsheet with a document that details the information in essay form. The reason why using a spreadsheet is recommended is because it will make viewing and data entry significantly easier. Especially if you want to do some calculations in your competitive analysis. You can make the spreadsheet however you want. You can also use examples found online. There is no wrong way to make the spreadsheet. As long as you can read it then it would be okay. The spreadsheet needs to be able to categorize your sections and the data that is related to each competitor.
3 Categorize your competitors
After you have a spreadsheet ready, your competitors need to be categorized properly. Earlier we mentioned that there are different forms of competitors. There are 3 categories of competitors that you need to consider. The first would be direct competitors which are companies that sell the same products to the same market as you (e.g. Burger King and McDonald’s). The second is indirect competitors which are competitors who offer different versions or different variations to your products aimed towards a different consumer (e.g. Xiaomi and Apple). The last one would be tertiary competitors which are companies that don’t sell products in a similar category but sell to the same consumers. They can be a partner in the future but can also be a threat in the future. Once you categorize your competitors, it would be a lot easier to create strategies that can help you compete with the different types of competitors.
4 Do positioning research and make a positioning map
What you need to do now is to do a positioning analysis of your competitors. Positioning is how brands are positioned in consumers’ minds. They show how the brand is perceived and its competitive advantages. The biggest reason to do this is so you can position your business in a place that has little to no competition. For example, most of your competitors are positioned in the high-end position in a market. That means you will have a better chance of success if you focus on the mid-range position.
Data for a positioning analysis is very easy to come by. This is because most of the data can be gathered online. Analyze your competitors’ social media and online presence. Read through the comments and user reviews. This way you can see how consumers see your competitor’s position. A more accurate but complicated method is through market research using questionnaires but this method is too time-consuming and not a good fit for small or medium businesses.
5 analyze your competitors’ advantages and weaknesses
After your positioning analysis is complete, you can focus on the details more. This would be your competition’s advantages and their weaknesses. Using their positioning analysis, you can better determine why they are successful in that area. This way you can replicate their strategies with a few tweaks or adjust your existing strategies to fill in the gaps of their strategies. You can use the data from previous steps to identify their strengths and weaknesses. User reviews are very useful since they can show what consumers are satisfied with and what they dislike.
6 Study and understand your competitors’ marketing
We cannot neglect how they market their brand and products. Their marketing will help you a lot in a competitive analysis. For successful competitors, you can try and understand why their strategy works. You can copy what they are doing so you can compete better. However, don’t just copy what your competitors are doing. You need to differentiate your marketing. If your marketing is similar to other competitors, then your marketing will have a risk of just getting ignored by consumers.
7 Do a SWOT analysis
The last step would be using the SWOT framework. However, instead of doing this to study your competitors, you will be doing this to study your own company. Using the data and analysis that we have done in previous steps, you can better understand your company. A SWOT analysis will accompany the results better. SWOT stands for Strength, Weakness, Opportunity, and Threat. Strength refers to your competitive advantage and what sets your brand apart from others. This can be pricing, logistics, CSR, and many more. Weakness is what your company or brand lacks compared to your competitors. For example, lackluster marketing or bad customer service. Opportunity refers to what your company or business can expand into to improve. This can be a new market, a gap in the market, or maybe even a new product. Lastly, threat refers to the things that can damage your business. This is different from weakness because weakness is internal whilst threat is external. This can be government policies, market trends, or logistical issues.
How and Where to Obtain the Data for a Competitive Analysis
Obtaining data for competitive analysis is very important since the quality of data will determine the result. We have touched on this topic a little bit in the earlier sections. However, we will be discussing more in-depth the various sources of information that you can use. It is important to note that the number of information, while important, is not the most important thing. As long as you have an appropriate amount of data it should be enough. However, the most important thing is the quality. Harvard Business Review highlights this point in their article. HBR highlights that quality should be valued over quantity.
1 Social Media Performance
The most accessible source would be social media performance. There are a few metrics to collect in social media performance. The most visible metric would be follower count on various social media platforms. This would show how much their general audience is and how well their reach is. The second would be social media engagement. Engagement is the interaction that their audience makes with their social media posts. Another one would be their growth in general. This would be the increase in followers and engagement on social media that your competitor experiences. This is because a competitor can have a very low social media presence. But if their growth is exponential, it should be noted.
2 SEO Analysis
SEO analysis refers to search results that are shown when you type in keywords. SEO stands for search engine optimization. If a business can be featured on the first page of the search results, they are doing well. You can see the content that is featured and learn from it. This may sound a bit complicated since SEO analysis usually involves analytics and web tools. Luckily, Google has a set of tools that you can access for free like google analytics to help you in analyzing the SEO of a competitor.
3 Content Marketing
Content marketing refers to the type of content that your competitor makes as a part of their marketing or selling process. This can range from blogs, videos, short videos, memes, and many more. The content type can be seen in social media platforms as well as in their channels. For video content, it is useful to look at the views and ratings of the content. It will be a bit more complicated when the content has no indicator of views or ratings. But there are still ways to measure the popularity like with SEO.
4 Online questionnaire
Lastly, we have a primary method of gathering information. Questionnaires can be created to gather information about consumer perception. This does require a lot of time and skill. Luckily it has become more simple to do this. Services like google forms are free and easy to use. However, processing the information will still be complicated.
So now you have learned how to conduct a competitive analysis for your business. Doing this is very important in terms of growing a successful business. Knowing your enemy and creating strategies to compete with them will increase your growth in terms of brand recognition and success. However, this is just one part of the battle. Offering a great experience is also important.