Competitor analysis is the process of analyzing your competitors to better understand their strategies and weaknesses. The goal is to gain insights into what they are doing well and what opportunities exist for you in the market.
Competitors can be other brands in your industry, companies that sell complementary products, or even businesses in unrelated industries. It is absolutely essential for your brand to move forward.
Why do you need competitor analysis?
Businesses of all sizes have to deal with competitors, also called the competitive environment. Whatever business you are in, there will be a lot of competition and one or more companies that offer similar products to yours.
Customer research is an important part of your analysis because it helps you understand your customers' wants and how you can best meet their needs. It can provide insights into:
How your company compares against its direct competitors
What opportunities exist in the market for new products, services, or business models
Identify potential threats from companies that may seek to enter the market or take away current customers by offering something better than yours This applies primarily to businesses operating in monopolistic industries where there are no strong barriers to entry (for example, taxi services).
Competitor analysis is most useful for existing companies that need to defend their market position and ward off new competitors. It can also help you understand whether it's worth entering a new industry or market.
For example, if there are already many established players in the market selling similar products, then this may indicate that there isn't much of a profit margin to be made and your business model would be better suited to another industry.
How to do competitor analysis?
Step 1: Understand your competitors
The first step in a competitor analysis is to gather as much information about your competitors as possible. It's useful to know who they are, their business model, and their target market (i.e. customers).
There are several ways you can do this. Here are some of the most popular ones:
Step 2: Gather information about your competition
Once you've identified your competitors, the next step is to gather as much information as you can about them. Here are some of the most useful sources:
The best source for competitor information is other businesses in your industry. You may want to start by interviewing people at similar companies that will be willing to provide insights into their competitors' strategy and prospects in the market.
Another option is using paid sources such as online business directories or search engines (Google Trends can come in handy). You can also subscribe to services that provide company profiles, although these may not always be accurate because they rely on official data from government agencies and third-party reports (such as Hoover's Company Profiles, Bloomberg Businessweek or Hoovers ). Finally, you can read industry reports from banks (such as Dun & Bradstreet ) and consulting firms.
Step 3: Compare your company with its competitors
This is the part where you compare your business against its direct competitors. Doing this exercise alone will not take long, but it's an essential step in understanding how well established your company is compared to others in its market.
On average, a small business has 6-10 competitors. This should be enough to get an overview of what new products and services they offer to their customers and provide insights into how large the opportunities are for companies like yours, especially if they're not being capitalized upon.
The most common method for benchmarking competitors is known as SWOT analysis. The acronym stands for Strengths, Weaknesses, Opportunities, and Threats.
This is a simple technique but can be very useful because it helps you to:
Gather information on your company and its industry better understand what your weaknesses are so you can make effective improvements Get an in-depth understanding of the opportunities available to you in the market. Determine areas where your company would be vulnerable if other companies were to start targeting them or entering into that particular market segment Now let's take a look at some examples of how businesses have used this technique to outshine their rivals.
Step 4: Use competitive benchmarking to improve your performance
Once you've done the comparison of your company versus its competitors, you can start trying to gather as many insights as possible on how your business compares with them. This will help you identify and understand gaps in your strategy that could be improved upon. Here are some examples:
Benchmark competitor products: Gather information about the most popular products and services being sold by your rivals—and figure out how they compare with yours. For example, if they're offering a higher quality product or service for less money than what you sell it for, then this may present an opportunity for growth. If established companies are already doing something that customers love (e.g. providing fast delivery), then you should consider how you can start doing this as well.
Step 5: Download this template
Use this competitor analysis template to analyze your competitors, and uncover what you could differ from the rest
The insights that you can learn from competitor analysis are too valuable to pass up. Whether it's a digital marketing strategy or the way your brick-and-mortar store is laid out, understanding how your competitors operate will help you improve what you're currently doing and create new opportunities for growth in other areas.
Benchmarking against established companies with similar products or services may seem intimidating at first, but this tool has helped many businesses grow their customer base exponentially by implementing strategies they learned about through competitive benchmarking.
If the competitor analysis helped you here are couple of thing thing you need to prepare before your new brand:-