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What is Competitor Analysis?
A competitive analysis is an assessment of your competitors’ products, services, and sales tactics, evaluating their strengths and weaknesses relative to your own. It’s a good business practice to conduct a full competitive analysis at least once a year.
A competitive analysis will help you see your own unique advantages as well as any potential barriers to growth so you can strengthen your marketing and business strategies. It also keeps your business proactive instead of reactive. Many entrepreneurs operate based on preconceived ideas about their competitors and market landscape, but those ideas may not be accurate or may be out of date.
How to do a Competitor Analysis?
Josh Rovner, business consultant and bestselling author of Unbreak the System: Diagnosing and Curing the Ten Critical Flaws in Your Company (Lioncrest Publishing, 2020), shared with us nine steps for completing a competitive analysis.
1. Identify the products or services you want to evaluate.
For most analyses, they will be the products or services that generate the highest revenues or demonstrate the most significant potential for growth.
2. Seek direct competitors.
These companies compete for roughly the same market with comparable products or services. For example, accountants compete against other accountants.
3. Pinpoint indirect competitors.
These companies target the same market but with different products or services. For example, accountants compete against bookkeepers.
4. Examine replacement competitors.
These companies offer a different product or service but address the same issue as your products or services (for example, apps that assist entrepreneurs).
5. Determine which parts of your competitors’ businesses are worth investigating.
These aspects could be pricing, distribution and delivery strategies, market share, new products or services coming to market, who their long-standing, highest-spending customers are, the quality of after-sales support, and which sales and marketing channels they use.
6. Research all identified competitors.
You may only find minimal accounting and operational records for most competitors, especially nonpublic companies. Other useful information – like target customers, product features, type of staff employed, and price points – will be easier to find.
7. Document your research in a written analysis.
Make sure your document is substantive and actionable, but not so long that your staff won’t read it. Comparison charts and graphs are helpful to help you and your team visualize your position in the market in relation to your competitors.
8. Identify areas to improve and execute the changes.
Could you improve the quality of your products or services by adding or amending a feature, lowering the price to be more affordable, or improving after-sales support? Could you achieve a better ROI on your marketing budget by investing in a more capable CRM for better lead management?
Rovner recommends including information about related trends in your market and region for a more complete picture of the entire competitive landscape. “Document what threats are out there that could have a negative impact on your business, and document the opportunities out there that you could take advantage of better than your competitors.”
9. Track your results.
Measure your sales with a profit and loss statement to determine if the changes were successful.