What is competitive analysis and how do you do it?
Whatever business that will or you wake up, chances are you will face competition in the market. But contrary to what many people think, true competition is good for business. The existence of business competition usually means indicating there is a demand in the market, and the offer is worth selling.
In addition, this competition motivates you to innovate, distinguish, and develop your best offer to stand out on the market and increase your market share.
So, it doesn’t matter if you are new to existing markets or players, competitive analysis is something that must be on your task list because your competitors are out there practicing them to find opportunities to lead.
What is a competitive analysis?
Competitive analysis is the process of identifying competitors and analyzing their business strategies to determine their strengths and weaknesses relative to your business or offer.
With a simple word, competitor analysis (also called competitive analysis) is the process for –
- Identify who competitors: this includes current competitors and prospective competitors.
- Analyze their business strategies: Business strategies include a long-term and short corporate strategy and competitive.
- Identification of Opportunities and Threats: The motive for competitor analysis is to analyze the strengths and weaknesses of competitors, compare it with your own strategy, and identify opportunities and threats.
The importance of competitive analysis
In addition to the reason that the competitive analysis process helps you determine the strengths and weaknesses of competitors to find short-term and long-term opportunities and threats, conducting competitive analysis is very important because it helps you:
- Building an understanding of how the existing market operates and how potential customers assess competition.
- Get a good idea about what customers really need and how you can sell them to them.
- Develop strategies how to grow in the market today and expand to the new market.
- Develop different offers that stand out from the crowd with competitive advantage.
Competitive Analysis Goals
Usually, there is not only one reason to do competition analysis. Competitive analysis in marketing is done for –
Understand market conditions better
It is rare when the company competes with only one competitor. Competitor analysis helps you identify all competitors directly and indirectly today and potential, which can inhibit your entry or growth on the market.
Find opportunities that have not been utilized and future threats
Competitive analysis is the analysis and evaluation of the strengths and weaknesses of market participants. This analysis often produces discovery of untapped opportunities that can be used for short-term or long-term benefits. This opportunity can be a weakness in –
- Cycle Development of Competitor Products
- Competitor Marketing and Sales Process
This analysis also produces identification of threats that will come in the form of new competitors or changing market trends.
Bring up a better strategy
When you know how the market is currently working and what is in the box, it will be easier to think out of the box and produce more effective and competitive strategies (competitive) that will provide different benefits for businesses.
Help develop competitive barriers
Careful analysis of competitors is very important in developing barriers that are difficult to destroy. Timely competitor analysis also helps in developing obstacles to prevent the entry of new competitors to the market.
How to do competitive analysis?
Although conducting competitive analysis is not very complicated rocket science, this analysis requires a lot of effort and often can be boring.
But don’t worry.
Here is a simple and easy-to-use competitive analysis process that you can use to identify competitors and analyze competitors to help you oversee other players in your market room.
Determine your goals
Competitive analysis is exercises supported by the purpose of the mind. You need a reason to analyze your competitors and evaluate their efforts. The reason is included but it’s not limited to –
- Identify and analyze market players today (and their marketing efforts) to develop marketing strategies and better new products.
- Oversee the marketing efforts of competitors available to develop a better strategy to attract more customers.
- Analyze competitors before entering a new market.
- Find indirect competitors that can be a direct competitor in the future.
- Identify the strengths and weaknesses of competitors related to your business.
This reason forms the backbone of the competitive analysis process which is the basis of the next steps.
Identification of competitors
After ‘why’ competitor analysis is answered, the process continues to determine ‘who’ your competitors. It’s important to know the right competitors and separate them to compare the data correctly. If not, a lot of time will be wasted without the right understanding.
Remember, almost every niche category covers more than a dozen players. You can easily find it by tracking your buyer’s journey or by doing online research.
However, competitor analysis is not about analyzing everything. It’s about finding ideal competitors representing the biggest threat to your business. The best way to identify this is to follow the WWH approach.
- Who is the customer?
- What is the problem?
- How is the problem resolved?
All you need to do is answer these questions for all players you think and categorize it into three types according to the answers.
Competitors who serve the same customers, overcome the same problem, and provide the same solution as you. For example, Uber and Lyft complement each other when we talk about cabin aggregators on request.
Competitors who serve different customer segments but handle the same problem and provide the same solution as you. For example, Gucci and GAP, despite handling the same clothing problems, serving different customer segments.
Competitors who serve the same customer segment and handle the same problem but provide different solutions. For example, Domino and McDonald’s, despite dealing with the same problem from the same target audience, offering different solutions.
After completion, select the type of competitor to be analyzed according to the specified objective.
Identification of parameters & develop competitive analysis frameworks
The next step involves you to decide on ‘what’ and ‘how’ of competitive analysis – what needs to be analyzed, and what framework you will use to analyze it?
Based on your goals, you can use the existing competitive analysis framework or develop your own framework based on certain parameters. Some existing competitive analysis frameworks are –
- SWOT analysis: To help identify potential competitive advantages by analyzing strength, weakness, opportunities, and threats of competitors.
- Five Power Porter: To help analyze the structure of industrial competition by analyzing five newcomers, buyers, suppliers, compensation, and competitive competition.
- Strategic Group Analysis: To assess the position of the player in a competitive environment based on two variables.
- Growth-Share Matrix: To classify products in your company’s portfolio on industrial competition landscapes to determine products that are worthy of investment and products that are not feasible.
- Perceptual mapping: To represent visually the perception of your product relative to competitive alternatives.
There are more than five frameworks. Most of these frameworks use predetermined parameters and many let you choose your parameters. This parameter can be qualitative or quantitative originating from the true objectives of competitor analysis.
Qualitative parameters included but not limited to –
Advertising and marketing strategies used,
- Sales strategy,
- Value proposition,
- Shop design,
- Website design,
- Customer reviews,
- Product quality,
- Customer location,
- The presence of social media
- Type of ads on social media,
- Customer response in social media posts, etc.
Quantitative parameters included but not limited to –
- Price setting,
- Cost structure,
- Number of reviews,
- Funding is accepted,
- Profit margin,
- Company size,
- Discounts offered for products,
- Distribution channels used,
- Keywords targeted at search engines,
- The number of ads runs on social media,
- Customer income, etc.
In general, if the proper competitive analysis framework is not found, this data parameter is grouped together and the standard competition analysis framework is developed to collect, sort, present, and analyze data.
Collect data and analysis
After the framework is decided, the next step involves data collection. If you happen to do research online, you can use several competing analysis tools –
- Ahrefs: To get data related to their search engines.
- Sprout Social: To analyze the performance of competitors on social media.
- SimilarWeb: To get a general overview of website traffic, references, search traffic and keywords, social media, pictorial ads, audiences, and sites and similar applications.
- Prisync: To track competitor prices and stock available at e-commerce stores.
- CrunchBase: To get company insight like the number of employees, funding, etc.
After the data is collected, then sorted and put into a competitive analysis framework for analysis.
Examples of competitive analysis
To make a competitive analysis process more clearly, take this hypothetical example –
Mr. Adam has a special toy store (selling wooden puzzle) in the famous market. He noticed that even though his customers were reduced, his competitors did not lose because they were also present online and sold their products online.
Now, before making a spontaneous decision, Mr. Adam decided to do a competitive analysis to develop the best plan strategy so that it was equivalent to its competitors.
To find a company that sells wood puzzles online and analyzes all the channels they use.
Even though Mr. Adam already knew about his competitors, he did more online research to find other competitors through the web. He utilizes Google Query like “Buy Wood Puzzle Online” to find sellers who sell the same product and similar to it.
Once identified, he categorizes them under direct, secondary and indirect competitors.
Now, because he only needs to know the channel they use, he chose direct and secondary competitors to be part of his research.
Develop competitor analysis framework
He developed a simple Excel sheet that mentioned the name of the competitor and channel they used.
Data collection & analysis
He individually examined the presence of every competitor online and filled its competitor’s analysis template. After completion, he determines the most sought-after channel and develops a new strategy for the same channel.
Competitive analysis or competitors are important practices for new players and existing ones. Analysis of periodic competitors helps companies oversee their competitors, identify opportunities, and are ready to face future threats.
By knowing the advantages, disadvantages and what competitors have done in business, you can easily make the best decisions that will bring your business in the right direction.
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