Every confident business owner might fancy their chances of knocking their competition out of the water, but as we’ll explore in this guide, doing a competitor analysis can be an important way of understanding who and what you’re up against.
What is a competitor analysis?
A competitor analysis is a way of identifying and assessing the strengths and weaknesses of rival companies in your sector. The term competitor analysis doesn’t necessarily refer to a document – unlike a business plan – but is more about the process of conducting competitor research, and is often a continual process rather than a one-off event. This can include everything from analysing customer reviews to understanding a competitor’s pricing strategy.
Why competitor analysis is important
Here are some reasons why you may wish to consider running a competitor analysis:
Spot gaps in the market. Before starting a company, a competitor analysis could help you assess your competitors on factors such as price and quality, as well as which neighbourhoods are under-served by similar businesses to your own.
Tweak your product and services. Competitor research is an opportunity to see how other companies have rolled out products and services, potentially helping you to define your own unique selling proposition (USP).
Understand trends. Seeing success stories in your industry could help you understand what your potential customers want, and which markets might be saturated.
Anticipate threats. Many businesses will have bumps in the road, and your competitor analysis can shed light on mistakes companies have made and potentially reduce the risk of you making them too.
Establish a benchmark. Your competitor research can help you define what success looks like, and could help you plan your company growth by comparing against others’ year-on-year expansion.
What should a competitor analysis include?
There is no one-size-fits-all rulebook when it comes to what goes into a competitor analysis for your company, but here are some elements you may want to include if you’re writing-up your competitor research:
- A list of your competitors and their products or services
- Your competitors’ pricing strategy
- Any publicly available data on their customers, such as age profile, economic status and how far they’re willing to travel.
- Industry challenges and how your competitors have responded to them.
- Identifying and analysing the competitive advantage of your competitors.
How to do a competitor analysis
Running a competitive analysis doesn’t mean you have to put on your Sherlock Holmes investigative attire; there is plenty of information in the public domain that can help you assess your competitors. You could seek out the following when analysing a competitor:
- Company accounts
- Customer reviews
- Social media channels
- Sales literature
- Press releases
- Published reports
- Confirmation of which trade bodies they’re registered with
- Word of mouth opinion
In addition, beyond just scrolling through a competitor’s Twitter feed, there are certain questions you may want answered if you can do some digging. For example :
- Who are their suppliers?
- How often do they refresh their product inventory?
- What channels or platforms do they sell through?
- How often do they discount their products or services?
- How many locations do they operate in?
- What is their growth trajectory?
Moreover, you could even commission market research – for example, through the Market Research Society – to find out what customers like about a competitors’ products. And of course, there’s nothing to stop you from using a competitors’ service yourself to do your own homework; for example, you could visit a restaurant as a customer to assess the quality of the experience.
What is a competitor analysis framework?
There are different models you can create, known as competitor analysis frameworks, to help you research your competitors. For example, competitor mapping is a way of producing a visualisation that pinpoints where your competitors stand relative to one another on issues like price, quality and customisation (the latter referring to whether products or services can be personalised ). You may also come across terms like SWOT analysis; this is a grid split into four, with different insights for each of your competitor’s Strengths, Weaknesses, Opportunities and Threat. Regardless of whichever framework you use to assess your competitors, these tools could prove useful in building out your business plan and starting your company.
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