A competitive analysis is an evaluation of the strengths and weaknesses of your competitors relative to your own business, products, or services. It helps you better understand the industry in which you’re competing and identify opportunities to gain a competitive edge.
Explaining Competitive Analysis
Competitive Analysis is considered a critical element in order for businesses to develop successful strategies, as it enables them to make well-informed decisions that give them a competitive edge. A competitive analysis examines the strategies and strengths of competitors within the same industry, comparing price points, market share, products, services, and customer bases amongst others. It also involves studying existing trends in the industry and learning from past mistakes by other businesses.
While some business owners might think of Competitive Analysis purely as a means to gain an advantage over their competition, it can also be looked at as an opportunity to collaborate and form strategic partnerships with rivals. By understanding the strengths and weaknesses of your competitors, you may find opportunities where a mutual agreement could prove profitable for all involved. Collaboration amongst companies can result in more innovative products and increased efficiency within the industry overall.
In many ways, analysing what your competitors are doing can act as a source of motivation – striving to stay ahead of their game will push your own business to reach new heights.
Regardless of whether you use it to get ahead or collaborate with rivals, Competitive Analysis gives you key insights into the moves being taken by your competitors, as well as what direction to steer your own strategy in. As such, it’s essential for all businesses to conduct regular Competitive Analysis in order to remain competitive in the long run.
By performing Competitve Analysis, businesses can understand where they stand compared to their rivals while working towards reaching their desired goals in the most efficient manner possible. Next we’ll dive into what Competitive Analysis is and learn how businesses can use it proactively to stay ahead of their competition.
What is Competitive Analysis?
One definition might suggest it’s simply an assessment of the landscape of competition, with the goal of understanding where you fit into the overall market. To others, taking a more proactive approach to competitive analysis could be more in tune with their goals. This approach involves studying the strategies and tactics that competitors might be employing, and how those strategies can be adapted to bolster your own business objectives.
Both sides of this debate have merit. Taking a more reactive approach to competitive analysis does provide insights into how you measure up against your competitors, but focusing on becoming proactive is often what leads to real competitive advantage. Companies applying definite strategies based on competitive analysis may come up with innovative approaches or diversify their markets, making them less vulnerable to losses due to majority changes or consumer preferences.
Data has increasingly become the greatest asset within any organisation, and compiling it in actionable ways is where competitive analysis can see its greatest success. For example, companies like Amazon have focused heavily on collecting data related to consumer habits and interests. Their data-driven approach helps them better anticipate and respond to customer needs, setting themselves apart from their competition and creating competitive advantages in both their internal processes and customer satisfaction.
Ultimately, competitive analysis can take both a reactive and a proactive tack when studying the competition landscape. In either case, gathering accurate data and optimising it for decision making remains integral to successfully executing any business strategy. The next step is consistent monitoring of key metrics, which will enable teams to build an awareness of changes within their market – ensuring they remain ahead of the curve regardless of what direction their competitors are headed in.
Gathering the Data
Gathering the data needed to complete a competitive analysis is one of the more time-consuming steps in the process, but it is also one of the most important. On one hand, a thorough analysis requires significant effort up-front in order to ensure that it will be a valuable exercise and help you to answer your research questions. On the other hand, gathering too much irrelevant data can waste resources and delay time-sensitive decisions about strategic direction. The key is finding the right balance between executing on a comprehensive analysis and being practical about limited resources.
The process of obtaining data for a competitive analysis usually involves both qualitative and quantitative techniques such as interviews, surveys, focus groups, industry reports or news sources, financial records, customer feedback and more. Additionally, gaining access to proprietary information from competitors – often by collecting surveys or conducting interviews with key stakeholders within their organisations – may be difficult. This may require that you use publically available primary sources that are not always tailored specifically to your industry or company needs.
When preparing to do a competitive analysis, it may feel like there is an overwhelming amount of information required. However, with some solid planning ahead of time and creative problem solving during the process, it is possible to get all of the necessary information without overcomplicating your efforts or working longer than necessary. In the next section we’ll discuss some concrete data sources that could be relevant and helpful in crafting a detailed competitive analysis.
Sources of Data
Once you have gathered all available sources of data, it’s time to begin analysing the information. But it’s important to understand the types of data sources that are at your disposal and what kind of insights they may provide about your competitor’s current strategy.
Primary sources of data such as customer interviews, survey responses and market research focus groups give very detailed information about a company’s target customers, their behaviour and how they view certain products and services. This type of data can be used to better understand the target market, identify unmet needs or pain points, and reveal potential growth opportunities. It can also reveal what kind of campaigns your competitors are running, how they’re engaging with customers on social media, and which strategies seem to be working well for them.
Secondary sources of data such as reports from industry organisations, news stories, search engine results and analytics tools enable you to assess the performance of competitors’ websites or digital campaigns in comparison to yours. These resources allow you to gain insight into where your competitor is succeeding or falling short when it comes to website design, content creation, SEO best practises and digital advertising efforts. For example, if your competitor’s website has higher pageviews or conversions than yours, secondary sources can help you uncover why (e.g., more effective user interface design or faster load times).
Taking the time to collect and analyse this kind of data helps ensure that your competitive analysis is comprehensive and gives you a 360-degree view of the competitive landscape. Armed with these insights, you can refine your own business strategy to outsmart the competition.
Now that you have a good understanding of the different types of data available, it’s time to start digging deeper into each source to uncover meaningful insights about your competition.
Analysing the Data
Once the sources of data have been identified and gathered, it is important to start analysing the data. In order to make sense of complicated data sets, the practise of breaking tasks into manageable pieces can be useful. It may be helpful to start by categorising pieces of information according to common characteristics or topics. This way, it can be easier to understand how these categories relate and interact with each other.
It is important to think objectively when analysing the data. It is essential that any assumptions that one might be tempted to draw from quick observations are not accepted without proper evidence. However, paying attention to patterns or trends in the data can be useful in understanding larger processes behind them. The results of a thorough analysis can then lead one’s strategy moving forward.
Analysing data should always strive to answer specific questions about the competitive market, such as: What do competitors do differently? What kind of value propositions do they offer? How do consumers perceive each competitor? How easily are customers switching from one competitor to another? By asking specific questions and being attentive to possible answers, it is possible to gain valuable insights through careful analysis.
Data analysis does not necessarily stop once there is an answer for the question at hand. Being able to issue accurate predictions on what changes and trends lie ahead becomes key when positioning one’s business against competitors and taking strategic decisions based on future scenarios needs to become second nature. Having a future-oriented outlook while interpreting data can help preempt upcoming threats and take advantage of opportunities before anyone else. To enable effective decision making based on this type of analysis, it is essential that suitable experience and knowledge within the field plays an active part in the process consistently.
With a comprehensive set of data attainable through various sources, understanding how best to analyse it is essential in formulating strategies which outsmart competitors. Making the most out of that data is the step which usually follows once those sources have been identified; and it requires an open-minded attitude which looks at possibilities beyond immediate answers and speculates on what might come next.
- According to HubSpot, 44% of businesses state that a comprehensive competitive analysis is one of the most effective procedures for optimising their success strategy.
- A survey conducted by BrightEdge in 2019 revealed that 85% of surveyed marketers believed having a good understanding of competitors was critical to gaining search visibility.
- According to an analysis by SHIFT Communications, 86% of B2B marketing leaders cited competitive analysis as one of the most important tools for creating successful marketing campaigns.
Stages of Analysing Data
Having collected and organised the data, the next step is to analyse it. Data analysis is an important part of a competitive analysis – it’s what allows you to draw insights from the data and gain an accurate understanding of your competition’s activity. There are a few different stages involved in analysing data: synthesising, identifying patterns and trends, comparing to your own performance, and making decisions.
The first stage of analysis involves synthesising the collected information into meaningful categories or sets of data. This involves looking for similarities between individual pieces of the collected data that allow you to determine clear patterns or trends. For instance, if you are looking at financial reports for different competitor companies, you could group them by industry type or size.
The next stage is to identify any noticeable patterns or trends in this data. For example, when collecting pricing data from competitors, you can look for inconsistencies or wide variations in rates. These discrepancies may be indicative of certain market conditions or strategies which can be used in your competitive calculations.
The third stage is to compare this collected information with your own performance and track progress over time. This will help you understand how competitive your company is relative to others in the industry and make adjustments accordingly. It will also allow you to identify areas where there may be room for improvement. It is here where you can determine whether there are gaps in your offerings or strategies that could benefit from more attention.
Finally, after considering all the relevant data, it’s time to make decisions on how to capitalise on these findings and set strategic goals for future success. While it may seem difficult to strategize based on such a complex array of data points gathered from multiple sources, it is possible with careful consideration and reflexion – and it can bring about significant rewards for organisations working within highly competitive industries. As such transitioning from analysing the data to setting strategic goals would be a wise move for businesses wishing to outsmart their competitors.
The stages of analysing data is only the beginning of one’s competitive analysis process. Now, it is time to set strategic goals for your business based on the information and insights you have gathered. This involves considering how each piece of your competition’s strategies and tactics can affect your own strategy, in both a positive and a negative way.
There is a fine line between aiming too low or setting unrealistic goals and pushing yourself to the ultimate heights with ambitious goals. On one hand, it might be more realistic to set smaller goals that are achievable without risking failure. On the other hand, bigger risks can often have bigger benefits which could put you ahead of your competition in the long run. Therefore, balance should be kept when deciding on strategic goals – make sure they’re challenging enough to motivate you while being realistic so they can still be met within reason.
An example of this could be setting a goal of increasing website visits by 10% this quarter compared to last quarter. If successful, this could be seen as an achievement marking growth in customers and website visibility in comparison to previous periods. Another example could be setting a goal for obtaining 10 new memberships by the end of the year to increase customer loyalty towards your business over its competitors.
Having set achievable but ambitious strategic goals is an essential step towards outsmarting your competitors as these will help you hone in on key areas that need improvement or maintenance within your business based on its overall strategy – allowing you to strategically compete against other businesses within the same market.
Now that we have discussed strategic goals, it is time to move onto understanding our company’s strengths and weaknesses compared to our competition – the next important step when attempting to outsmart them.
Strengths and Weaknesses of Your Company
It is essential to understand your company’s current strengths and weaknesses in order to form an effective strategic goal. A great way to determine both areas is through conducting interviews with key personnel, surveying customer feedback, and analysing market data on sales performance. Once you have a good understanding of your company’s strengths, you can potentially identify opportunities for improvement.
Take, for instance, a community-driven fitness centre. It could find that its main strength lies in the positive, supportive environment it has created thanks to all of the deicated employees and members of the club. This is an area where the company should focus more efforts if they are looking to further differentiate themselves from competitors. On the flipside, if the analysis uncovers weaknesses such as difficulty hiring new personal trainers or poor customer service, then this is something that needs to be addressed and improved immediately.
Once you have identified both your strengths and weaknesses, use them to create a list of items that can be monitored, improved upon, or discarded entirely. Consider every potential outcome before deciding on a course of action.
With this knowledge firmly in hand, you can now begin to look at potential opportunities and threats within your market environment and leverage those findings to valuable advantage. Aiming for the highest return on investment requires careful consideration of competition and consumer trends so that you are able to properly anticipate future developments.
Opportunities and Threats in Your Market
The competitive analysis of your company’s strengths and weaknesses can be complemented by analysing the opportunities and threats of the current market. Opportunities present themselves when a business can recognise unexploited areas that can yield a good return-on-investment and give the company a chance to stay ahead of the competition. For example, if a new technology is adopted in the industry, offering your service through that technology might give your business an edge over the others. On the other hand, threats often come from competitors finding innovative ways to fill customer needs or understanding customer preferences in order to offer better services than you. Keeping track of competitors’ activities and initiatives can help you spot these potential threats before they become too significant.
It would be wise to also consider potential external threats such as changes in government policies, increases in taxes and tariffs, or sudden global events that could disrupt the supply chain, cause volatility in commodity prices or reduce demand for products. These possibilities should be managed carefully and taken into consideration before expanding operations.
Having gained insights into both sides – your company and its competitors – as well as opportunities and threats within the current market landscape, you are now ready to assess customer advantages and disadvantages that exist in your industry. Knowing these will help you prioritise efforts and target those customers most likely to benefit from what your business has to offer.
Customer Advantages and Disadvantages
Your competitive analysis should also look at the advantages and disadvantages that your customers face in comparison to your competitors, as these can have a powerful effect on your strategy. Customers will be more likely to purchase from vendors who offer the best value, and understanding how your competitors can provide different services can be key to outsmarting them.
One important consideration for customers is cost. Do your competitors have pricing structures or other incentives that you don’t have? What do customers get from using different products or services? Are there any additional expenses such as installation or shipping fees that could be affecting customer decisions towards one vendor or another? If so, this could be an advantage for you to use when forming your own strategies.
Additionally, investigate the qualities and benefits of your competitors’ products or services. How are they able to deliver better experiences than you? For example, Amazon Prime offers free two-day shipping and access to streaming services such as Prime Video – something you may not currently offer. Or, a competitor may offer better customer service options or have more advanced technology than what currently exists in the market. Understanding these advantages that customers see from rivals will allow you to form marketing strategies in order to attract new users.
It is also important to understand the disadvantages that customers experience when using different vendors. Where are their available points of failure? Are there any areas where competitors may seem stronger than you but actually lack in quality? Examples here could include thin product offerings, unreliable service delivery, hidden costs or other similar roadblocks for buyers. Differentiating yourself here can be crucial, as it helps to identify areas where you can comfortably differentiate and build loyalty with customers.
The goal of all of this analysis is to find opportunities where you can create a unique value proposition that sets you apart from the competition while still meeting customer needs in areas they care most about. By understanding both the advantages and disadvantages of competing with others in your space, you’ll be better equipped to craft a strategy that allows you to outsmart them and become the best option for potential customers.