What Is Competitor Analysis & How To Do It?
Chances are unless you’re selling Jupiter sand, you’ll have some competition in the market. But unlike what many people believe, competition is beneficial for businesses. The presence of commercial competition typically indicates that there is a market need and that the product or service is worthwhile.
Additionally, it spurs you on to innovate, set yourself apart from the competition, and create your greatest product in order to dominate the market and grow your market share.
Therefore, whether you’re a new entrant to the market or an established player, competition analysis should be on your to-do list because your rivals are already doing it and looking for ways to overtake you.
How Does Competitor Analysis Work?
The process of competition analysis involves identifying your rivals and evaluating their business plans to ascertain their advantages and disadvantages in comparison to your venture or product.
Competitor analysis, often known as competitive analysis, is a method to –
Determine your rivals’ identities, including both present and future rivals.
Examine their business plans: Long-term and short-term corporate and competitive plans are both a part of business strategy.
Find potential dangers and opportunities: Analyzing your competitors’ strengths and shortcomings in order to compare it to your own plans and find opportunities and dangers is the goal of competitor analysis.
A Competitive Analysis’s Value
Conducting a competitive analysis is crucial since it aids you in discovering opportunities and threats in the short and long term, in addition to helping you identify the competitors’ strengths and shortcomings.
Develop a grasp of the market’s current dynamics and how prospective clients see the competition.
Get a strong understanding of the consumers’ exact needs and how to sell to them.
Create plans for how to extend into new markets and grow in the present market.
Create unique products that stand out from the competition thanks to their competitive advantages.
Competitive Analysis’s Goals
Usually, there is more than one justification for performing a competitive analysis. In marketing, competitive analysis is done to:
Improved Understanding of Market Conditions
It is unusual for a business to face forth against just one rival. Your introduction into the market or expansion there may be hampered by existing and potential direct and indirect competitors, which competitor analysis helps you identify.
Locate untapped potential and impending dangers
Competitive analysis examines and assesses the advantages and disadvantages of market participants. Finding unexploited opportunities that can be exploited for immediate or long-term gain is frequently the consequence of this investigation. These possibilities might be the flaw in the
Cycle of product development for the rival (s)
Competitor’s sales and marketing strategy (s)
Additionally, this study identifies a potential threat in the shape of a fresh rival or shifting market dynamics.
Create more effective tactics
Knowing how the market now operates and what is conventional makes it simpler to think creatively and develop more effective and efficient (corporate and competitive) strategies that will provide the company a clear advantage.
help create barriers to competition
It is important to do a thorough analysis of rivals before creating obstacles that are challenging to overcome. A timely competition analysis also aids in creating barriers to stop new competitors from entering the market.
How Should A Competitive Analysis Be Done?
Although doing a competitive analysis is not difficult, it frequently takes a lot of time and effort.
But don’t worry.
Here is a straightforward procedure for conducting a competitive analysis that you can use to find your rivals and analyze them to assist you keep an eye on other businesses in your market.
Establish Your Goal
Competitive analysis is a practice that has a specific objective in mind. You need a justification before you can analyze and assess the work of your rivals. The following causes are only a few of them:
To improve new product development and marketing strategies, identify and analyze the market’s current participants (and their marketing initiatives).
monitoring the marketing initiatives of current rivals to create more effective plans to draw in more clients.
competition research before entering new markets
identifying potential direct competitors who are currently indirect competitors.
determining the advantages and disadvantages of the rivals in regard to your industry.
The competitive analysis process is supported by this factor, on which the subsequent steps depend.
Determine Your Rivals
The next step in the competition analysis process is to identify “who” your competitors are after the “Why” question has been resolved. To properly compare the data, it is essential to identify and separate the appropriate competitors. Without adequate insight, a lot of time will be squandered.
Remember that there are usually more than a dozen players in each category area. By monitoring your buyer’s journey or conducting web research, you can quickly locate them.
But analyzing each competitor isn’t the point of competitor analysis. Finding the perfect rivals who pose the greatest threat to your company is important. The WWH method is the most effective way to find this.
Who are the clients?
What’s the issue?
How is the issue fixed?
All you have to do is provide answers to these questions for every player you can think of, and then group them into one of three categories based on your findings.
Direct competitors are businesses who serve the same clients, deal with similar issues, and offer a comparable service to yours. For instance, while discussing on-demand taxi aggregators, Uber and Lyft complement one another.
Secondary competitors are those who serve various consumer groups but handle the same issue and offer the same remedy as you do. For instance, while Gucci and Gap both address the issue of clothes, their target markets are distinct.
Competitors who serve the same consumer group, handle the same issue, but offer a different solution are considered indirect competitors. For instance, although addressing the same issue for the same target market, Domino’s and McDonald’s provide different solutions.
After that, decide which competitor type will be examined in light of the predetermined objectives.
Develop A Framework For A Competitive Analysis Based On The Parameters
The following phase requires you to choose the “What” and “How” of the competitive analysis – what needs to be analyzed and what methodology would you employ to do so?
You can either create your own framework based on specific characteristics or use an existing competitive analysis framework, depending on your goal. Several of the competitive analysis frameworks in use today include:
By examining the rivals’ strengths, weaknesses, opportunities, and threats, a potential competitive advantage might be found.
The five forces of Porter to aid in the analysis of five factors—new entrants, customers, suppliers, substitutes, and rivalry among competitors—that affect the industry’s level of competition.
To evaluate players’ positions in the competitive environment based on two variables, use strategic group analysis.
Growth-Share Matrix: To categorize the items in your company’s portfolio in relation to the industry’s competitive environment to identify those that are worthy of investment and those that are not.
Visually illustrating how consumers perceive your products in comparison to rival options is called perceptual mapping.
There are a lot more frameworks than simply these five. Most of such frameworks use predefined parameters and many let you choose your parameters. These parameters can be both qualitative or quantitative that stems from the actual goal of the competitor analysis.
Qualitative parameters include but are not limited to –
Advertisement and marketing strategies used,
Sales Strategies, USP, Value proposition, Store design, Website design, Customer reviews, Product quality, Customer location,
Social media presence
Type of ads on social media, Customer response on social media posts, etc.
Quantitative parameters include but are not limited to –
Pricing, Cost structure,
Number of reviews,
Store distance from a specific place,
Company size, Discount offered on products,
Channels of distribution used,
Keywords targeted on search engines,
The number of ads running on social media,
Customer income, etc.
In general, when an apt competitive analysis framework isn’t found, these data parameters are grouped together and a standard competitive analysis framework is developed to collect, sort, present, and analyse data.
Collect Data And Analyse
Once the framework is decided, the next step involves collecting data. If you happen to conduct research online, you can make use of some of these competitor analysis tools –
- Ahrefs: To get their search engine related data.
- Sprout Social: To analyse competitors’ performance on social media.
- SimilarWeb: To get an overview of the website traffic, referrals, search traffic and keywords, social media, display advertising, audience, and similar sites and apps.
- Prisync: To track competitor prices and available stock in its ecommerce store.
- Crunchbase: To get company insights like the number of employees, funding, etc.
Here’s a list of survey tools if your research happens to involve surveys.
Once the data is collected, it is then sorted and entered into the competitive analysis framework to be analysed.
Competitor Analysis Example
To make the competitive analysis process even more clear, take this hypothetical example –
Mr Adam owns a specialised toy shop (selling wooden puzzle) in a famous market. He notices that while his customers are reducing, his competitors aren’t making losses because they also have an online presence and sell their products online.
Now, before making any spontaneous decision, Mr Adam decides to conduct a competitive analysis to strategize the best plan to come at par with his competitors.
To find the companies selling wooden puzzles online and analysing what all channels do they use.
Even though Mr Adam already has an idea of his competitors, he conducts more research online to find other competitors over the web. He makes use of Google queries like “Wooden Puzzle Buy Online” to find the sellers selling the same and similar products to him.
Once identified, he categorises them under direct, secondary, and indirect competitors.
Now, since he has to only find out the channels they use, he chooses both direct and secondary competitors to be a part of his research.
Developing A Competitor Analysis Framework
He develops a simple excel sheet mentioning the competitors’ name and the channels they use.
Competitor Analysis Framework Data Collection & Analysis
He individually checks every competitor’s essential practice presence online and fills his competitor analysis template. Once done, he determines the most sought after channels and develops new strategies for the same.
Competitor analysis is an essential practice for new and existing players alike. A periodic competitor analysis helps the company keep a tab on its competitors, identify opportunities, and become ready for upcoming threats.