Want to Get Ahead? You Need to Know Your Competition

What keeps you up at night as a small business owner? Profit margins, product launches, how to win customers and keep the ones you’ve got? Ok, but how about your competition? Whatever kind of business you’re running, no matter how unique you are (and we’re sure you’ve got your own dazzling USP), you’re sure to have another business that’s doing something at least similar, and competing with you for customers. It’s up to you to know what they’re up to so you can have a fighting chance, and we’re not just talking about scrolling through their social media accounts or checking out their website. We’re talking about something more in-depth: a competitive (or competitor) analysis.

What Is a Competitive Analysis?

Simply put, a competitive analysis is a strategy for:

  1. Identifying competitors in your industry
  2. Researching their marketing tactics, products, and sales
  3. Using this information as a way to compare your business with your competition, so you can identify your company’s strengths and weaknesses relative to each competitor

It sounds like more work than a simple breeze through social media – and it is. But it will be worth it for the insights you gain.

Why Do a Competitive Analysis?

So why embark on a project like this, when you’ve got so much on your plate? Well, there are a lot of benefits to doing a competitive analysis, including:illustration of a laptop screen with competitor websites on the screen

  • Gaining a better understanding of your market – When you start identifying who your competitors are, you might discover some businesses that you didn’t know about, or that you hadn’t even considered to be your competition before. In addition, when you more thoroughly understand your competition, you might also be able to identify areas where your market is underserved, so you can move in and fill those unmet customer needs, or even find a new niche for your business.
  • Getting an insight into industry trends – You’ll be able to see where things are headed, but you’ll also know how your competition is reacting, so you can zig when they zag!
  • Identifying your business’ strengths and weaknesses – Knowing how your competitors are perceived will help you draw conclusions about your own brand’s strengths and weaknesses. With a competitive analysis, you’ll be able to identify your business’ unique value proposition in comparison to others, and what makes you different from your competitors. This will allow you to clearly communicate to potential customers why your product or service is the best choice of all those available. And studying your competition to find out what they’re doing right will help you understand where you fall short in your relation to your competition, so you can identify areas where you may want to invest time and resources. 
  • Identifying your competitors’ strengths and weaknesses – Knowing what your competitors are doing right will help you stay relevant and ensure that both your products/services and your marketing campaigns are outperforming industry standards. And knowing their weaknesses will tell you where your competitors are falling short, which will help you identify areas of opportunities, and maybe even figure out new, unique marketing strategies they haven’t taken advantage of.

So there’s lots to be gained by doing a bit of research into your competition. But where do you start? Check out the following steps.

Doing a Competitive Analysis

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Start your competitive analysis by creating a competitor matrix on a spreadsheet.

Conducting a competitive analysis just means following the steps below, so you can get a comprehensive look at what your competition is doing compared with what your business is doing. Start by:

Creating a competitor matrix

A good way to start with your competitive analysis is by creating a competitor matrix. This can simply be a table or spreadsheet you can use to compile your research, which will help you spot trends as you go. On your matrix, or grid, you’ll have one row or column for each competitor that you’ve identified. On the other axis, you’ll list data points or categories of information you want to find out about each of your competitors. Some of the basics you’ll be starting with might include company history and location.

Determining who your competition is, and what they’re offering

Now you’re ready to go. Start with the basics: who is your competition – who are you going to put in each of the columns on your matrix? This means making a list of businesses where your customers would turn if they weren’t going to buy from you. Make sure you separate your potential competitors into two categories:

  • Direct competitors – These businesses sell a similar product or service to a similar target audience. These are likely the companies that first come to mind when you think of your competition.
  • Indirect competitors – These businesses sell a different product or service in the same category as your business, but target an audience similar to yours. For example, if you run a coffee and dessert cafe, a luncheonette that also has dessert offerings might be your indirect competition. Or think of clothing subscription services: some offer designer items, while others offer workout gear – these companies would be indirect competitors. 

While you’ll want to focus more on your direct competition, you should always keep one eye on your indirect competitors: you never know when they’re going to make a move into your territory.

Narrow your list of direct competitors down to around 10 diverse businesses that you can really focus on. Once you’ve done that, start analyzing your competitor’s complete product/service line and the quality of the products or services they’re offering. In addition, ask questions like:

  • Are they low-cost or higher-cost?
  • Are they operating on a volume basis, or are they mostly one-off sales?
  • How do they distribute their product or services?

Profiling your competition’s target customers

You’ve got an idea of who your competition is and what they’re offering, so it’s time to think about who those businesses are targeting. To get a good idea of your competition’s target customers:

  • Read their mission statement
  • Check out any messaging they use
  • Look at their social media accounts, and get an idea of who they’re responding to, how they’re interacting with them, and who they follow
  • See if there are any customer testimonials in their content, so you can see who they’re highlighting

Unsurprisingly, you’ll probably find a lot of overlap with your target customers – you’re competitors, after all! But you might find some very useful small differences that you can take advantage of. 

Examining their sales tacticsmagnifying glass with an eye in it

Some of the information about how your competition’s sales tactics work might be trickier to come by, but if you can, get some answers to the following:

  • What does their sales process look like?
  • What channels are they selling through?
  • Do they have multiple locations?
  • Are they expanding? Scaling down?
  • Do they offer discounts?
  • Why do their customers choose them over you, or vice versa? Why do they end relationships with your competition?
  • What is their revenue and total sales volume?

Completing the 4 P’s

If you’ve already looked at “place” (or locations of your competitors, and the market to which they primarily sell), and the “products” they offer (including any special features they offer, and what is most and least appealing about them), it’s time to complete the 4 P’s and look at “pricing” and “promotion.”

When thinking about pricing, ask these questions: 

  • What kind of pricing model do your competitors use? One-time purchase or subscription?
  • How much do they charge for their product or service? Do they offer sales or discounts?
  • How does their pricing reflect the quality, or perceived quality, of their product or service?

When you’ve answered these questions, you can look at if the quality of your product/service in comparison warrants you raising your prices, or, alternatively, if there is a gap in the market for a more affordable option. You can also consider matching any perks or discounts (like referral discounts, or free trials) that your competitors are offering, if it seems right for your business. 

Next, promotion, or marketing: how do your competitors go about reaching their target customers? Ask questions like:

  • What unique selling propositions do they emphasize?
  • How do they tell their company story and talk about their brand?
  • What kind of advertising avenues do they use? Traditional print, social media, email newsletters? Do they have a blog, or post videos and webinars, or even host a podcast? Have they found a really unique tactic, like guerilla marketing?

Looking at your competitors’ content strategy and social media presence

Related to the above, you’ll have to take a look at your competitor’s content strategy, including how often they’re posting on social media, their website, and/or their blog, etc, and the quality of their content. Is it original, accurate, in-depth, and full of engaging photos? And, most importantly, is it working for them? 

To determine this, head to social media and see if: 

  • Certain topics seem to hit the mark better than others
  • The comments are negative, positive, or a mix
  • People are tweeting about specific topics more than others
  • Readers respond better to Facebook updates about certain content
  • There is specific content of theirs that is highly shared and linked to. How does your content compare?
  • Your target audience is using specific platforms more than others
  • There are sites that are linking back to your competitor’s site but not yours
  • Third parties are sharing what your competitors are publishing
  • You can see who is referring traffic to your competitor’s site

Performing a SWOT analysis on your competitionSWOT analysis

Finally, try performing a SWOT analysis on your competition, or identifying their strengths, weaknesses, opportunities, and threats. If you’re not familiar with this type of analysis, check out our description of how to do one here – and don’t forget to do one for your own business!

When it comes to your business, that old saying “What you don’t know can’t hurt you” doesn’t apply. Whether your business is big or small, well-established or just starting out, you can’t afford to be ignorant of what your competition is up to. You need to do some strategic planning around them, and a competitive analysis is a great place to start. Follow the steps outlined above, and consider performing a SWOT analysis on your own business once you’ve done so, so you can set yourself up for success!

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