You know that thing you do where you pick a favorite restaurant and then check out all the other places in town to see if they’re better? No, not just for dinner – for every single thing. You compare prices before buying anything, scope out the competition before starting your own business, and generally like to have as much information as possible before deciding.
Welcome to the world of competitive analysis. While it might seem tedious at first, this process can be extremely valuable in helping your business stay ahead of the curve. By examining and understanding your competitors’ strengths and weaknesses, you can finetune your offerings and ensure that you’re always one step ahead. Not to mention, it’s a great way to learn from others’ mistakes and successes.
What is Competitive Analysis?
The competitive analysis examines your competitors’ strategies and tactics to discern their strengths and weaknesses. It helps you understand how your competition is performing in the market, what products or services they offer, their pricing, and how they market and promote them.
The first step in any competitive analysis is to gather as much information as possible. It can be done through online research, interviews with customers and competitors, and even covert observation. Once you have all of the data, it’s time to analyze it. However, this detailed process necessitates hiring exceptional business professionals who possess a wide range of skillsets encompassing every business function. So, look for business graduates with general MBA credentials since this degree instills knowledge relevant to every business domain and function.
Once you have them on board, rest assured that they’ll seamlessly carry out the competitive analysis from scratch.
How to Conduct Competitive Analysis
There is no one right way, as your approach will depend on the type of business you have and the products or services you offer. Nonetheless, there are a few key things to keep in mind when conducting a competitive analysis:
- Start by identifying your top competitors and doing some research on them. Who are they, what do they offer, and how do they promote their products or services?
- Analyze your competitors’ strengths and weaknesses. What makes them successful?
- Examine how your competitors price their products or services. Are they competitive? Are there any strategies they use that you could adopt?
- Study your competitors’ marketing and advertising efforts. What are they doing that’s working? What could you do differently?
- Evaluate your competitors’ online presence. Do they have a powerful social media presence? A well-developed website?
Powered with all this valuable information, you can craft a unique strategy to help you stand out from the competition.
Why Conduct Competitive Analysis?
Globalization and rapid technological advancements have made the world a smaller place. Today, it’s easier for businesses to learn about their competitors and how they’re performing in the market. Competitive analysis is essential for companies for various reasons.
Stay Ahead of Your Competitor
Knowledge is power, and if you know what your competition is up to, you can stay ahead of the curve. By understanding their strategies and tactics, you can redevise your offerings and ensure that you remain competitive.
For instance, if you observe that your competitor is offering a product or service at a lower price, you might want to consider dropping your prices too. Otherwise, your potential customer base may start switching to your rivals. Or, if you see that they’re using a marketing strategy that’s working well, you might want to try it yourself without wasting resources on trial-and-error for other methods.
Improve Your Product or Service
Have you often received feedback from your consumers about how and why your competitors’ products or services are better? If so, it might be time to conduct a competitive analysis. It will give you insights into your customers’ stated and unstated needs, enabling you to redesign and innovate your current offerings.
For example, suppose you find your competitor’s website more user-friendly than yours. In that case, you might want to work on redesigning your website. Or, if you discover that your competitor’s product is of a higher quality than yours, you might want to consider increasing the quality of your products.
Stay Relevant in the Market
There’s a lot of chaos and noise in the business world, and it can be tough to stay relevant if you’re not keeping tabs on what’s happening. You can ensure that your business is always up-to-date on the latest industry trends and changes by conducting a competitive analysis.
It could include details about a new technology that your competitor has adopted, a shift in customer preferences, or even changes in the regulatory environment. If you’re aware of these things, you can adjust your business strategy to stay ahead of the competition.
Protect Your Market Share
By carrying out competitive analysis, you can scrutinize any areas of your market where your competitors are making inroads.
Then, you can take steps to shore up those areas and protect your market share. For example, suppose you observe your competitor targeting your clients with a new marketing campaign. In that case, you might need to develop a counter-campaign. Remember when McDonald’s started to lose market share to Burger King? Part of the reason was that BK began to offer a breakfast menu.
Save Time and Money
Microsoft hit a record high in 2021 by incurring 20.7 billion US dollars in research and development expenses. That’s massive. Since Microsoft secures its position at the top, it can spend more on R&D to maintain this. However, a small business doesn’t have that luxury.
Competitive analysis can help you avoid costly mistakes by unearthing what your competitors are doing well. Additionally, it can help you focus your resources on areas that will significantly impact your business.
Bottom Line
You are already on the road to scaling your business when you realize that competitive analysis is a critical part of your plan. However, if you dive in without a plan, it may lead you astray. By taking the time to develop a strategy, you can ensure that your efforts are focused on the right areas and that you’re not wasting valuable resources.
Define your goals, determine what data is most important for your business, and set up a systematic competitor analysis review process. Within no time, your business will attain significant competitive advantages.
Alton Clarke was born and raised in Syracuse. He has written for MSNBC, The Business Insider and Passport Magazine. In regards to academics, Alton earned a degree from St. John’s University. Alton covers entertainment and culture stories here at Diving daily.