How analysis of your competitors gains a Competitive Advantage in your market
To gain and keep on achieving Competitive Advantage in your market, you must have a thorough knowledge of your competition. This article explains how analysis of your competitors gains a Competitive Advantage in your market. Competitive analysis helps you do three things:
- Understand how your customers and potential customers view the competition
- Identification of the strengths and weaknesses of your competitors
- Provide you with a great starting point for developing effective competitive marketing strategies in your target market.
But this is all well and good, and it sounds like a great idea. But where do we start? The first action is to identify who your competitors are. Any service provider or product similar to yours within the same geographic region can be classed as a direct competitor. And many businesses geography barriers are reducing at an alarming rate all the time. Think Boots and Superdrug. And any business offering something different or something that customers can use instead of yours is considered an indirect competitor. Think a train and intercity coach. So when determining if someone is your competitor, you should ask:
- What product or service are they offering?
- Are they offering that product or service within your market?
- Are they operating within the same geographic region?
Ok, but how many competitors do we need to analyse?
How many competitors you need to analyse is dependent on several things. Such as what you want to do with the information you find, how competitive the industry is and how easy it is to name all of the competitors. If you can easily name your competitors, then it’s wise to analyse each one of them. But if you are in a market with many competitors, your job becomes a lot harder. And you can save yourself a lot of time by following the 80/20 rule. In a fragmented market, it tends to be that 80% of the revenue is achieved by only 20% of the competitors.
However, never take this for granted, and you should first take a look at the market as a whole. Then dig down. We recommend a pyramid approach. Your most essential competitors sit at the top of the pyramid. The lower down the pyramid, there are more competitors. Midway down, you will find upcoming competitors, those on the decline and mid-sized companies. At the bottom are all the small competitors, less of interest or you know little about.
The top of the pyramid is where you do your deepest Competitive Intelligence. And the best place to utilise external assistance. We can dig deeper without fear of compromise. In the next layer, you do a reasonable job of making sure you know everything about them. At the bottom, you ensure you keep an eye on them by monitoring and price checking.
It’s wise to determine your selection criteria for the pyramid and agree on when a competitor should move up or down your pyramid. Before you start looking for your sources, bear in mind what you need to know. You need to be able to answer the following questions about your competitors.
Common questions to ask
- What’s the full range of products and services they offer? Are their products aimed at satisfying similar target markets to you?
- How well established are they?
- Are your competitors making money? Are they profitable?
- What’s their growth rate?
- What’s their market share?
- Are they expanding or scaling down their operations?
- What’s their sales, pricing and marketing strategies?
- Have there been any changes in their target segments? What do their customers think of them?
- What is the quality of their products and services?
- Do they market on price, durability, style, brand name, customer service, convenience etc.?
- How do they compare to your own business?
- What’s their competitive advantage?
- And how can you differentiate yourselves from them?
The starting point is by looking to secondary sources. Secondary source information is collected for a specific purpose and published “opensource”, usually on the web. Some great, fundamental, and obvious secondary sources are advertising copy, product information, Linkedin, websites, and sales brochures.
These sources provide a great deal of product information so you can learn the basics of how your competitors are positioning their products and themselves. What features and benefits are they’re using to sell their products or services. These basic secondary sources give an idea of:
- How and what are your competitors planning for the future?
- How their organisation is run
- Their new product information or innovation
- What they are saying about their new product
Product reviews are valuable for revealing a competitor’s product strengths and weaknesses. Business databases can be accessed for free at most public and college libraries with business resources. Then there are the government sources for such information as the annual financial reports, surveys, industry directories and national and local statistics. If your competitor is a publicly-traded company, its reports may be available on their website or via the exchange they trade on. And perhaps there will be analyst reports available too.
Then there are your own sales teams. They probably have more access to competitive information than anyone else. Customers can show your sales team, literature, contracts, price quotes and other information from competitors. They also interact with industry peers, And will often learn what their rivals are doing or hear the gossip.
Your trade associations compile and publish industry statistics and reports on industry news and its leaders. Many will sponsor trade shows and network meetings, where you can see firsthand what your competition is producing and discover new players in the scene. Visit all physical locations of your competitors in your geographic region. Be a prospective customer. Ask questions about your competitors’ products. No need to lie in this situation, but you need to tell them who you are either.
Call them up and ask questions. See how you compare in terms of customer service and get on their email list. A friendly conversation can go a long way. People enjoy talking about themselves and sharing their success stories and concerns with peers. Try and interview your customers, suppliers and industry experts about your competitor product and service. Now, this should get you started on your road to Competitive analysis. Once you’ve collected all the information, it’s time to analyse it.
Now, how analysis of your competitors with help you
Once you’ve gathered all of the competitive information you’ve been able to find, it’s time to analyse. It would be best to assess product information, market share marketing strategies, and isolate your competitors’ strengths and weaknesses.
Then there’s product evaluation. Determine what features and benefits of your products are most important to your prospects and current customers. A product’s “features” competitive position is mainly determined by how well it is differentiated from its competitors and, yes, price. Make a list of your competitors’ product features and benefits in order of priority. Indicate which competitors have what features and benefits. Prepare a grid to show whether or not each of your competitors possesses them.
Features can be straightforward. Either a product has them, or it doesn’t. Benefits are much more subjective. And the most critical opinion must be that of current or potential customers. Now determine how own your product compares to your closest competitors. And what features and benefits are unique to your product compared to theirs? Usually, the more unique features and benefits your product has, the stronger your market position.
The next aspect to look at is pricing. Unless you have isolated clear and obvious benefits to your customers, if your price for a similar product or service is higher than the competition, you’re going to have a struggling market position. And if it’s lower than the competition, you may have a better product position. Also, look for trends in pricing rather than momentary rises, and false customer preferences for products or services are just one part of the picture.
Some other things that you need to consider include:
- Do your competitors have the financial resources to withstand any significant financial setbacks?
- Do they have enough money in the bank to sustain a pricing cutting exercise? How long for? Would they do it?
- How are they currently funding new product development and improvement?
- How do they save time and cost with smart production and delivery techniques?
- What relationships do they have with other companies regarding product development, promotion or add on sales
- How’s their morale and staff retention levels?
- What is their employee motivation, commitment and productivity levels?
Market share is a commonly used performance indicator. A competitor may not offer the best product or service, But if they have a significant market share, they may control the standards for their products or services. Devote substantial resources to maintain market share. And influence the popular perception of the product or service.
To determine your company’s market share on a percentage basis, use the formula current market share equals company’s sales divided by industry sales. Then calculate the same for each of your competitors. Look to you determine what your competitors market objectives are and the strategies they’re using to achieve to:
- Maintain or increase their market share to maximise short term or long term profits
- Introduce technology to improve their products and change your market
- Establish themselves as market leaders to protect their market share under attack by solid competition
- Develop new markets for their existing products
What are their strategies?
Once you’ve identified the objectives your competitors want to achieve, you need to see what strategies are put in place to maximise their success. Ask how you can counteract some of the strategies they may be used to reduce their prices, marketing, and advertising strategies. To develop an effective competitive strategy, you need a realistic assessment of your competitors, strengths and weaknesses as viewed by the market. You need to ask:
- What does each of your competitors do that is better than your own company?
- What places are they weak or worse than your company?
Slowly, you will build a clear picture of your position. And also, determine if you are a market leader, one of several followers or new to the marketplace. Once you’ve identified and analysed the competition and understand your position, you’re ready to do something about it. So next steps could include:
- Identify and discuss the main aspects of competitive advantage and disadvantage
- Review your competitive environment
- Look for similar and substitute products or services
- Summarise the significant problems and opportunities facing your firm which may require action
Take the following into account:
- Types of market penetration
- Distribution coverage
- Product line needs
- Price revisions
- Cost reductions or increases
- Market segmentation
Integrate your competitor analysis with demographic market analysis to design and implement a quality marketing strategy to strengthen your market position.
Understanding your position
Now that you understand your position and how can you limit and control the competition. Market segmentation further allows you to focus your attempts to limit and control the competition on a smaller target. There are many strategies a business can employ in a competitive environment, from price to new packaging or improving customer service to new product development. To beat the competition, you must first know the competition.
Finally, how analysis of your competitors gains a Competitive Advantage in your market
This article explained how analysis of your competitors gains a Competitive Advantage in your market. To achieve and keep on achieving a Competitive Advantage in your market, you must have a thorough knowledge of your competition, have a great place to start, collect information and then analyse to make the most of your situation. And to beat the competition, you must first know the competition.