Updated on 25/01/2021
It’s natural that businesses may want to be competitive, and to edge out against rival businesses as it can mean reaping rewards such as increased revenues or growing customer bases. The process of becoming more competitive, though, is a complex one.
It starts with introspection; truly understanding your customers, your value offering and your market. Then, it may require some competitor research to establish who you’re competing against and for which products or services.
Finally, this cycle can be completed with a thorough competitor analysis. It’s this final part of the competitor mix that we’re going to talk about today, as we outline a competitive analysis template and explore how you could look to compare your business to a competitor’s.
A competitor analysis is an investigation into your competitors’ business strategies, followed by an evaluation of how the strategies differ. It establishes the strengths and weaknesses of each party involved, enabling you to make more informed strategic decisions that put your business’ best interests at heart.
Before diving into a competitor analysis, it could be useful to double-check that you’ve fully mapped out the competitive landscape surrounding your business and industry. With full visibility over who you’re competing against and in what ways, you’re able to begin analysing. So, it may first prove valuable to conduct a traditional landscape analysis using frameworks such as Porter’s Five Forces, before asking yourself; ‘have I taken all reasonable steps to identify competitors?’.
You may find yourself competing with competitor products that are typically outside of your industry, or your industry itself may be evolving and changing, but if you’re confident that you can answer this question with a ‘yes’, then let’s move on to developing a method for competitor evaluation.
When you compare a competitors’ business with your own, on what grounds should you look to compete? What are the different levels at which you can assess a small business and its’ operations?
Here are a few suggestions for a competitor analysis framework that may help you measure competitors in an objective way.
One of the key elements to consider when kickstarting your competitor analysis is the amount of information you’re able to gain on a competitors’ activity. Naturally, more is better.
To maximise this, look at your competitor’s activity across all possible channels – from in-store promotions to organic Twitter posts. What products and services are they offering? How are promotions developing over time, and which messages are they investing the most resources into? Is their offering seasonal, and are they running promotions to further growth? Speaking of which…
From an offline perspective, are they running physical advertisements such as cleverly placed billboards in your area? If relevant, how do they utilise their store space to attract customers? Do they have visibility in printed publications or magazines?
Then, digitally, what mediums are they investing in for advertising? Perhaps the easiest way to establish this is to simply google their brand name and look at the results page you’re shown. If your search returns results with ‘Ad’ next to their website, then you know they’re utilising Google ads. But there are many more digital channels to consider, including all forms of social media, and SEO.
You could also conduct more searches to establish whether they’re also paying to show ads on non-branded keywords that are important to your brand. If you own a bakery, for example, then ‘local bakery’, ‘bakery in Manchester’, or ‘local bakery delivery’ may help you find where competitors are paying to be visible.
Keyword research tools such as Ahrefs (pictured above) may help you identify how customers are searching for products or services relevant to you. It may be worth exploring the variety of tools offered by different providers to find a good match for your SME.
Having made as many observations as possible on your competitor’s activity, you can likely speculate on which areas of their marketing or product activity they’re most dependent on. It could be the case that a local coffee shop you’re vying for business against uses online advertising intelligently to drive footfall, or you may uncover from your research that they do not actually have any online presence; creating an opportunity for you to capture market share.
With a good idea of competitor strategy in mind, you could look to explore the bigger picture behind where their business is going and where it’s come from. That is, to identify their business objectives.
Businesses are inclined to stick with the strategies that drive success for them. With this in mind, if you’ve observed from digital marketing tools that a competitor is ranking more effectively in Google for searches around a specific product, you could reasonably speculate that improving the visibility of that product is a key objective for their business.
It can also be useful to think about the intention behind their activity; are they looking to drive conversions with salesy-messaging, or to drive awareness by posting information about their brand on social media? Further observations that may be useful to make include looking for investments in infrastructure, or perhaps technology. What’s more, they may be acquiring new physical resources or diversifying their product offering.
Repeating this methodology of identifying competitor strategies and speculating on probable objectives for each channel, you may be able to paint a good picture of their overall business objectives for the upcoming year. But, what do you then do with those objectives?
It could be wise to see this process of competitor analysis as more of an ongoing cycle rather than a one-off assessment. So, by creating a tracker you may open more opportunities to view competitor objectives from a month-to-month, or even year-on-year perspective that may indicate their growth priorities over the long term.
Each quarter, you could track the activity you’ve noted, such as digital PR activity if you’re noticing them getting local press coverage or promotional messages delivered through advertisements and try to identify the objectives behind them. Tracking when they switch from more brand-building activity to conversion-led messaging, and what type of sales and discounts they run could help you get ahead of the curve when switching up your own promotional activity.
With your rivals’ strategies and business objectives at the forefront of your mind, you can start to think more about how you’re competitively positioned against them in market. It could be worth conducting an analysis on your differing product ranges in a similar fashion to how you would if starting a new business. However, a proper competitor analysis looks at not only where you’re currently positioned, but also at where you’re heading.
For example, if you’re a local barber shop that competes by offering a luxurious service at a higher price point than your rivals, but you notice that they’re renovating their businesses due to continued success, you could look to pivot your strategy and come closer to their price point if you think it could potentially unlock a larger customer base. This type of long-term decision making, and strategic thinking, is both easier to sell into stakeholders and better supported by the data acquisition and objective monitoring we’ve covered in points 1 and 2.
You could also look to make projections on how much profit competitors are making and to what extent they can reasonably grow their offering, perhaps noting increases in digital advertising spend if that strategy seems to be working them. It’s also important to be realistic about your own capabilities and limitations when determining how you’ll respond strategically.
The last part of the competitor analysis cycle is to consolidate your findings and simplify them into a set of assumptions about competitor activity that your business can really work with.
Assumptions could be as simple as ‘X business is investing in digital marketing and using paid LinkedIn posts to attract new customers’, and they could allow you to forget the detail and compare your strategies in a top-level way; adopting a bigger-picture view.
A competitor analysis can be a powerful tool that enables your business to stay competitive, innovative and avoid stagnating. As such, it can be an incredibly powerful motivator, and having a conversation about competitors within your business can sometimes yield innovative ideas that could benefit your business’ future, or it could result in you finding new motivation to compete.
This has been prepared by Esme Loans Limited for informational purposes only and should not be treated as advice or a recommendation. There may be other considerations relevant to you and your business so you should undertake your own independent research.
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