5 steps to conduct your own low-cost competitor analysis
Read time: 4 minutes
To build a successful business, you have to come up with products and services that stand out from the competition.
But to create those unique offerings, you need to know who your competitors are and what they are bringing to the market.
While you may not have the budget to hire a professional market intelligence firm, you can learn a lot about the competition by doing some simple research.
Here are 5 steps you can follow to conduct your own competitor analysis.
1. Identify your competitors
A competitor is someone who targets the same market segments as you with a similar product. As such, an advertisement company could operate next to another company that also sells advertisement without competing. How can this be? The businesses can target different customers: One might serve multinationals, while the other sells to local businesses.
Generally, competitors are divided into three types:
- Direct competition—These businesses offer the same products and services to the same clients within the same territory as your business.
- Secondary or indirect competition¯Businesses that offer slightly different products and services or target a different clientele within the same territory.
- Substitute competition—Businesses that offer different products and services to the same clients in the same territory.
2. Gather information about your main competitors
Once you’ve identified your main competitors, you’ll want to gather as much information as possible about them.
You can try to compile the following information about your competitors:
- Products and services—Evaluate their products or services and compare them to your own, ideally by purchasing them and trying them out. How is the quality? What features do you like or dislike? Who are their suppliers? Does it respond to consumer preferences?
- Pricing—How are their products and services priced? Do their prices vary for channel partners and customers? What is their discount policy? Can you estimate their cost structure?
- Positioning and branding—Analyze your competitors’ websites, product documents, brochures and catalogues. Follow them on social media and visit them at trade shows. What are their target markets? What is their unique selling proposition?
- Market reputation—Talk to customers, suppliers and distributors to get their views. What do they know about your competitors? What are their opinions about their products, sales and marketing strategies and customer service?
3. Analyze the competition’s strengths and weaknesses
Preparing a written evaluation of your competitors will allow you to compare their performance with your own.
You can list your competitors and write out their respective strengths and weaknesses. Are they popular because of their location? Visibility? The quality of their staff? Are their prices too high? Or does their product lack a key feature that’s demanded by your target customers?
This analysis will give you an idea of how you can adapt your strategy to counter their strong points and take advantage of their weak points.
4. Talk to your competitors directly
It can be a good idea to get to know your competitors personally. In fact, taking that first step can often lead to a relationship that’s beneficial for both sides.
Indeed, it’s not unusual for two companies to compete sometimes and co-operate at other times. For example, a competitor may be willing to refer customers to you if they don’t serve a particular market niche. But to do so, they have to know, trust and like you.
Even if you can’t come to an understanding with your competitors, talking to them can still help you gather important information to help you differentiate your business in the market.
5. Identify your competitive advantage
Analyzing the competitive landscape will help you identify your competitive advantage. Maybe it’s lower prices or promotions that attract new customers—but remember that this type of strategy can be copied by your competition and might not be viable in the long run.
Taking advantage of a weakness in the competition is always a good idea. But is it sustainable? A competitive advantage should ideally be a great strength that’s distinctive and can appeal to your target clients. Identifying your competitive advantage will help you create your messaging and brand image by relying on your key differentiator(s).
Another way of looking at it is that it’s important to keep tabs on the competition and improve your business in response, but you shouldn’t allow concerns about what others are doing to dominate your strategy.