Recent research shows that 94% of businesses are investing in competitive research and intelligence[1]. This is because competitive analysis is essential for comprehending your market position and identifying opportunities for growth. It allows businesses to benchmark their performance against industry leaders, discover strategic insights, and enhance their competitive advantage.
In this article, we’ll explore the meaning of competitive analysis, delve into its benefits for your business, and provide a step-by-step guide to conducting an effective competitor analysis. By utilizing this comprehensive guide, you’ll be able to stay ahead of your competitors and make informed strategic decisions.
What Is Competitive Analysis?
According to research, around 90% of Fortune 500 companies use competitive intelligence to gain an advantage in their industries[1]. This demonstrates the immense business value of performing competitor research. Not only does it give you a research-backed overview of your market, but it can also contribute to long-term success.
Here are some other benefits of carrying out competitive analysis:
Understand Your Market and Industry
Competitive analysis provides crucial insights into the dynamics of your market and industry. By evaluating your competitors’ strengths, weaknesses, opportunities, and threats, you can identify trends, market demands, and potential areas for growth.
This understanding allows you to make informed decisions, align your business strategies with market realities, and anticipate industry shifts, which can enhance your market positioning and long-term sustainability. Additionally, research shows that competitive intelligence is a strategic tool business executives use to enter and succeed in new markets[1], meaning that insight obtained from analyzing your competitors is valuable for market expansion.
Identify Your Differentiators
Analyzing competitors helps you identify what makes your business unique. By comparing your offerings, value propositions, and customer feedback against those of your rivals, you can pinpoint distinct strengths and attributes that set you apart in the market. This clarity enables you to refine your marketing messages, enhance product features, and emphasize your unique selling points, ensuring that your brand stands out to potential customers.
Get Closer to Your Target Audience
Competitor research provides valuable information about how other businesses engage with their customers, including their strategies, communication channels, and customer service practices. Studying these aspects allows you to identify what resonates with your target audience and tailor your approach accordingly. By aligning your offerings with customer expectations and preferences, you can foster stronger connections, improve customer satisfaction, and build loyalty.
Identify Gaps in Your Strategy
By performing strategic competitive analysis, you can identify areas where your strategy may be lacking or discover opportunities for improvement. This could include areas like product features, marketing tactics, customer service practices, or technological advancements. Recognizing these gaps allows you to address them proactively, innovate, and enhance your overall strategy, ensuring that you stay competitive and relevant in the marketplace.
Foster Innovation
Competitor analysis can inspire innovation within your business. By observing the successes and failures of competitors, you can think creatively about how to differentiate your offerings and improve your processes. This competitive insight encourages you to stay innovative and agile and continuously look for ways to enhance your business.
Mitigate Risks
Monitoring your competitors closely helps you identify potential threats early and develop strategies to address them. These threats may include new entrants to the market, changing customer preferences, or disruptive technologies. Being aware of these risks allows you to adapt quickly and protect your market position.
10 Best Practices for Conducting Competitor Analysis
Now that you have a foundational knowledge of competitive analysis, let’s explore the steps needed to conduct your competitive market research.
1. Identify Your Competitors
Embarking on competitive analysis begins with a clear identification of who you’re up against. Typically, there are two types of competitors, both of which need to be identified in a detailed analysis:
- Direct competitors are those offering the same services or products as you, often within the same market space.
- Indirect competitors might not share the same product line but fulfill the same customer needs through alternative solutions.
For example, a local coffee shop might see another café as a direct competitor, but a nearby convenience store selling coffee could be an indirect threat that might be overlooked in a less thorough analysis.
Utilizing a blend of digital tools — Google for broad searches, social media for real-time activities, industry reports for trends, and direct customer feedback for unfiltered opinions — provides a 360-degree view of your competition. This comprehensive approach ensures you’re not missing out on any potential threats or opportunities.
As famously said by Sun Tzu, Chinese general and strategist:
“Know your enemy and know yourself, and you can fight a hundred battles without disaster.” – Sun Tzu
This emphasizes the importance of having a thorough knowledge of your competitors when it comes to strategic planning, as well as highlights the necessity of competitor research for success.
2. Analyze Competitors’ Strengths and Weaknesses
Conducting a SWOT analysis — examining Strengths, Weaknesses, Opportunities, and Threats — provides invaluable insights into your competitors’ operations. Strengths and weaknesses focus on internal factors, highlighting things like:
- What your competitors do well, such as exceptional customer service or groundbreaking product innovation and
- Where they fall short, perhaps in marketing strategies or distribution channels.
On the other hand, opportunities and threats look at external factors, such as identifying potential market shifts or looming challenges they may encounter.
Information obtained from this analysis can help you adjust your strategies based on learnings from their strengths and opportunities, as well as capitalize on their threats and weaknesses to improve your position in the market.
For instance, if a competitor is highly praised for an innovative product feature but criticized for poor after-sales support, this presents an opportunity for you to capitalize on and differentiate your offerings by emphasizing superior customer service and excellent post-purchase support, thereby strengthening your competitive position in the market.
3. Evaluate Competitors’ Offerings
Truly understanding what you’re up against requires experiencing your competitors’ offerings firsthand. This immersive approach allows you to assess the quality, usability, and customer service experience from a consumer’s perspective. This allows you to identify what makes their products or services appealing to the target market and reveals any existing gaps that your business can exploit.
For instance, purchasing a software subscription from a competitor can reveal strengths in their user experience design you might want to incorporate into your product development while also highlighting weaknesses in customer support or feature limitations.
Consider the story of Apple and Xerox. In the late 1970s, Steve Jobs visited Xerox’s Palo Alto Research Center, where he saw the first graphical user interface (GUI) being used on a computer. Although this technology was revolutionary, Xerox hadn’t fully grasped its potential. Inspired by what he saw, Jobs introduced the Apple Lisa and, later, the Macintosh — both of which transformed personal computing by making it more user-friendly and accessible[2]. This move not only set Apple on its path to becoming a tech giant but also showcased the power of recognizing and acting on opportunities that competitors overlook.
4. Conduct Continuous Market Research
The marketplace is an ever-evolving ecosystem, with consumer preferences and competitive strategies constantly shifting. Continuous market research is vital to keeping your finger on the pulse of these changes. This involves regular analysis of competitors’ operations, tracking their service updates, marketing efforts, and strategic pivots.
Tools like Google Trends provide insights into search behavior trends, while industry forums and social media analytics offer a window into public sentiment and competitor activities. Engaging directly with your customer base through surveys and feedback mechanisms can also yield direct insights into how your offerings compare with competitors.
Finally, industry conferences and events are a great place to meet competitors’ employees and exchange valuable insights in an informal way.
5. Utilize Alerts for Real-Time Monitoring
Staying ahead in today’s fast-paced market requires real-time awareness of competitors’ activities. Tools like Google Alerts provide instant notifications on competitor mentions, product launches, or strategic changes. This continuous stream of information allows you to react swiftly to market developments and adjust your strategies to counter or capitalize on competitors’ actions.
For example, an alert about a competitor’s new partnership could signal a shift in market dynamics and prompt you to explore similar strategic alliances. Such proactive monitoring serves as an early warning system, ensuring you’re always prepared to respond to competitive threats and opportunities.
6. Learning from Competitors’ Successes and Failures
Observing and analyzing competitors’ successes and failures offer valuable lessons without the direct cost of experience. This approach helps you to adopt best practices that have proven to be successful while avoiding pitfalls that have tripped up others.
For instance, a competitor’s highly successful digital marketing campaign provides a blueprint for effective online engagement, and using platforms like Facebook’s ad library can give you insights into what type of ads the business ran and how much engagement it got.
Let’s look at a real-world example of this strategy in action. In the early 2000s, Blockbuster had the chance to buy Netflix for a mere $50 million[3]. Netflix was just a fledgling DVD rental service, and Blockbuster was the giant of the industry. However, while the industry giant saw Netflix as a minor player in DVD rentals, Netflix astutely pivoted to digital streaming, reshaping the entertainment landscape, while Blockbuster filed for bankruptcy in 2010[4].
Netflix’s keen observation of market trends and their competitors’ underestimation led them to redefine entertainment consumption. This story highlights the danger of dismissing emerging competitors and the necessity of adapting to industry innovations.
7. Adapt Your Strategy Based on Insights
Competitor research isn’t just about gathering information. The ultimate goal of competitor analysis is to inform and adapt your business strategies for competitive advantage. This involves taking the insights gathered from your research and applying them to refine your product development, marketing, customer service, and overall business approach.
As aptly said by Jack Welch, Former CEO of General Electric:
“Change before you have to.” – Jack Welch
This quote underscores the importance of proactive adaptation and innovation in response to insights gained from competitive analysis. By remaining agile and continuously evolving your strategies based on competitor intelligence, you can maintain a competitive edge in your industry and stay ahead of the curve.
8. Build Relationships and Monitor Regularly
Beyond conducting competitive analysis, fostering relationships within your industry is vital and can provide ongoing insights and opportunities for collaboration. Engaging with competitors at industry events, through professional forums, or in collaborative projects can offer a deeper understanding of market dynamics and strategic thinking.
In addition to that, a system of continuous monitoring of the competitive landscape is also essential. Utilize tools and platforms to stay updated on competitors’ activities, as this ensures that you’re always equipped with the latest intelligence to inform your strategic decisions. This approach not only keeps you ahead of the curve but also cultivates a network of industry relationships that can support mutual growth and learning.
9. Incorporate Customer Feedback into Your Analysis
Customer feedback is invaluable for gaining insights into how your offerings compare to those of your competitors. To gather feedback, actively seek it through surveys, reviews, and social media channels to understand customer perceptions and preferences.
For instance, receiving consistent praise for a unique feature of your product highlights a competitive advantage, while recurring complaints about a service aspect might indicate an area where competitors are outperforming you.
By systematically collecting and analyzing this feedback, you can identify strengths to leverage and weaknesses to address, ensuring your strategies are customer-centric and aligned with market demands. This customer-driven approach not only enhances your competitive analysis but also guides product development and service enhancements to stay ahead in the market.
10. Apply Advanced Analytical Techniques – Competitive Analysis Frameworks
To gain a comprehensive understanding of the competitive landscape, it’s essential to utilize advanced analytical techniques such as Porter’s 5 Forces and PESTLE analysis.
- Porter’s 5 Forces: This framework offers a structured method for assessing the competitive dynamics within your industry. It delves into factors such as the threat of new entrants, the bargaining power of suppliers and customers, the threat of substitute products, and the intensity of competitive rivalry. It can help you identify areas where your business faces challenges and where opportunities for differentiation and growth lie.
- PESTLE Analysis: Additionally, employing PESTLE analysis expands on the insight gotten from a 5-forces analysis by considering external macro-environmental factors that could impact your business. By examining Political, Economic, Social, Technological, Legal, and Environmental aspects, you gain insight into broader trends and forces shaping your industry’s landscape. For instance, a PESTLE analysis might reveal emerging regulatory changes that will affect all industry players, offering a strategic opportunity to proactively adapt your operations and gain a competitive edge.
These frameworks provide a structured and systematic approach to analyzing the competitive environment, enabling strategic decisions that are well-informed by a deep understanding of both direct competitive dynamics and broader market forces. By applying these advanced analytical techniques, businesses can navigate uncertainties, identify strategic opportunities, and stay ahead in a rapidly evolving marketplace.
Monitoring the Competition Post-Analysis
Although a competitive analysis is comprehensive and insightful, it does not eliminate the need for post-analysis monitoring. Combining in-depth analysis with ongoing vigilance is key in the ever-evolving business landscape. This crucial phase transforms insights into action, fostering a culture of continuous adaptation and foresight. Here’s the streamlined approach:
- Establish Active Engagement: Set up a routine for actively engaging with the competitors. Subscribe to competitors’ newsletters and follow them on social media platforms. This offers valuable insights into their strategies, product launches, and market moves.
- Attend Industry Events: Attend industry conferences, seminars, and trade shows not only for networking but also to gather firsthand intelligence on emerging trends and competitor behavior. Engage in discussions and observe presentations to stay updated on industry developments.
- Utilize Competitive Intelligence Tools: Leverage advanced competitive intelligence tools to receive regular updates on competitors’ activities and market shifts. These tools automate the process, saving time and effort while providing real-time data for strategic adjustments.
- Monitor Online Presence: Continuously monitor competitors’ online presence, including their website updates, blog posts, and social media interactions. Analyze customer feedback, reviews, and comments to gauge market sentiment and identify areas for improvement.
- Track Pricing Strategies: Keep track of competitors’ pricing strategies, discounts, and promotions. This helps in understanding market dynamics and positioning your offerings competitively.
- Analyze Marketing Campaigns: Analyze competitors’ marketing campaigns, including advertisements, email newsletters, and content strategies. Identify successful tactics and incorporate them into your own marketing efforts.
- Stay Updated on Product Developments: Monitor competitors’ product developments, new features, and innovations. Evaluate how these advancements impact market demand and consumer preferences.
- Benchmark Performance Metrics: Continuously benchmark your performance metrics against competitors. This includes key performance indicators (KPIs) such as market share, customer satisfaction, and brand perception.
- Stay Agile and Adaptive: Remain agile and adaptive in response to changing market conditions and competitor actions. Be prepared to pivot strategies quickly based on new insights and emerging opportunities.
- Regularly Review and Refine Strategies: Conduct regular reviews of your competitive analysis findings and refine your strategies accordingly. Keep your competitive analysis process dynamic and iterative to stay ahead in the competitive landscape.
By incorporating these best practices into your post-competitive analysis framework, you can effectively monitor the competition and maintain a competitive edge in your industry.
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At NUOPTIMA, we specialize in helping businesses analyze their competition. We run audits on their digital performance across channels to identify opportunities for your business to gain competitive advantage and scale. A notable example of our impact is our collaboration with Alphagreen, Europe’s largest CBD marketplace. Through meticulous market and competitive analysis, we propelled them to market dominance within six months[5], earning them a prestigious nomination for the ‘Best Scale Up’ award at the 37th Marketing Society Awards.
In addition to helping you perform competitive research, we also offer a comprehensive list of SEO services and have a team of experts ready to optimize your digital presence. From analyzing competitors’ keyword strategies to identifying missed opportunities for your business, we ensure your SEO efforts stand out. Our exhaustive competitor study also uncovers new link-building and marketing opportunities to enhance your online visibility.
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Conclusion – Adopting a Dynamic, Chess-like Approach
Success in business, much like in chess, depends on foresight, adaptability, and strategic agility. It’s not just about reacting to the present but also about anticipating future moves, understanding competitors’ strategies, and shaping the competitive landscape.
By embracing competitor analysis as an ongoing strategic game, you can prepare your business to confidently navigate market complexities with confidence. Every market shift should be seen as an opportunity, and every competitor move as a challenge to overcome. Arm yourself with insights and strategies, knowing that with each move, you’re not just competing but also shaping the future of your business and making strategic decisions that will drive you toward success.
FAQ
Competitive market analysis is a process that involves gathering data on competitors’ strategies, strengths, and weaknesses to gain insights into market dynamics and inform strategic decision-making in a specific market segment.
Although a SWOT analysis isn’t the full scope of a competitive analysis, it is a key component of competitor research. It assesses the strengths, weaknesses, opportunities, and threats of your business, as well as those of your competitors, with the goal of providing a comprehensive view of both internal and external factors that might affect your business.
Competitive analysis typically involves multiple steps, which include identifying your competitors, gathering information on their products and services, analyzing their strengths and weaknesses, assessing market trends, and formulating strategies based on the findings to gain a competitive advantage.
References
- https://www.evalueserve.com/blog/competitive-intelligence-statistics/[1]
- https://www.newsweek.com/silicon-valley-apple-steve-jobs-xerox-437972[2]
- https://finance.yahoo.com/news/blockbuster-had-opportunity-buy-netflix-185915158.html[3]
- https://www.theguardian.com/business/2013/nov/06/blockbuster-video-closes-remaining-stores[4]
- https://www.businessleader.co.uk/europes-biggest-cbd-marketplace-alphagreen-set-to-raise-2m-funding/[5]
