The Importance of Competitive Analysis in Business
Without a competitive analysis, it’s challenging to understand what others are doing to attract clients or customers in your target market. A comprehensive competitive analysis report can provide valuable insights, including:
- A description of your company’s target market
- Details about your product or service compared to competitors’
- Current and projected market share, sales, and revenues
- Pricing comparison
- Marketing and social media strategy analysis
- Differences in customer ratings
What is Competitive Analysis?
Competitive analysis involves identifying your direct and indirect competitors and using research to uncover their strengths and weaknesses relative to your own. This process helps you understand where you stand in the market and how you can improve your business strategy.
Direct competitors offer the same product to the same audience as you, while indirect competitors offer the same product to a different audience. By identifying these competitors, you can gather information to see how you compare in the market landscape.
Why Competitive Analysis is Crucial
Whether you’re running a business or playing in a football game, understanding your competition is key to success. While you may not be scoring touchdowns in the office, your goal is to secure business deals and win customers. The preparation methods for athletes and business owners are similar—once you understand your strengths and weaknesses compared to your competitors, you can improve your strategy.
Steps to Conduct a Competitive Analysis
Follow these five steps to create a competitive analysis report and gain a broad view of your market position. This process can help you analyze several competitors at once and better approach your target customers.
- Create a Competitor Overview Select between five and ten competitors to compare against your company. Choose competitors with similar product or service offerings and business models. Include both direct and indirect competitors to see how new markets might affect your company. A mix of startup and seasoned competitors will diversify your analysis. Tip: Use Google or Amazon to search for your product or service. The top results are likely your competitors. If you’re a startup or serve a niche market, you may need to dig deeper into the rankings to find your direct competitors.
- Conduct Market Research Begin in-depth market research, combining primary and secondary research. Primary research comes directly from customers or the product itself, while secondary research is precompiled information. Track the data you collect in a user research template. Primary Market Research may include:
- Purchasing competitors’ products or services
- Interviewing customers
- Conducting online surveys
- Holding in-person focus groups
- Examining competitors’ websites
- Assessing the current economic situation
- Identifying technological developments
- Reading company records
- Analyze the Data Compare each detail of your product or service against the competition to assess strategy efficacy. By comparing success metrics across companies, you can make data-driven decisions.
- Identify Strengths and Weaknesses Use the gathered data to identify your competitors’ strengths and weaknesses. This will help you understand where you can improve and what areas you can capitalize on.
- Develop a Strategy Based on your findings, develop a strategy to enhance your market position. This could involve adjusting your pricing, improving your product, or refining your marketing efforts.
Conclusion
Competitive analysis is a vital part of any business strategy. By understanding your competitors and where you stand in the market, you can make informed decisions to improve your business. Use our free competitor analysis template to identify your competitors and create a more insightful business plan.
