Do you need to know the strengths and weaknesses of your current and potential competitors? Of course, you do. How else will you know if your product/service is still competitive? Stagnant or declining sales don't happen overnight, so keeping a pulse on your competition is essential.
World-class athletes study their competition carefully because it increases their chances of winning. Businesses are no different. To win, you have to know who you are competing against.
Where Do You Start?
Let's start with some basic questions you need to ask yourself:
- What specific business (niche market) are you in?
- What are your main strengths?
- Who are your key (most visible) competitors?
- What benefits do they ofter to their customers?
- Do they offer anything unique?
Take your time answering these questions, because it will set the right tone for the next step.
Create A Profile For Each Competitor
Having a profile for each competitor will help you organize your findings, and make it easy to reference. Start by writing down some basic information about each competitor.
Competitor Profile (example):
- Name, years in business, location (offices), and number of employees
- Financials - price, revenue, profitability, etc. You may have to do some educated guesstimating.
- Product/Service offerings
- Marketing - market share, promotional offers, advertising campaigns, digital channels (e.g. website, facebook, google, etc.)
- Target customer (ideal customer)- this may not be obvious at the beginning, but will eventually become apparent. For example, what keywords are they targeting? Which digital channels do they use? How do they use social media? How do they describe the company on their website? And so on.
- Unique Selling Proposition (note: SWOT analysis can help you identify their USP)
Don't forget to include future competitors! Many companies don't think about future competitors until it's too late. How do you spot a future competitor? A future competitor often exhibits these traits:
- They offer related, but not competing products/services
- Display traits of aggressive growth (e.g. quickly expanding into new regions or new product categories)
- Near, but not directly in your geographical area
You do not need to keep detailed information about future competitors, so we suggest having this information in a single profile (labeled "Future Competitors" or "Potential Competitors").
There are numerous tools and techniques to help you analyze your competition. SWOT analysis is one technique we often use, so we will use it as an example.
SWOT is an acronym for strengths, weaknesses, opportunities, and threats; therefore, SWOT analysis is used to illuminate your biggest strengths, weaknesses, opportunities, and threats.
You will only benefit from SWOT analysis if you are brutally honest. For example, many companies will list "customer service" as a strength, but the reality is very different. We suggest you ask your coworkers, partners, and customers for feedback.
After you perform a SWOT analysis on your business, the next step is to use it on your competitors, because it is often the quickest path to uncover their unique selling proposition.
Unique selling proposition is your competitor's most important weapon, so make sure you truly understand it.
Where Does Digital Marketing Fit In?
As we often mention in our posts, the great thing about digital marketing is the fact that you can measure everything. This also means that there is no shortage of tools that will help you find data on your competition. For example, website traffic, top-performing content, product prices, Ad spend, etc. Of course, a lot of these numbers are only estimates, but from our experience, the data is fairly accurate.
Also, you don't have to look further than a website to know what your competitor is focusing on. Which specific keywords they use, and how they describe their services/products will give you a significant clue on their strategy.
For example, most businesses think long and hard about their website's meta description. Why? Because it is prominently displayed in Google; therefore, the meta description will give you big clues on who they are targeting and how, and also if they are trying to pivot their business.
Dollar Shave Club (example)
"Everything you need in the bathroom – from razor blades to grooming products." Clearly, Dollar Shave Club has moved away from selling just razors to selling all grooming products for men; therefore, they entered a new space with new competitors.
Which Tools Can I Use To Help Me Analyze My Competition?
Which specific tools you decide to use will depend on many factors (e.g. size, industry, niche, internal expertise, etc.), so we hesitate to recommend any one tool.
However, you can start by evaluating some of these tools - we only listed tools that are easy to use and relatively inexpensive.
(in alphabetical order)
How Often Should You Analyze Your Competition
For most small businesses, once a quarter may be sufficient unless you are in the online shopping space, then you should do it more frequently. Medium-sized businesses with more resources should do in-depth analysis every quarter, but you should monitor your competitor's products/services more regularly. Finally, large companies with large marketing teams will typically do market and customer research frequently (ad-hoc).
Finding The Right Balance
Obsessing over your competition can do more harm than good because it frequently leads to "Me-Too" (Copycat) features and services. Also, companies that copy their competitors often lose their identity, and end up in a price-war.
Related: How to avoid Price Wars
On the other hand, sticking your head in the sand and ignoring your competitors can be disastrous, because you will not spot threats and opportunities until it's too late.
As is the case with most business initiatives, finding the right balance is vital, and competitor analysis is no different.
If you catch yourself talking about your competition every day, then you are probably obsessing over them. On the other hand, if you haven't checked your main competitor's website in months, then you are not doing enough.
As we demonstrated in this post, competitor analysis is certainly something an average decision-maker, manager, owner, CEO, or founder can undertake themselves. Of course, experts will produce better analysis (insight), but if you are in no position to hire an expert, then basic competitor analysis is better than no analysis at all.
World-class athletes and businesses alike study their competition because it helps them win! You should do the same.