Every business owner wants to outdo the competition.
You want to offer more value, do more business, and ultimately have an advantage over your competitors.
But to do this, they have to gain a good understanding of who their competitors are, what their strengths and weaknesses are, etc.
That is why competitive analysis is very important. It helps businesses gather and analyse as much information as possible about the competition.
By analysing the competition, businesses can gain new knowledge, uncover market gaps they can take advantage of, identify opportunities to improve their business and how they operate, and much more.
Four Steps To Analysing Your Competition
1. Identify Your Competition
The first step to analyse your competition is to identify them. Every business has a good number of competitors, whether direct or indirect.
You must determine the brands and businesses that are offering the same value to your target market or a niche market, or satisfying the same customer needs that you are.
It is easy to identify customers that sell similar products like yours, but you must remember that other competitors help customers satisfy their needs differently.
Make a list of the top five (5) competitors you have identified, both direct and indirect.
2. Gather Information On Your Competitors
Now, after you have made a list of your major competitors both (direct and indirect), you have to research each of them.
The more information you can get here is the basis upon which you can conduct your analysis.
So, invest the necessary time and effort it requires.
So, where can you get this information? The first place you should look is google, read articles about them, visit their websites, eCommerce stores etc.
But it is unlikely that you’ll get sufficient information by visiting their websites, so you need to talk to their sales people, visit their social media and analyse their marketing, talk to customers, suppliers, and try their products or services yourself.
At the end of this step, you should know enough to conduct your analysis.
3. Carry Out S. W. O. T Analysis
A SWOT analysis is an analysis of the strengths, weaknesses, opportunities and threats of a business.
You need to conduct a SWOT analysis for both your small business and your top five (5) competitors.
This reveals areas where your competitors are performing better than you are, where your business has a competitive advantage, opportunities available for expansion, and threats facing your business.
To get the best insights from your analysis, you have to ensure that you’re making objective and honest assessments of your business and your competition.
If you find that it is difficult to be unbiased in your analysis, you should invite a third party to analyze your competition on your behalf.
4. Draft Your Competitive Strategy
Your analysis of your competition does stop after your analysis, you have to take the information you learn from steps 1 – 3 above to improve your business.
How is your business going to offer a better product? How are you taking advantage of the new opportunities and markets you uncovered? Can your sales or marketing be better? How are you going to strengthen your competitive advantage and develop new ones?
You have to write out your answers to these and other questions and take steps to implement them.