A competitive analysis is an essential tool that can be used to monitor the activity of a business’s competition. For a business to succeed in a competitive industry, a detailed competitive analysis can be one of the most important things to collect and understand. Two of most important aspects of any competitive analysis are when to collect the information and exactly which elements to research.
The practice of completing a competitive analysis can vary by intensity and sophistication based on the size of a business and their competitive landscape, but there are 6 critical characteristics that are most relevant when conducting an analysis.
- Who are your direct competitors and what is your share of the market?
- Who are your indirect competitors?
- What are your competition’s strengths and weaknesses? What are your strengths and weaknesses?
- What are the differentiators of your product or service?
- Is your target market important to your competition?
- Does your competition have a unique marketing and advertising strategy? What can you learn from it?
Some fundamental areas of focus while conducting a competitive analysis and successfully utilizing its findings include:
Direct and Indirect Competition
Direct competition includes all of the known competitors within the marketplace that offer a very similar product and service with comparable pricing and function. Indirect competition consists of businesses that provide anything that can be a close substitute for your product or service, as well as any elements that exist within the marketplace that can adversely affect the success of your products and services. As advancements in technology continue to make a difference in production and marketing, the importance of understanding your direct and indirect competition becomes vital.
Marketing Strategy
A competitive analysis is essential when developing any marketing strategy. By thoroughly understanding the positioning your competition holds within the marketplace, your can clearly define how to outline the specifics of your marketing objectives and ultimate goals. Monitoring trends amongst the competition can help solidify an effective SEO and content strategy, as well as the need and messaging for your advertising. It can also provide important information when developing and maintaining relationships with your sales and business partners.
Pricing Strategy
Pricing your product or service correctly has always been an essential element of success. By monitoring the competition, you can recognize where your pricing stands and if it requires an adjustment. Maintaining the right balance for your business and your customers is key. If pricing is set too high for the market, customers can switch to the competition. If pricing is too low, the business runs the risk of losing out on essential revenue. Your pricing strategy should be a result of the justified value of your product or service in the eyes of your customer, not an exact match to your competition.
Product Features Comparison
Outlining the features of your product is an important element of a competitive analysis. This activity can provide a clear understanding of how your product or service compares to the competition. Important questions that should be answered in this comparison include:
- What is the level of quality in comparison to the competition?
- What unique value does it provide the customer?
- What is the overall offering and is it similar to the competition?
- What unique benefits does the product or service provide that the competition does not?
Once these important details are gathered, the marketing strategy can begin to focus on these specific points of differentiation.
Conducting a competitive analysis can help decipher who your competition is, what value they bring to the table, and where your business fits into the mix. Use it to closely monitor and stay in tune with the developing landscape and market trends, keep on top of your products and services, and develop a plan of action for times of trouble. A competitive analysis is an essential element of the marketing strategy at all times, no matter what size business.