To achieve and maintain a competitive advantage in reaching and selling to your target market, you must possess a thorough knowledge of your competition. An in-depth competitive analysis will provide you with:

  • An understanding of how your existing and potential customers rate the competition.

  • A positive identification of your competitor’s strengths and weaknesses.

  • A mechanism to develop effective competitive strategies in your target market.

Preparing to Conduct Your Analysis

Before you can start your analysis, or begin collecting information, you must first determine who your competitors are.

Who Should I Consider as Competitors?

Any business marketing a product similar to, or as a substitute for, your own product in the same geographic area is a direct competitor.

Firms offering dissimilar or substitute products in relation to your product or service are considered indirect competitors.

For example, indirect competition would exist between the manufacturer of eyeglasses who competes indirectly with contact lens manufacturers.

To evaluate whether a business is your competitor ask?

  • What is the range of products and services they offer?

  • Are their products or services aimed at satisfying similar target markets?

  • Do they operate in the same geographic area?

Do I Need to Analyze All of My Competitors?

There are several markets where it is relatively easy to name every competitor, such as the steel and automobile industry. If this is the case for your product or service, you will need to develop an analysis for each competitor.

If you are selling in a market with many competitors, your job becomes a little more difficult. Since it is unrealistic to collect and maintain information on dozens of competitors, you can save yourself valuable time with the 80/20 rule. In fragmented markets with many competitors, it is most probable that 80% of the total market revenues are accounted for by 20% of the competition. So it’s the 20% you would examine most closely.

Do you know your target market? Build effective marketing personas with The Buyer Persona Workbook

Gathering Competitor Information

Professional marketing research, such as focus groups and questionnaires, can provide you with valuable information about your competition. While hiring a marketing research firm saves you time and legwork, it can pricey and simply not a possibility for new and growing businesses. Plus, most of the information you need about your competitors is readily available.

What do I need to know?

Before you begin seeking out your sources, keep in mind the information you are looking for. At the very least you will be looking to answer to the following questions:

Regarding competitors

    • What is the full range of products and services they offer?

    • Are their products or services aimed at satisfying similar target markets?

    • Are my competitors

      • profitable?

      • expanding, or scaling down?

    • How long have they been in business?

    • What is their

      • marketing strategy?

      • promotional strategy?

      • pricing structure?

      • size or revenue?

      • percentage of market share?

      • total sales volume?

      • growth rate?

    • Have there been any changes in their targeted market segments?

    • What are their positive and negative attributes in the eyes of customers?

    • How do they rate in terms of price, quality, durability, image/style, value, name recognition, customer service, customer relations, location, convenience and more.

Regarding my company in comparison to competitors

    • Do they have a competitive advantage; if so, what is it?

    • How do current customers rate my business compared to the competition along important dimensions? (If you need help writing effective customer survey questions check out this vlog)

    • How can I distinguish my company from my competitors?

Where do I find information?

Now I said most of the info you need is readily available. Secondary sources are an excellent starting point for developing competitive and industry analysis.

Secondary sources are information developed for a specific purpose but later made available for public access and alternative uses - like sizing up your competition! Some great secondary sources are:

  • Advertising. Ad copy not only tells you a competitor’s price and other product information, it provides an indication of your competitor’s entire promotional program and budget.

  • Sales brochures provide a wealth of product information. You can learn how your competitor is positioning their product and company and what features and benefits they’re using to sell their product or service.

  • Articles in newspapers and magazines (online or print) can give you an idea of what your competitor is planning for the future, how their organization is run, and what new product information or innovations they have.

    • Product reviews are especially valuable for revealing a competing product’s strengths and weaknesses.

  • Reference Books and Databases can be accessed for free at most public and college libraries that have business resources. Some examples are:

  • Annual Reports. If your competitor is a publicly-held company, many of its reports to the U.S. Securities and Exchange Commission are available on the SEC-Edgar Web site.

  • Your Sales Staff probably has more access to competitive information than anyone else in your organization. Customers often show salespeople sales literature, contracts, price quotes, and other information from competitors.

  • Your Employees working in other areas of the company also become exposed to competitive information. They interact with others in their industry area and often learn what your rival is doing or hear gossip and rumors.

  • Trade Associations compile and publish industry statistics and report on industry news and leaders. Most also sponsor trade shows and professional meetings where you can see first-hand what your competition is producing and discover new players on the scene.

  • Direct Observation. Visit all of the physical locations of competitors in your geographic region. Act as a prospective customer; ask questions. Buy your competitor’s products. Call their 1-800 number to see how you compare on customer service. Get on your competitors email list.

  • Your Competitors. You can garner a great deal of information through a simple, friendly conversation. People like to talk about themselves and share their success stories and concerns with business associates.

  • Your Business Network. Make it a point to interview your customers, suppliers, and industry experts about your competition’s product and service.

Once you know who your competitors are, what you need to know about them and where to find it, its time to conduct your analysis. And lucky for you we'll be covering just that in the second part of this series.

Thanks for nerding out with me. Let me know if you found the vlog helpful in preparing for your competitive analysis by commenting below ;)

Not sure who your target market is - get your free guide to developing buyer personas today.

Get Persona Workbook