Reading Time: 4 minutes
As a decision-maker within a business that drives growth and innovation, one of the best ways to come up with a new marketing strategy, product feature, or pricing model is to conduct a competitor analysis.
Researching your competitors helps you in all aspects of business. It helps you create a brand that stands out in your industry, assess customer behavior and preferences, and enables you to identify the strengths and weaknesses of your competitors and use them to craft your own high-quality products with their own unique selling points.
With that said, many entrepreneurs and professionals in leadership positions still underestimate the value of competitor analysis or simply don’t know where to start. This article will provide insight into the advantages of conducting a competitive analysis and give some tips on how to start.
3 Benefits of Competitor Analysis
Knowing more about your competitors is never a bad thing. The more information you have about what leads to success or failure in your particular market, the better. Take a look below at three of the biggest advantages that come with conducting a competitive analysis.
Better Product Development
If you have a business in a competitive industry, you know that everybody is doing their best to create the most valuable and innovative new product with the most appealing selling points.
Knowing the kind of products your competitors offer can help you perfect your own—whether that means making your product more similar or more different. You can compare things like functionally, utility, and price to make improvements to your products or services, thus improving your market positioning.
Finding Gaps in the Market
Making a name for yourself in an industry is all about finding a competitive advantage and utilizing it. Conducting a competitor analysis and doing market research enables you to spot and develop products for unserved or underserved gaps in the market, or brand yourself in a way that attracts a new audience.
Crafting your business and your products and services to fit those unique niches will help you attract your own customer base, hopefully increasing your market share in your industry.
Improves Marketing Insight
Nowadays, a good marketing strategy usually revolves around a story-based approach and a narrative about how you can change your customers’ lives for the better. Knowing how your competitors are framing their products and services is vital, as it can help you become more creative and engaging in the way you communicate with customers and market your brand.
Along with that, seeing what your competitors’ customers don’t like about their marketing methods will inform you on what to avoid, and it can also give you an “in” with them if you fix those issues in your own marketing.
Where to Start With Competitor Analysis
So, where to start? Just like any market research, competitor research has a lot of different components and requires time and effort, especially if you want to be thorough. Outlined below are a few basic steps to begin with when conducting a competitor analysis.
Identify Your Competitors and the Products They Offer
The first thing you should do is determine who your top competitors are, ensuring that you’re looking at the most relevant data possible. In order to do this, you need to divide your competition into two main categories—direct and indirect. The direct competitors are those who offer similar products to you, and the indirect competitors are those who provide a different solution to satisfy the same customer needs or solve the same problem.
When doing a competitive analysis, it’s a good idea to focus on direct competition, especially for small businesses and esepcially if this is your first time doing in-depth competitor research. After you’ve narrowed down your list of competitors, you should begin analyzing exactly what they offer. Some questions to consider are:
- How do their products differ from the competition (both yours and other businesses)?
- Are they low-cost or high-cost providers?
- What is their market share?
- What is their target audience and who is their ideal customer?
- How do they distribute their offerings?
Analyze How They Market Their Product
Analyzing a competitor’s marketing efforts is another vital component of competitive analysis. The easiest way to do this is by looking at their website and their social media presence. Ask yourself the following questions to learn more about their marketing and advertising efforts:
- Do they create blog posts or eBooks?
- Do they have a podcast or a YouTube channel?
- On which social media platforms are they active?
- What channels do they seem to rely on most?
- Do they use PPC (pay-per-click) ads?
You can also sign up for their email drips and newsletters to get a better understanding of their mid-funnel strategies. As you do this research, it’s important to analyze any available data such as engagement rates on social media to determine which of their marketing moves are most effective. This knowledge can help you make decisions about your own marketing campaigns.
Take a Look at Their Pricing Model
There are a lot of significant factors that go into pricing a product, and one of them is understanding and analyzing what your competition is charging for a similar product or service. If your product has better or more unique features compared to what the rest of the market is offering, then you can make your prices more expensive than the standard.
However, you have to back up your pricing with marketing efforts and you should ensure your audience is receptive to paying more by using a data-driven approach when doing market/customer research.
On the other hand, you may find that your industry is in need of more affordable products. In that scenario, you might decide to come up with a business model that allows you to charge less than the competition to capitalize on a different side of the market.
Тakeaways
Doing competitive analysis is a must for any business that wants to succeed. Not only does it give you insight into all the ways you can stand out from the competition, but it also gives you ideas for how you can take your company to the next level by offering more innovative products, having a unique selling pitch, and marketing in a more engaging way.
