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Effective Competitive Analysis Guide
For your business to stay viable and succeed in this omni channel world we have to do business in these days, you need to know almost as much about your competitors as you do about your own company, products, services and customers. Unfortunately, many businesses make the mistake of waiting until a competitor has opened up shop across the street (so to speak) and is cutting into their revenues and profits before they take the time and effort to find out who and what they’re up against. Just ask anyone in the brick and mortar retail store business. Were they paying attention to the rise of Amazon? Nope, certainly not all of them! And now those that aren't on life support are fighting to recapture market share or keep Amazon from taking share. Admittedly, some are continuing to do well in the throes of the “Amazon Apocalypse.” But, these are the ones that did their homework, kept on top of the competition and positioned their company, products and services in such way as to avoid Amazon damage. And, while we’re on the subject of Amazon, retailers are not the only sector that needs to pay attention to what the sector killer is up to.
A competitive analysis allows you to identify your competitors and evaluate their respective strengths and weaknesses. By knowing the actions of your competitors, you will have a better understanding of what products or services you should offer; how you can market them effectively; and how you can position your business.
Competitive analysis is an ongoing process. Too many businesses see it as a "one time and done" sort of need. But the reality is that you should always (as in around the clock, especially in this digital world) be gathering information about your competitors. Look at their web sites. Read their product literature and brochures. Get your hands on their products. See how they present themselves at trade shows. Follow them on social media. Check out their advertising in all channels. Read about them in industry trade press. Talk to your customers to see how they feel about competitive products or services. Secret shop them.
Click on the steps below to learn more about how to analyze your competitors
Step 1: Identify Competitors
Every business has competitors, and you need to take the time to research who your customers and prospects can approach to get a product or service that fills the same need as yours does. Even if your product or service is truly innovative or unique, you need to look at what else your customers could purchase to accomplish this task or fill this need. It’s not just pricing, it’s the whole offer, the product, pricing, services, support, etc., behind or in support of the product and sale. For example, you may be launching a website that sells home delivered packaged meals (a Meals on Wheels). Your competition would be other packaged meal websites, other food/grocery websites, the grocery stores in your customers’ market area, restaurants that delivery prepackaged meals, and any other businesses that are competing for the same meal/food dollars.
You start by looking at your primary competitors. These are the market leaders, the companies who currently dominate your market. They are probably the ones who you find yourself bumping up against in your search for new customers. If you’re a computer reseller VAR (value added reseller), it would be other computer resellers serving your target customer segments both on and off line. With the important of direct selling via the Internet, you have to consider some online resellers are primary competitors. If you also offer computer services along with computers, then your primary competitors would probably be those that have a physical presence in your customer’s market areas.
Next, you’d look for your secondary and indirect competitors. These are the businesses who may not go head-to-head with you, but who are targeting the same general market. Sticking with the computer reseller example, it might be local electronics stores, like Best Buy that also sell computers and support services, a national VAR like CDW, or a DELL Computers or IBM. Depending on your target market, retailers like a Target or Walmart, who also sell computers could come into play. Finally, look at potential competitors, who might be moving into your market area or selling direct into that market, like Amazon.com.
Step 2: Analyze Strengths and Weaknesses
After you've figured out who your competitors are, determine their strengths and find out what their vulnerabilities are. Why do customers buy from them. Is it price? value? service? convenience? reputation? Focus as much on “perceived” strengths and weaknesses as you do on actual ones. This is because customer perception may actually be more important than reality.
It’s a good idea to do this strengths/weaknesses analysis in table form within your overall competitive analysis database. Write down the names of each of your competitors. Then set up columns listing every important category (factor) for your line of business (product, price, value, sales processes, customer support, customer service, location, reputation, expertise, R&D, convenience, personnel, advertising/marketing, or whatever else is appropriate to your type of company). Once you have this table set, rate your competitors. Use a scale which indicates something is “not a threat” to something that is a “severe threat” (example: 1 for unimportant to 10 for very / extremely important). Add a section for comments to explain your ratings.
You will also want to look at their key business strategies, their financial condition and history, their wins and losses (if you’re talking B2B). It’s also a good idea to develop a calendar of your competitor’s marketing /promotional activities over the course of a year so you know when they have special promotions, events or other activities that might impact your business.
Step 3: Look at Opportunities and Threats
You will want to look into your competitors’ opportunities and threats as well. Strengths and weaknesses are often factors that are under a company’s control. But when you’re looking at your competition, you also need to examine how well prepared they are to deal with factors outside their control. These are called opportunities and threats.
Opportunities and threats fall into a wide range of categories. It might be technological developments, environmental factors, regulatory or legal action, economic factors, or even a possible new competitor. For example, an eCommerce business should know how well prepared other eCommerce companies are to deal with the changing regulations regarding the collection of sales taxes. Or a renewable resource power company (wind energy) should know what other wind energy companies are doing to prepare for environment and regulatory changes regarding off shore wind farms.
Again, an effective way to do this is to add a table to your competitive analysis database to cover SWOT and PEST analysis so you can track factors in each category, strength, weakness, opportunity, and threat.
Step 4: Determine Your Position
Once you analyzed your competitors’ business strategies, finances, sales and marketing factors, product related factors, service and support related factors, and done a SWOT and PEST analysis on them, you will need to develop your company’s positioning strategies verses the competition, your key differentiations and sell against strategies. Based on the results of your analysis, some of these may be obvious, but you will also have to take a hard look at how your business operates as well.
Areas of the analysis that you will want to include and possibly rank in terms of each company’s business might include:
Overall business condition
Financial status and condition
Overall business strategies
USP, value proposition
Promotional strategies, programs, activities, calendar
Personnel / staffing issues
Distribution / channel management
Service and support
SEO / SEM
Event trade show marketing
Each of these categories might be broken down into subcategories depending on your industry and markets. And, there may be other categories or factors that you would want to review and rank.
Step 5: What Do You Do With This Information?
Now you’ve collected all of this information, done your analysis and you’ve come up you’re your positioning strategies, key differentiators and key sell against strategies, the very next step is to bind all this information up, put it on the bookshelf and let it collect dust. Just joking. I am, but the reality is that for many businesses not only is this a “one-time” effort, but it’s an effort that once done is forgotten.
The first and most important aspect of this is that competitive analysis / intelligence is never done. It’s an ongoing business process that you need to instill in your organization that receives undying support from your management team. Collecting this information not only tells you what has been done, but if properly executed it can give you an eye into the future in terms of the behavior of your competitors so that you can be proactive rather than reactive in developing your competitive strategies.
The second most important aspect of competitive intelligence is dissemination of the information and resulting competitive strategies and plans to the rest of the organization as a whole. That would include finance, customer service and support, manufacturing, R&D, Fulfillment and operations, sales and marketing and the management team, etc. You can’t expect the sales organization to win deals, if they don’t have the right products and offers, not to mention sell-against strategies to deal with customer/prospect objections that are competitor related.
The best way to do this is to develop a universal competitive intelligence data system that everyone in your organization has access to so they all know or can find what they need to know about competitors quickly. It will (should) also provide them with information on how to deal with competitive issues.
We, at DWS Associates, have developed such an application which is cloud or server based that is available to those that need it 24/7 via desktop or mobile device. The product is “Intellicomp CIS” and will give the user access from desktop or mobile devices, a real necessity for sales executives in the field, who need the information at their fingertips when making customer/prospect calls. Click here for more information (Intelicomp CIS).
I. List of Competitors
List the key competitors (and potential competitors, this would include current as well as potential business partners) active in this market segment.
Note: include the predominant sub-segments the competitor covers when completing for a segment.
- Competitor Name
- Principal Lines of Business
- Geographic Coverage
- Size (Revenue)
- Predominant Subsegments
II. Comprehensive Competitor Profiles
Profiles of competitors provide a thorough understanding of key competitive capabilities and performance. Include a separate profile for each major competitor within the market segment.
- Vendor Identification
- Address(s) of primary locations, by type
- Date founded
- Ownership; parent organization
- Trademarks, brand names
- Nature of business
- Descriptions of lines of business
- Specific Offerings
- Other capabilities
- Leading solutions, products, services
- Focus market areas (i.e., industry sectors)
- Operating units
- Key personnel, positions
- Culture, management style
- Geographic coverage
- Key locations
- Number employed, by function, by geography
- Financial performance
- By principal line of business
- By market segment
- By geography
- Cost structure
- Significant investments
- Strategic direction
- Core competencies
- Key technologies
- Development Investment
- Dollars ($$)
- Research Budget
- Development Cycle Time
- Industry, segment focus
- Recent announcements, investments
- Announcement Cycle
- Alliances, joint ventures
- Business Partner Relationships
- Anticipated directions, initiatives
- Specific strategies
- Product/offering strategies
- Terms strategies
- Terms and conditions
- Warranty strategies
- Support strategy
- Fulfillment strategy
- Image strategy
- Distribution strategies
- Channels and distribution
- Promise of Value Assessment and implications to company
- Key differentiation points
- Best of breed analysis
- Strengths and weaknesses
- Evaluation of recent successes; likely follow-up
- Evaluation of recent failures; likely responses
- Assessment of financial condition
III. Competitive Market Performance
This section describes elements of competitor performance and perceptions in the market segment.
Note: complete one table for each competitor listed in section I.
Current Year - 1
Current Year - 2
Market Segment Position
Customer Acceptance: Revenue:
Customer Acceptance: Revenue:
Customer Acceptance: Revenue:
Direct Resources (by type)
Direct Resources (by type)
Direct Resources (by type)
IV. Competitive Offering/Solution
Note: This section applicable at Solution/Offering level only.
This section describes and evaluates characteristics of competitor offerings/solutions in each element, and assesses strengths and weaknesses. Relative market position is identified.
If applicable include the elements of APPEALS.
$ Price -- customer comparison of price and value
A Availability -- customer's complete buying experience
P Packaging -- visual evaluation
P Performance -- customer comparison of performance and function
E Ease-of-Use -- comparisons of ease of use
A Assurance -- customer fears and assurances provided by the whole product/service
L Life Cycle Cost -- life cycle cost which represents the true cost of ownership
S Social Influences -- other sources and standards that influence buying decisions