Entrepreneurs and businessmen must constantly examine their competitors to provide greater customer value and satisfaction than them. A good marketing strategy is incomplete without a competitor analysis and businesses must make sincere efforts in gaining a strategic advantage against their competitors in today’s market. It’s not enough to launch new products with the latest features and technologies; businesses must position their offerings strongly against the competition to make an impact in the minds of the end-users.
To do this, business owners must not only understand their own strengths and weaknesses but also of the competitor’s. This is where competitor analysis comes into play and if you are the owner of a small business or a start-up, you should ensure to have a competitive marketing strategy in place. A good business strategy goes a long way. This course can help you plan out a winning, differentiated business strategy. Let’s discuss more so as to give you greater insights on how to understand your competitors and gain a competitive edge in the marketplace.
What is Competitor Analysis?
The process of understanding who your competitors are, their marketing strategies, the strengths and weaknesses of their products or services in comparison to yours so as to improve your marketing plan is called competitor analysis. It helps you understand the uniqueness of your product or service thereby giving you a definite advantage in attracting the target customers. A competitive analysis is a critical part of a company’s marketing plan and must compare the firm’s size and industry position with respect to that of its competitors. Based on this comparison, certain strategies can be adopted to reap greater benefits from the overall brand marketing efforts. Learn more about building and managing a strong brand with this course.
Let’s take an example of how a small business owner conducted market research and competitive analysis to position his services carefully even before setting up shop! The owner of Bibbentuckers, Dallas’ high-end dry cleaning and laundry establishment, Robert Byerley wanted to open his own dry-cleaning business but found that the competition is huge. To make his business stand out, he conducted a thorough research on the industry, collected information on the competitors’ services and inputs from potential customers. Learn how to do your own market research with this course. Robert’s competitive analysis focused on the following points:
1. How could his business offer something different to the customers?
2. What are the other dry-cleaners offering and what is the customer opinion on them?
3. How to survey the target market and get key inputs on customer preferences?
4. How could he position his dry-cleaning business in the market so as to get a competitive edge against the large number of other dry-cleaners in the area?
He answered all these questions by conducting a focus-group research on the competitor’s services with the help of a marketing firm. Potential customers were asked to provide feedback on the services of the 15 best cleaners in town, with Robert bearing the cost of this exercise. The feedback gave him several inputs and he learned that customers weren’t too happy with the existing dry-cleaning services. Contrary to popular opinion, it was not due to pricing, but due to various other reasons such as:
1. Existing dry-cleaners didn’t stand behind their actions therefore leaving the customers dissatisfied
2. Customers were not looking for cheap prices but high-quality service
3. Customer convenience wasn’t given enough importance by the competitors
For more insights on how to conduct a market survey and competitor analysis, take this online course on market reserach. Based on his low-budget market research and competitive analysis, Robert launched his high-end dry-cleaning business, Bibbentuckers, with a complete focus on:
1. High-quality service with a computerized bar-code system that read customer preferences and tracked the clothes throughout the cleaning process
2. Customer convenience was prioritized by providing a drive-through area for collection and delivery, decorative awnings, TV screens and refreshments
3. Positioned his business as a five-star service and quality, with an establishment that didn’t look like a dry-cleaner!
A simple market research and competitive analysis on the other dry-cleaners’ services gave Robert the required results and he was able to establish a successful business that started earning profits within 4 months of launch. Moreover, his ability to create a unique offering further enhanced his business growth; Bibbentuckers has expanded its operations to multiple stores at various locations ever since and is a popular dry-cleaning business today.
How to Conduct Competitor Analysis?
1. The first step to making a competitive marketing strategy is to find answers to the following questions:
- Who are your competitors?
- What are the products or services they sell?
- What is your competitor’s market share?
- What are their past and current market strategies?
- How do they reach out to their target audience?
- What are their strengths and weaknesses? What are the potential threats they pose? And what are the opportunities they present you with? In short, conduct a SWOT analysis.
2. Compare your offerings with your competitor’s offerings by drawing up a competition grid. Find out more about competitor grid and business strategy in our course on brand building for successful market positioning.
3. Once you have analysed the competition grid, group your competitors into strategic groups based on their skills and advantages, and find out where your business can fit in.
4. Define your own competitive advantage based on your business goals and develop a unique marketing strategy based on the following points:
- Place (of distribution)
- Promotion (Advertising)
The classic example of Microsoft’s market positioning against its competitors, Apple and IBM, gives us a better picture on the benefits of competitor analysis. Microsoft exploited the weaknesses of their operating system limitations to market its own product – Windows operating system, which revolutionized personal computers all over the world! While Apple’s OS was specifically designed for its Macintosh line of computers thereby not allowing many of the popular Windows based business applications to be run on it, IBM’s OS/2 suffered from the limitation on the number of programs that could be run simultaneously. Microsoft had conducted an effective competitor analysis prior to launching its products; thereby gaining the largest market share in the personal-computer/ operating-system software market across the globe!
Benefits of Competitor Analysis in Business Strategy
If you are setting up a new business or entering new markets, it is important for you to conduct a competitive analysis to understand the market conditions and give a strategic direction to your business. Here are the following benefits of undertaking a competitor analysis:
1. Helps you find market gaps – you can spot markets that are unserved due to high pricing or low quality of the competitor’s products or services, thereby making an appropriate business plan. For example, Toyota introduced its Lexus line with a value proposition against Mercedes and BMW by offering high quality automobiles for lower price. It took into account the high price of its competitors’ vehicles thereby tapping into the potential market. Toyota attracted huge sales and Lexus earned a repurchase rate of 60%, twice the industry average, with many Mercedes owners switching to Lexus! Our course on managing customer experience will give you an in-depth knowledge on how to attract target audience and build long-lasting relations.
2. Assists in product development – if you are in the process of developing a new product for market launch, you can learn from your competitor’s mistakes or success, thereby incorporating new features in your product or improving its quality etc. By knowing the competitor’s strategy, you can position your products and services better to create a positive impact on your customer’s mind.
3. Helps understand market trends – with competitive analysis, you can discover greater opportunities to position your offerings, sometimes even in contrast to the market trends. For example, at a time when auto-manufacturers positioned their brands on performance and luxury, Toyota advertised its hybrid vehicle, Prius, as a fuel-efficient and high-tech solution to energy shortage through its marketing campaign statement: “How far will you go to save the planet?” Competitive analysis helped Toyota in not only understanding its market positioning but also in developing its marketing strategy. Learn how you can position your business better with this course on market positioning specially for small business owners.
These are just a few ways in which competitor analysis and subsequent planning can help you gain a strategic advantage in the marketplace. Remember, choosing a differentiation and positioning strategy consists of three important steps:
1. Identifying customer value differences that gives you an opportunity to build your market position
2. Choosing the right competitive advantages against your competitors for effective positioning
3. And selecting an integrated marketing strategy to communicate your positioning to the market for greater success
For higher returns on investment and greater sales efficiency, an understanding of the market trends and competitor’s strategies is very crucial.
To conclude, if you aspire to set up a business or expand into newer markets, the important thing is to understand how your business can be different from others operating in the same market? Do you have the resources to develop a sustainable business model and leverage your unique offerings? These questions can be easily answered with the help of a competitor analysis. So, sharpen your marketing research capabilities and discover your competition before you dive into formulating your marketing plan!