Competitor analysis and how to do it is important for small businesses when developing a marketing strategy.
When it comes to marketing strategy, I’m often asked what a competitor analysis is and what is the importance of it, so I thought I’d answer those questions for you in this episode.
In episode 17 , I was discussing what happens when marketing goes wrong. One of the ways to avoid things going wrong with you marketing strategy is to carry out a current competitor analysis.
In this episode I’m going to explain the benefits of doing a competitor analysis and how you can complete one for your business.
Why Do A Competitor Analysis
Many successful businesses swear by having a robust competitor analysis to maintain success. I know some business owners and company directors who don’t think it’s necessary, because they believe in the way they do business and they’re not interested in what their competitors are doing. Some of these businesses have failed and others have thrived regardless.
Whether you do a competitor analysis or not is entirely up to you, but my advice based on decades of experience and formal marketing training is definitely do one. I believe that it will assist you with making better strategic decisions. Especially if you’re opting for a growth business strategy. It will help you to guide your business in the right direction.
So, what is a competitor analysis? Essentially, it’s a way of comparing each of your top competitors with one and other, then assessing how the match up to your product or service and how you do things.
The Positive Impact Of A Competitor Analysis
I’ve lost count of the amount of competitor analysis I’ve done on behalf of clients, but what I’ll never forget is the impact that the results can have. In the interest of communicating to you the importance of this, I’ll share with you how it transformed the business and ultimately the lives of a former client.
A Clients Story
This is a client that I worked with many years ago. If I remember correctly, it was probably about 2005. For the purposes of this podcast, I’ll refer to them as Client A. As I share the background of Client A, you may be able to relate to this business and the business owners.
Client A was a kitchen company. When I met the owners, who were married, and due to have their first child, they were a home-based business. The plan was for the husband, who had been a kitchen fitter for many years, to supply and fit kitchens through their own business. The wife was to perform the admin and bookkeeping duties. Their biggest challenge was that they had no showroom, which they thought would stop people buying from them. Also, based on a set of assumptions, they had decided to enter the lower end of the market, supplying, and fitting a large number of low-priced kitchens.
Fortunately, through networking, they met me before they went with this strategy. Don’t get me wrong, there was other research and analysis completed other than a competitor analysis. However, it was the competitor analysis that had the biggest impact.
Competitor Analysis Results
It revealed that the lower end of the market was saturated, which meant that customers were extremely price sensitive. Consequently, if that had been the strategy, there would have been a massive amount of labour and time involved for little profit. However, I identified that there was a gap in the market at the higher end of the market. Rather than hide the fact that there was no showroom, we sourced 3D design software, and used the fact that there was no showroom to differentiate from the competition.
Customers didn’t have to leave their home because Client A would go to them. They could see their designs whilst stood in their own kitchen, which added extra value to the customer experience. Plus, my client was able to compete on price, based on the fact that the company overheads were considerably lower than any other player in the market.
High end products, high end personalised service, at a very competitive price. Plus, I’d been able to identify ways to improve the sales processes and entire customer experience, which meant it was difficult for the other major competitors to keep up with. Particularly, as their costs were so high in comparison.
If we had not done a thorough competitor analysis the future of their business may have been a different story.
The ending of this particular business story was that within a year, they had a reputation of the best quality supplier in their area, and they had leased a building and designed beautiful showroom. They went on to buy that building. Some years later they went on to sell the business for a handsome sum and emigrated to live in the sun.
I’m still in touch with Client A to this day and, believe me, they are living their best life.
What To Include In Your Competitor Analysis
Every business is different and the specifics of what’s involved of your competitor analysis will vary depending on your overall business objectives, industry, and structure, but I’m certain you will benefit from doing this.
So, let’s cover what you need to include in your competitor analysis, so that you’ve got a basic guide to work from.
First, decide which key competitors you are going to assess. Personally, I like to opt for five. However, you may prefer to use a smaller number. At the very least, I’d have at least three. If you’ve got that many competitors within your sector.
I’m going to give you seven key areas to focus on for your competitor analysis. Assess the results later. For now, start noting down the data you gather. Remember, to start with your business first before focusing on your competition.
- Business strategy/aims
- Business model including structure and operations
- Products and services
- Market share
- Financial resources
Focus on things like social media, website, customer experience, time in business, reputation, and anything else that is relevant.
When I’m doing an analysis like this, I usually gather the data, dump it into a document in table format and analyse it all at the end.
Avoid Final Decisions Now
The reality is that as you’re gathering data, you will start having realisations and drawing conclusions, but avoid making any decisions or being influenced either way until your competitor analysis is complete.
You may very well complete this and realise that your initial preconceived assumptions were correct. You may even determine how well your business is doing by comparison. Or you may very well be dumfounded by what you find, and it could lead to a massive strategic shift that could change the course of your business entirely. So, just keep an open mind.
If you’re listening to his and you’re wondering if you can afford the time to do this, ask yourself can you afford not to?
By its nature this type of strategic analysis is very subjective because it’s going to be open to the interpretation of the person completing it. If you’ve listened to this and you think you’re the right person to do this, then you do it. If, however, you know you’re not or you can’t prioritise the time, then let someone else do it for you. You may have a member of your team who can take on this responsibility but remember that you’re going to be basing massive decisions about your business on the results, so choose wisely. If you don’t have someone internally to do this, then seek professional marketing support.
I hope I’ve helped you decide if a competitor analysis is important for you and your business. A basic understanding of how you can perform this analysis yourself and guided you through the process enough for now.
If you have any questions about anything that I’ve discussed with you in this podcast or you would like my help with completing your competitor analysis for you, then do get in touch with me via my website www.tracyheatley.com
As always, you could be entered into this month’s podcast prize draw. All you need to do is subscribe to this Be Better With Tracy Heatley podcast and leave me a review. You could win a 40 minute online one-to-one marketing mentoring or networking one-to-one training session with me
Better Business, Better You!