Size up your competition with a business competitor analysis
Whether you’re starting a new business or revisiting your marketing plan for your existing business, a business competitor analysis can be essential.
Why is a business competitor analysis so important?
A business competitor analysis can help you understand competitors’ strengths and weaknesses in relation to yours, and develop a marketing strategy to gain a competitive advantage. It helps you build:
- An understanding of the competitive landscape and how your business stacks up against the competition
- Insight into your company’s unique value proposition
- A basis for developing an effective competitive strategy
- Plans for how to pursue target customers in new markets
- A sense of how your current and potential customers perceive your competitors
- A strategy for pursuing target customers
It’s crucial that you have a good sense of the immediate local market where your business competes, so you can make better-informed decisions about your overall marketing strategy. You’ll want to look at both direct competitors and indirect competitors to help develop well-rounded targeted strategies. You may want to use a pricing strategy to compete with your direct competitors and a social media focus to compete with your indirect competitors.
What you’ll get out of your competitor analysis
Your competitor analysis should give you hard-hitting insights into your overall marketing strategy, such as:
- How to advertise
- How to promote your business
- Which products to emphasize
- How to refine your target audience
- Which unique value propositions to promote
As part of your competitor analysis, you might want to conduct a few customer surveys—whether formal or informal—to get a sense of your customers’ impression of your company, and how you compare to your competition. Spend some time reading online reviews to see what people are saying about the competition:
- Are there any common complaints from customers?
- Are any of your local competitors starting to slip a bit, making mistakes or disappointing customers?
These sites can be a place to gather insights on overall market trends and emerging opportunities in your immediate local market.
What steps should I take to perform a competitor analysis?
Here are our recommendations for performing an accurate and insightful competitor analysis to help grow your business.
- Use the available tools
The Small Business Administration (SBA) offers market analysis and competitive advantage tools you can use to conduct market research. For example, if you own a pizza restaurant, you can search for “pizza restaurants” in your local city to see the average revenue of other restaurants, the number of employees, average employee salary, the cost-effectiveness of your employees, annual employee turnover and other key indicators of business performance.
Use the information you gather to compare your business’s performance with the average annual revenues from other companies in your city and state, and throughout the United States.
You can also measure your relevant market’s estimated total size and see how much money is being spent on specific categories of goods and services within your local area. For example, if you run a women’s shoe store and are trying to choose the best location for your next shop, you can get local information to see which parts of the city spend the most money on women’s shoes.
Doing these analyses will give you a much better understanding of your competitive position and help your strategic planning efforts.
There are also several free competitor analysis tools that could prove helpful.
- Ask the right questions
As part of your competitive analysis, you need to ask and answer the following questions:
What is the size of your local market?
- How much money is being spent on the products or services you sell?
- Is your local market growing, stable or shrinking? What are the overall trends?
- How many total competitors are there in this market?
- Who are the top competitors?
- Is the market already saturated with lots of companies trying to sell to customers, or is there room for new companies?
- Is the market evenly distributed among lots of companies, or just a few?
- Which local businesses are the biggest in this market?
- Are you competing mainly with other local businesses, or with big national/regional chains—or both?
How does your product compare to the competition? Be honest and unsparing. Evaluate your product and your competitors’ products based on:
- Customer opinions—which company or product has the best reputation in your market and why?
How does your marketing look vs. the competition?
- Digital marketing presence
- Content marketing strength
- Website: content, look and feel, tonality
How much market share can you expect to win?
- By product line
- By target market
- By area
- Do a SWOT analysis to evaluate the strengths, weaknesses, opportunities and threats
When doing a SWOT analysis, you’ll want to start by looking seriously at your own strengths, weaknesses, opportunities and threats. Then, evaluate your competitors’ strengths, weaknesses, opportunities and threats.
Strengths are the attributes within an organization that are considered competitive advantages. These could include:
- Strong brand names
- Good reputation
- Cost advantages
- Proprietary expertise
- Strong social media presence
- Solid online presence
- Engaging content marketing assets
- Exclusive relationships with suppliers or distributors
Weaknesses are elements that can prevent success. Here are a few examples:
- Weak brand name
- Poor reputation
- High-cost structure
- Limited expertise
- Weak social media presence
- Weak online presence
- Content marketing assets that don’t engage
Opportunities are external factors such as a vendor that expresses interest in working with your company (or a competitor’s company), positive market conditions and the arrival of new technology.
Threats include a lack of supplier vendors, trend changes, new regulations and new substitute products. Also, is there a company that’s not currently a direct competitor but could become one soon?
Tips for doing a successful SWOT analysis
Do your best to keep your SWOT analysis short and straightforward.
Get multiple perspectives on your business. Ask for inputs from your employees, customers, partners and suppliers.
When you complete your SWOT analysis, prioritize the results by listing them in order of the most significant factors that affect your business to the least.
Competitor analysis is a valuable and critical piece of your strategic planning. But resist the urge to use it to create a be-all-end-all competitive breakthrough. Your best bet is to start small and use tiny wins to propel you to your next priorities. Keep doing your work and pursuing your goals, even if it’s on a smaller scale than you first envisioned. The work you do to analyze your competitive position and develop a marketing strategy around it is worth its weight in gold.
Running a small business can be an intimidating investment with a lot of hard work involved. However, you don’t have to do it alone. Kabbage provides the resources you need to stay in control of your business needs. Find out how we can help you with financial resources, from opening an online business checking account, to helping you accept payments and ever.