How to do a competitor analysis AND make more money
Keeping a close eye on your main rivals is a great strategy to help grow your business.
However, although a host of information about our competitors is readily available, many of us never look at it.
All businesses know they can learn from their own previous financial information, so why not learn from our competitors? Why not take a look at their accounts online or conduct a credit report on them? Or why not go one step further and carry out a comprehensive competitor analysis?
Firstly, we need to know:
What is a competitor analysis?
A competitor analysis is the process of identifying your rivals and evaluating their business strategies to determine their strengths and weaknesses in relation to those of your own business and its products or services.
If you do compare your business to your competition, you can understand what your competitive edge is – based on factual information. And once this information is known, it can be used to develop an action plan which will drive your business forward to make it even more successful – and make you even more profit.
But how do you get this invaluable information? And how do you know what your competitors are doing?
Use these 7 simple techniques and put them into action right now:
Google them: It might sound simple, but a quick check on Google and a visit to their website should reveal quite a lot of information. If you want to go one step further and monitor them on a regular basis, sign up for Google alerts and get notified instantly whenever they are mentioned online.
Sign up for their emails and newsletters: Let your competitors update you about any new products or services they are introducing or special offers. If necessary, you can react or alter your own offering accordingly.
Be social media savvy: One of the cheapest and easiest ways to stay in touch with your competition is to monitor their social profiles by checking their accounts on Twitter, Facebook, LinkedIn and Instagram. Doing this will quickly tell you what their customers like and dislike about them by reading their engagements.
Ask your customers: Speaking to customers is a great way to get a clear idea about what competitors do well – and what they do badly. If a client or customer has switched to you, ask them who they used before and find out the reason why they were dissatisfied. You can then adjust your product or service to be better than those of your rival.
Treat suppliers like a source: In industries where you share the same suppliers as your rivals, asking a few simple questions could reveal what new products are proving popular or help you find out about the next big thing – keeping you one step ahead of the competition.
See who they’re hiring: A competitor with several vacancies to fill could be preparing to expand. The type of role available (engineer, developer, HR) could also indicate which areas they intend to focus on in the future.
Give them a call: It might sound silly, but you’d be amazed how much companies will tell you over the phone if you ask in the right way. By phrasing questions as if you are a potential customer, you can often find out much more than you’d expect – all of which can then be factored into your own business strategy.
What are we going to do with the information once we’ve got it?
If you’re going to invest your time conducting a competitor analysis, you need to keep the information organized. Creating a spreadsheet, database or simple grid is an easy way to do this.
Down the left side, write the names of your rivals and list the main products or services (Up to a maximum of 5) that directly compete with you.
Across the top of the paper, list as many of the main features and characteristics which are applicable, such as:
- Location where it is offered
- Price
- Sizes
- Distribution method
- Market share
- Past strategies
- Current strategies
- Strengths
- Weaknesses
- What would a customer buy as an alternative?
Now you have an at-a-glance competitor analysis grid that will allow you to see exactly where your product or service fits within the market and the area where you operate.
All you have to do now is work out what potential opportunities are open to your business.
To evaluate competitors strategically, group them based on their threat level, starting with the biggest threats first. It might be a good idea to devise a simple scoring system because this could help you to see who competes directly for a share of your ideal customer’s hard-earned cash.
Once you know who the biggest threats are, it is important to establish:
- What is the single biggest reason why they are successful?
- Why would a customer opt for them instead of you?
- Is it because their quality is better or because they do things differently?
- What is their single biggest weakness?
- Can you fill a gap in the market by coming up with a solution to it?
- Are there any other ways to make your offering unique from competitors?
Having figured out who your main competition is and analysed how you can be better than them. You can now devise a business strategy which is based on factual information.
To stay ahead of your rivals, it’s a good idea to conduct a competitor analysis on an annual basis. It’s best to conduct it every six months. The long-term business benefits will outweigh the time invested.
Using competitors’ success to improve your profits
Although this in-depth analysis will definitely help formulate a plan for how to run your business. It can become a long and arduous process and taking the first steps does seem a bit daunting.
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If you’d like to look into this but don’t know where to start, look at our CFO offering. It support business growth fuelled by regular board meetings with one of our directors.
