How to Conduct a Competitive Analysis
To succeed in business, you must vary yourself from your competitors. It requires knowledge of your competitors and what they bring to the market.
Fortunately, you don’t need to hire a professional market research firm to get this information. Instead, you can learn a lot by doing simple research yourself. Her Mallika Kazim, BDC Senior Business Advisor, walks you through conducting a competitive analysis.
What is Competitive Analysis?
Competitive analysis helps identify unique advantages and potential barriers to growth, allowing you to enhance your marketing and business strategy. Also, keep your business active rather than passive. Many entrepreneurs have preconceptions about competitors and market conditions that may be incorrect or outdated.
“Data is always changing, so challenge your assumptions,” says Kazim. “Don’t wait for your competitors to launch new products before changing your strategy. Otherwise, you may react to market changes. I want to be proactive – Doing this exercise regularly will help you become more aggressive.
How to Do a Competitive Analysis in 5 Steps
There are four main steps in a competitive analysis. Since you’re interested, you may also read this article: Diet for Your Specific Exercise Goals
1. Identify your competitors
Direct Competitors: These are firms that offer similar products and services and target the same customers in the areas where they operate.
Secondary/Indirect Competitors: These companies offer different products and services and target other customers but belong to the same general category (e.g., winery vs. brewery? also sells alcohol and is, therefore, a secondary competitor).
Surrogate Competitors: These companies offer different products or services but target customers in the same geographic area.
“For sole proprietorships like nail salons, home nail kits are an example of an alternative competition,” Kazim explains. “During the pandemic, people were accustomed to getting their nails done at home, which has probably put many salons in business.
NAICS provides a 6-digit code for all types of Canadian businesses, from toy stores (NAICS 451120) to tax advisory services (NAICS 541213).
You can find industry codes by searching the NAICS website by keyword. You can then search the Statistics Canada data table associated with the NAICS code to find information such as average firm size, operating costs, and employee wages for your industry.
It will help you understand how your company compares to other industries. “These benchmarks can give some interesting insights,” he says Kazim. “For example, you may find that you don’t invest as much in marketing as other companies in your industry or that your labor costs are far above average.”
2. Research Your Competitors
Products: ideally, buy, try and compare with their products. How’s the quality? What features do
Do you like and dislike it?
Pricing: How are your goods and services priced? Are distributors and customers priced differently? What is their discount policy? Can you estimate the cost structure?
Location: How extensive is your geographic reach or coverage area compared to your business?
Promotion: What marketing tactics do you use to interact and engage with your customers? Social What about your media presence?
Since the concept of the 4 P’s has evolved since its invention, consider other factors such as: Who is your target market? What is your unique selling proposition?
Reputation: What are people saying about your competitor’s products and services online and on social media? How do the reviews compare to reviews of your business?
People: How big is your organization? What is the general profile of the people they employ?
Partnerships: Who are your suppliers? How long have you been working with them?
If you haven’t done this exercise before, Kazim recommends gathering data and researching with your sales, marketing, and customer service teams for several weeks. He then attends an intensive two-hour session with the team to review his findings and outline the results.
In addition to a thorough annual analysis, Kazim says it’s helpful to set aside time to update the data every few months quickly.
3. Analyze Your Competitors’ Strengths and Weaknesses
During your two-hour session with the team, it’s essential to compare your competitors’ performance to your own easily. Start by ranking your competitors on a scale of 1 to 10 using the criteria above. Kazim suggests using a simple grid/table like this: Each competitor has its strengths and weaknesses.
For example, is it popular because of its location? Visibility range? Employee quality? Are their prices too high? Is your product lacking key features that your customers want? Finally, summarize why consumers would choose (or not choose) your competitors.
4. Determine Your Competitive Advantage
Now that you have all the information at your fingertips, it’s time to understand what the results mean for your business strategy. Analyzing the competitive landscape can help you determine your competitive advantage.
It can be a distinct strength to appeal to your target market and build your brand image and message. Or, if your competition has a weak spot, you can take advantage of this opportunity by lowering your prices and launching new promotions.
While it is essential to keep an eye on the competition and improve your business accordingly, Kazim says you shouldn’t let your concerns about what other people do completely dominate you or your strategy. How to Conduct a Competitive Analysis
When doing your first competitor analysis, don’t worry about being completely accurate or down to the last detail. Also, According to Kazim, it’s more important to understand the competitive landscape and the general patterns shaping the market. She also encourages taking a holistic perspective. How to Conduct a Competitive Analysis
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