Know Your Competition: How to Create a Competitive Analysis & Use It to Win
Before you launch a product or service (or expand into new markets), it’s critical to understand your competition. A detailed competitive analysis helps identify your company’s differentiators and what you bring to the table.
Knowing your competition will also help you build and refine your business strategy and its key components like your messaging and marketing plan. Plus, understanding your competition will better help you determine your company’s place in the market and what you can do to hit the ground running and immediately build market share after you launch.
We’ll take a closer look at some of the key elements of a competitive analysis. First, be ready to answer the following questions about your competitors and your company’s competitive position:
- What makes your product or service better?
- Why should a customer buy from you?
- How are you differentiated?
- How successful are they?
- What are you doing to exploit their weaknesses?
- What strengths do they have, and how are you responding?
- What are they going to do to beat you?
- Are they public or private?
- Who funds them?
- Who is their lead investor?
- What financial position do they have?
- What is their pricing strategy?
- What is their marketing strategy?
- How is their sales force deployed?
Not being able to answer basic questions about your competition will reduce your chances of winning a sale and possibly raising funding. Worse yet, you won’t have the information you need to form a clear strategy to beat them.
What to Include in a Competitive Analysis
Like other forms of business-related research, a competitive analysis can quickly become overly complicated. You want to understand your competitors, but not spend huge amounts of time digging into the minute details.
Instead, use information sources like their websites, SEC filings, media articles, consultant briefings, marketing material, their customers and former employees to learn more about each competitor. Be sure, of course, to not gather any confidential information.
As you analyze each competitor, compile these key details:
- Company description, including demographics, size and locations
- Summary of key management
- Financials, with an analysis of strengths and weaknesses
- Description of how they’re capitalized
- Product and services descriptions, assessing their strengths and weaknesses
- Description of their marketing and sales strategy
- Positioning analysis and what makes them different
- Determination of what threats they represent to your strategy
- Description of what opportunities you have to beat them
This is essentially a SWOT analysis (strengths, weaknesses, opportunities and threats). With this information, you’ll not only better understand your competitors; you’ll also have the insight to create both a business and marketing strategy that can push you ahead of the pack.
Use Your Analysis to Build Strategic Initiatives
Once all the information is available, create strategic initiatives based on what you’ve learned from the competitive assessment. It may help to create summary points or statements that can help you identify both opportunities and challenges. Some examples include:
- They are missing many of the key product features that are attractive to the marketplace.
- They are financially weak by carrying too much debt.
- They have a cost disadvantage, so dropping their prices will be hard.
- They are losing market share and don’t seem to be responding with new marketing initiatives.
- They could merge with another company and become a powerhouse.
- Their customers are dissatisfied with the quality of their service.
- They are missing a great opportunity in another market.
- If we had integration partners, we would have a key strength they don’t have.
Plan to Win
From your summary, formulate the most effective initiatives to assure your company’s success. Your company can only have one competitive strategy. So, your strategy has to be the composite of what you need to do to beat the competitors that matter — those that have the greatest strengths and represent the greatest threat.
Here are some examples of strategic initiatives that illustrate the elements of a prospective competitive strategy:
- We will position the company as having the most comprehensive solution because none of the competitors offers all of what buyers need.
- The chemical industry is best for us because none of the competitors have a presence there.
- Our cash position is strong, and their cash is running low. We will spend money on marketing initiatives and gain market awareness with our new and superior product.
- We will partner with the leading complementary software product company and present a more complete solution than any competitor.
- They cannot drop their price. Our price is below theirs and we offer much more.
- We will partner with large integration services companies where our product adds value to their offering.
- Briefings will be given to all the leading industry analysts so they know how superior we are when they advise clients.
- Our media strategy will position us as an emerging leader with more capabilities for less money.
- We will feature our patented technology, which gives a tremendous improvement to our customer’s processes and saves them money (and we’ll show them how).
With a more thorough understanding of your competitors, you’ll have the insight to build a marketing strategy and product plan that not only showcases your product or service, but also how you’re different and better.
Once you launch your product or service, it’s a good idea to keep a consistent eye on your competitors. After all, they’re likely to grow and evolve, just as your business will.
By monitoring what they’re doing (but not at the expense of your own business operations), you’ll be more likely to make strategic improvements or changes proactively, rather than reacting to a competitor and risk losing valuable market position.