Performing a competitive analysis on a semi-regular basis can help you spot market opportunities, keep tabs on customer trends, and adjust your product mix to stay ahead of the competition. Use one of these methods to assess where your competitors may be outperforming your brand, and evaluate your strategy accordingly.
What is a competitive analysis and when should you run one?
A competitive analysis is a process that reveals how your competitors’ products, sales and marketing strategies, pricing, and other variables compare to yours. Performing a competitive analysis helps you spot market opportunities, hone your unique brand positioning, and recruit customers.
“A competitive analysis can come in handy if you're starting a new business and are looking for a unique niche or are looking to stay on top of trends that may influence an existing business’s future growth,” wrote Bank of America. “It can also be helpful if your sales have suddenly slowed and you’re not sure why.”
It’s worthwhile to perform a competitive analysis before making major business decisions. If you’re considering expanding, launching a new product line, or acquiring a company, do a competitive analysis to make a more informed decision. These analyses are also useful during times of major change, such as a recession, or to see how a trend like the rise of AI could impact your sales.
[Read more: 6 Steps to Performing a Competitive Analysis]
The SWOT analysis
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This method of competitive analysis organizes a company’s information into these categories.
A company’s strengths are those factors that offer benefits, such as engaged employees, strong brand recognition, or premium pricing. Weaknesses are factors that lead to disadvantages in the marketplace, like the lack of a website or a small marketing budget. Opportunities are external factors that the company could take advantage of: for instance, demand for curbside pickup. Finally, threats are external factors that could pose a risk to the business, like supply chain delays.
A SWOT analysis can be used both for your company and your competitors. This method enables you to see where your business can improve and where there may be an opportunity to take market advantage.
[Read more: SWOT Analysis: What It Is and How to Do It]
Porter’s Five Forces
Designed by Michael Porter, a professor at Harvard Business School, this competitive analysis template examines five key market forces in an industry, which include:
- Competition in the industry.
- Potential of new entrants into the industry.
- Power of suppliers.
- Power of customers.
- The threat of substitute products.
Many entrepreneurs use Porter’s Five Forces to evaluate an industry in which they may launch a new business. This framework enables the entrepreneur to understand the competition intensity, attractiveness, and profitability of an industry or market. It can also be useful when creating business expansion strategies and targeted goals, such as launching a new product line or expanding into a new geographic area.
A feature comparison matrix is a tool that can be used internally for competitive analysis and externally to help customers navigate your product lines.
Growth-share matrix
A growth-share matrix classifies your company’s products into four quadrants: stars, question marks, cash cows, and pets. These cute names belie a specific combination of relative market share and growth.
“The matrix reveals two factors that companies should consider when deciding where to invest—company competitiveness, and market attractiveness—with relative market share and growth rate as the underlying drivers of these factors,” wrote Boston Consulting Group.
Stars, for example, are products that have high growth and high market share. These products have high future potential and are worth investing more in. Cash cows see low growth but high market share; question marks tend to be new products with high growth but low market share. Lastly, pets are those with low growth and low market share that are worth cutting or repositioning.
Strategic growth analysis
This template organizes competitors into groups based on the similarities of their strategies. This method of competitive analysis is among the most flexible approaches. You could group competitors using their marketing tactics, pricing, product features, or sustainability efforts.
This type of competitive analysis is best used to dial in on a specific consumer need. If your analysis reveals that your top three competitors are using similar pricing strategies, for example, it can signal that you might also benefit from using that strategy. It can also show you where taking a risk by doing something different can pay off in the long run.
Position mapping
Finally, position mapping is one of the simplest tools for performing competitive analysis. Essentially, you compare two factors, such as perceived quality and price or price and benefit, in one map. A price benefit-position map, for instance, shows the relationship between a product’s primary benefit to customers and the prices of all the products in the market, explains Harvard Business Review.
Position mapping involves a fair amount of research, as well as regression analysis, but it can reveal how much customers expect to pay, on average, to get different levels of the benefit you have identified. With this information, you can refine your product line, improve your pricing, and capture more business.
Feature comparison matrix
A feature comparison matrix is a tool that can be used internally for competitive analysis and externally to help customers navigate your product lines.
Internally, a comparison matrix offers an easy way to compare your product or service with those of your competitors. A comparison matrix typically lists the competitors and your company in the first column. Across the top of the matrix, list the variables that your customers are considering when they shop: price, popularity, features, etc. Be as thorough and specific as possible to tease out where your offerings differ from your competitors.
For shoppers, the matrix highlights the differences and similarities between product versions, subscription tiers, or service levels. “This matrix enables informed decision-making by highlighting essential features, advanced capabilities, limitations, and value-added benefits,” wrote Creately. “It is especially useful during the evaluation and purchasing stages, as it reduces research time and eliminates confusion.”
Consider showing a comparison matrix on your website to help reduce friction in the consideration stage. These tables make it easy for customers to quickly pinpoint what they’re looking for and click "buy."
How to turn competitive insights into action
After you complete your competitive analysis or market research, the real work begins. Translating your competitive insights into action starts with distilling the information into key takeaways. What did you learn about your brand in relation to the rest of the market?
Any competitive analysis you perform should be connected to a specific business goal or decision. For instance, a SWOT analysis can be used to help you understand whether to expand to a new geographic area. Once it’s complete, you should have the information you need to make a decision. Use the competitive insights to find the ideal storefront, hone your marketing message to your new customers, and refine your in-store marketing.
Applying what you’ve learned means returning to the reason you performed the analysis. “This might mean refining your product roadmap, adjusting your pricing, strengthening your messaging, or building new campaigns that highlight your advantages,” wrote Salesforce.
It’s also wise to start tracking KPIs that can indicate whether your strategy reflects the results of your competitive analysis. If you are opening a new store, track metrics like sales, foot traffic, market share, and brand loyalty. Update your competitive analysis at regular intervals to understand how the market is changing and adjust accordingly.
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