Whether you’re starting a new business or developing an existing one, the study of your competitors is a key step in any marketing decision. In this article, we would like to share with you our best practices for the competitive analysis of a market.
- Definition of competitive analysis
- 1. Defining your objectives and your study framework
- 2. Identifying and prioritizing your competitors
- 3. Defining and collecting data
- 4. Analyzing and interpreting
Definition of competitive analysis
Competitive analysis can be defined as the study of the situation of a company in its environment. Thus, it represents a strong component of a market analysis because it shows the intensity of the competition. At the end of this analysis, the company will have a map of the other players present in their market as well as the strengths and weaknesses of each. In other words, they will have an overview that will allow them to differentiate themselves.
Competitive analysis can be carried out in two different contexts:
At the creation of a company
When creating a company, it is essential to carry out a competitive analysis in order to segment the market, to see if the offer meets a need, to identify the different means of distribution and compare them, and to anticipate the market environment.
During the development of a company
During the life of a company, it is always relevant to carry out a competitive study in order to analyze the strengths and weaknesses of similar offers, to follow the prices and commercial offers of the competitors in order to make yours the most competitive, to be inspired, and to improve your entity.
In other words, performing a competitive analysis allows you to get a precise idea of the competitors products and services in order to refine your strategy and positioning in your environment.
This analysis is usually done in 4 important steps which are the following and which we will look at one by one.
- Defining your objectives and your study framework
- Identifying and prioritizing your competitors
- Defining and collecting data
- Analyzing and interpreting
1. Defining your objectives and your study framework
Before even identifying your competitors and starting to collect data, you must ask yourself why you are doing this. Indeed, even if the purpose of a competitive analysis is 90% of the time to gain market share, it is still essential to clarify your objectives.
You can have many objectives:
- Ensuring the feasibility of a new project
- Identifying a new opportunity
- Opting for a new positioning
- Modifying your marketing strategy
- Remedying a weak point (benchmark)
- Building an offensive strategy
Once these objectives have been defined according to your expectations, it is time to move on to the stage of identifying your competitors.
2. Identifying and prioritizing your competitors
During this step, you need to identify the competitors that you consider relevant to observe. This is a crucial step that will determine the rest of your study. Therefore, it is important not to target too broadly or too narrowly.
To simplify, you can prioritize your competitors in 3 categories as follow:
Your direct competitors are the companies that offer the same products/services as you to the same audience. In other words, these are the companies that come to mind first when someone talks about your competitors. It is even more relevant when your competitor operates in the same geographical area as yours.
Your indirect competitors are the companies that respond to the same need but in a different manner (by substitute products & services for example). You have to be wary of them as they can change their offer from one day to the next and thus conquer more market share.
Your potential competitors are more speculative. Indeed, this category includes all the potential incoming businesses in your market. They can be companies wishing to diversify or new competitors.
Once you have identified and prioritized all of these competitors, you can integrate them into a table to get an overview. If you are missing data on companies, you can collect information from your customers (via a qualitative or quantitative study).
3. Defining and collecting the data
Now that you know who to analyze, you need to identify what to analyze. As with your competitors, you should not collect too much or too little data.
To be sure to get a proper analysis your competition, you need to look at three main aspects:
Products or services
You are surely aware that the design of a product / service involves multiple components. You must take into account the price, the range, the quality, the characteristics for example. You can analyze these components within your competitors, notably through internet research.
By consulting for example the annual reports of your competitors, you can identify the points of contact of the latter with the consumers, the recurrence of their promotions, their sales forces (physical or digital) etc. This can help you deduce what works best with your targets.
You can analyze the marketing strategy of your competitors through branding, means of communication, social networks, websites or advertisements. This will help you to get a good idea of the image your competitors want to convey.
Thus, to have a global idea of your competition identified, you can collect :
Company name, Date of creation, Turnover, Staff, Nature of the targeted clientele, Product or service range and features, Prices charged, Market share, Distribution channels and geographical scope, Communication channels, Company values, Customer satisfaction, Marketing actions, Additional sales, Quality of work/services, Website, Presence on social media, etc.
Please note, this list is not exhaustive but is just an idea of information to collect.
4. Analyzing and interpreting
The fourth and final step consists of analyzing and interpreting the results of your research. At the end of this step, you will have a global view of your competitors and you will be able to meet your objectives.
This step can also be defined as a competitive benchmark, which is the study that results from the observation and analysis of competitors’ practices.
To do this, you can use different tools such as :
- Competitive mapping: This graph will allow you to situate your company within the competition according to two axes that represent a chosen variable (most often price – quality)
- SWOT: This matrix gives a general idea of your company and its market. Indeed, by listing the strengths, weaknesses, opportunities and threats of your company, you have an idea of its internal and external analysis.
- BCG: This matrix allows you to classify all your competitors into 4 categories according to the degree of maturity of their offer in the sector.
- The competitive analysis grid: As its name indicates, this grid allows you to identify the strengths and weaknesses of competitors in order to deduce an analysis.
Thus, you can identify the best place for your company within its market as well as the opportunities it can seize. In the same way, you will have an idea of the key success factors of the market in which you operate.
To conclude, the competitive analysis can be done at the start of a company or as it evolves. Consisting of 4 phases, it requires a lot of rigor and time. However, this analysis is very useful to reach real objectives. Without doing a complete competitive analysis, it is relevant to carry out a competitive watch overtime in order to foresee the evolution of the competition.
Once your study is done and you have a clear idea of your evolution in terms of positioning, think about unifying everything that follows: marketing in the broad sense and especially branding, website, etc ;). To do this, you can call on our services!