Being customer-centric and understanding exactly what your customers want and need is extremely important for any company.
However, knowing what your competitors are up to is often underrated, but can teach you a lot as well. A better understanding of the market and the competitive landscape can be used to improve product offerings, marketing strategies, and overall competitiveness.
What are the three steps to conducting a comprehensive competitive analysis?
First, in order to conduct a competitive analysis, you need to identify your competitors. These can be direct, indirect, or substitute competitors, meaning companies that offer different products and services but target the same customers, and can potentially expand and become direct competitors.
Second, you need to gather information about your competitors:
- Product - what are the key attributes, features, differentiators, and gaps?
- Pricing - are there tiers, does the price vary by customer type and size, and what is the pricing structure?
- Geography - what is their geographical and market focus?
- Promotion - what are their marketing tactics and how do they engage with their customers?
- Positioning - what is their unique selling proposition, and who are their target customers?
- Financial performance - What is their revenue growth rate, are they profitable, what is their financial stability, and where are they in the fundraising cycle?
- Strategic direction - what are they investing in, which key roles are they hiring, who are they buying, what are they divesting?
Lastly, you need to analyze your competitors’ strengths and weaknesses, on each of the above parameters. Based on this analysis you can draw a lot of conclusions that will help you make critical business decisions.
What do you do with the information you collected?
Here are a few ways you could leverage a competitive analysis to drive growth for your company:
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Improved marketing & sales: By analyzing competitors' strengths and weaknesses, you can identify areas where you can improve marketing and sales efforts to stand out from the competition. It allows you to define benchmarks and build points of reference against which you can measure your growth.
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Increased market share: With a better understanding of your competitors, you can tailor your offerings to target specific segments of the market and increase market share.
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Staying ahead of the competition: By monitoring competitors' actions you can stay ahead of the curve and anticipate industry trends and changes. This can help the company remain competitive and adapt to new market trends more effectively and with greater speed.
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Improved product development: You can use competitive analysis to determine areas where competitors have gaps in their offerings, and use that information to develop new products or features that fill those gaps and differentiate you. This analysis may also present an opportunity to turn a competitor into a partner.
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Better investment decisions: By analyzing competitors' financial performance and future goals, you can make more informed investment decisions to ensure long-term success. You may even want to consider acquiring them if they are a good fit to strengthen your position.
Competitive analysis is a critical aspect of business strategy for companies. It helps companies gain a competitive edge, improve product offerings, and make informed investment decisions to stay ahead of the competition.
Also published here.