In an earlier post, we talked about what businesses should do to define their unique selling proposition. The next step is to find out what your competitors are doing and how they’re doing it. Or we should say, conduct competitive analysis or competitor research.
Entrepreneur defines competitive analysis as:
“Identifying your competitors and evaluating their strategies to determine their strengths and weaknesses relative to those of your own product or service.”
Your goal is to find out what your competitors are up to and use that information to create a more robust branding strategy for your business. The goal is to learn from your competitors’ wins and losses. Also, you want to pay attention to the threats your competitors pose and the opportunities they present to your business.
The bottom line is that you want to know better to do better for your business.
Step 1: Identify Competitors
Make a list of your direct competitors. These are businesses that have the most in common with your business. They sell the same or very similar products and operate in your area. If you have a bakery, your direct competitors are other bakeries in your area. If you have a niche business, you’re more likely to have fewer competitors.
Don’t forget to also make a list of your indirect competitors. These are businesses that don’t offer the same products and services as you, but they offer other products that can satisfy your customers’ wants and needs. For example, a grocery store is an indirect competitor of a coffee shop. It sells products that consumers can purchase to make coffee and baked goods at home.
Step 2: Find Out What Your Competitors Sell
If possible, go in person to find out what each of your competitors sells and for how much. Don’t forget to check if they sell products online. You don’t have to go super undercover to do this. Instead, pretend to be a new customer and make mental notes. If you ask questions, don’t ask too many. You’ll look suspicious and the answers you get may not be the most accurate.
Pay attention to the general look of your competitors’ place of business, website and social media pages. How are their products presented to the general public? Check how easy it is to buy their products. Also, pay attention to the number of products they offer. Pretend to need help during your visit to find out how great their customer service is.
Step 3: Determine the Market Share of Your Competitors
It’s important to know how big your competitors are and how much of your target market is controlled by them. This can be tricky if they are small or privately held, but it can still be done. Any information is better than no information.
Start by asking Google. Look at several pages of search results. Chances are your competitors have done interviews or have been featured in local news stories. Such stories often include information about the business’ customers, market share, revenue, future plans and other useful information. Don’t forget to also check their website and promotional material.
Step 4: Look at Your Competitors’ Marketing Efforts
You want to know where and how consistently your competitors market their products. Pay close attention to the scale, delivery and tone of their marketing efforts, and the target audience’s reaction.
If one of your competitors recently did an Instagram giveaway, check how much buzz it created. How many people used the chosen giveaway hashtags in their posts? Read all the comments pertaining to the giveaway. If the giveaway was successful, you can consider doing something similar for your business. If it flopped, try to figure out why and learn from it.
Also, let’s say one of your competitors has significantly more money than everyone else in your market. Their marketing efforts are over-the-top. They go all out to show customers that they are the best and the biggest. Learning this can help you position your brand as the opposite of what that competitor is doing. Your marketing efforts can speak to all the underdogs who have never been the popular kids.
Knowing what your competitors are doing in terms of marketing prepares you to better choose your battles. It’d be silly to compete in an area you know you can’t afford. You’ll get more for your marketing dollar if you choose an approach that is more authentic and achievable. Not every business can be or needs to be #1.
Step 5: Calculate How Much Your Competitors Are Spending on Marketing
This will take some time, but it’s worth it. You won’t be able to find the exact numbers, but you can come up with a rough estimate. Try to calculate, as best you can, how much money each competitor is spending in order to get their products in the customers’ hands.
If you see a competitor’s ad in a local publication, you can find out roughly how much it cost by asking the publication for their advertising rates. Same goes for television commercials, billboards, and other similar forms of advertising. If your competitor has a really nice website, you can reach out the designer/developer to find out how much a similar website would cost.
It’s difficult to determine how much your competitors are spending on online advertising. If nothing more, you’ll at least know that they’re spending some money there and that it’s something you should also consider.
Step 6: Study the Brand Image and Personality of Your Competitors
What type of voice, tone and image do your competitors use to deliver their brands’ messages? If you find out that most of them have a serious, professional voice, you may need to adjust your brand’s voice to match that. Or try a completely different voice to stand out. It all depends on how you wish to position your business’ brand.
Check the consistency of your competitors’ branding efforts online and offline. Do they have the same personality on their website, social media channels and in person? If they don’t, that’s a sign that they may not have a solid branding strategy. It’s their weakness, and your opportunity to swoop in and steal their spot.
Google your competitors to see if there are any negative stories about them. Read all of their online reviews, especially on Google, Yelp and Facebook. Check if and how they respond to negative reviews. That tells you how committed they are to managing their reputation and providing exceptional customer service. Also, check what their employees have said about them on Glassdoor.
Look at all of their social media pages and the types of content they publish. Pay attention to how they interact with their followers and how much engagement their content gets. If one of your competitors has a large Facebook following, but their content gets very little engagement, that’s a red flag. They’re either not posting relevant content or their followers don’t enjoy interacting with them. Maybe their followers don’t engage with their content because their comments are ignored.
Create Google Alerts for your most important competitors. You’ll receive an email notification every time something is published about them online. It’s free and takes minutes to set up.
Step 7: SWOT It Out!
Once you’ve done a whole bunch of competitor research, you’re ready to do a SWOT analysis for your business.
Think about things inside your business that are superior to that of your competitors. What do you do better than your competitors? Maybe you have a patent on a product that no one else can sell. That’s an internal strength. Make a comprehensive list of everything you do or have that others don’t. This is the foundation for your unique selling proposition.
Be honest and think about improvements you should make as a business. Are there any things you’re currently doing that are not profitable? Does your business lack clear direction? Should you hire outside experts to help you in certain areas of running your business? Do you have a brand strategy for your business?
Also, think about your weaknesses from the customer’s point of view. What kind of improvements would they like to see you make?
Are there any things that you could be doing or selling better than your competitors? Maybe you noticed that a lot of consumers in your market are asking for a specific brand of product, but no one in your area is selling it. That may be a great opportunity, as long as it’s in line with your brand strategy. It would not be a good idea to start selling a product that’s not in line with your overall vision for your business.
Make a list of obstacles your business is likely to face based on changes in the market, government regulations or actions taken by competitors. If you’re a small manufacturer of plastic straws, your business would be in trouble if cities where your straws are distributed started banning plastic straws.
Technological advances can also threaten your business. Think about all the typewriter sales and repair shops that have gone out of business in recent history. Computers came along and made typewriters essentially obsolete. Typewriter sales and repair businesses that didn’t pay attention to the advancement of computers had no chance of surviving. They had no Plan B.
You should also think about what you would do if one of your well capitalized competitors decided to take over your business? What would you do? Do you have enough money to hold your position or would you have to fold? Would your loyal customers come to your defense? A lot of this depends on how strong your brand is.
So What? Why Should You Care? How Does This Relate to Branding?
Businesses conduct competitor research and do competitive analyses in order to find out how they and their competitors stack up in their target market. Think of it as opposition research.
It’d be devastating to spend $150,000 to open the first Vietnamese restaurant in town just to find out that there’s another one minute away and it’s been there for ten years. All of that could’ve been avoided by doing competitor research. Learning that there’s another Vietnamese restaurant in town after the fact would force you to change your brand strategy.
The more you know about your competition, the more equipped you are to differentiate yourself. As they say, knowing is half the battle. Once you have all the information, then you can move on to making your brand as unique as possible.
Do You Have Other Competitive Analysis Ideas?
How do you keep an eye on your competitors? How has it helped your brand? Share your stories in the comments below.