Competition Check


“If you make the opportunity, you’ll be the first in the position to take advantage of it.”

– Biz Stone of Twitter

Competitors are those businesses who offer similar products or services in the same market as yours. For instance, if you sell electronic goods to customers, your competitors will include businesses who also offer electronic items to the same target market. Moreover, businesses that offer substitutes of your offered products are also considered the competition.

With a significant rise in ecommerce stores, it’s easier to tap into global markets. You can reach out to customers present in different countries and encourage them to buy the products through eye catching ads and organic content. This globalization offered a plethora of benefits, but its negative aspect is that it increased competition. Now you don’t only have to compete with business entities that operate in the same geographical area, but also stand out from online businesses present in another corner of the world.

Competition can hurt your business and reduce your market share if you turn a blind eye to competitors’ tactics. You can succeed by monitoring the activities of competitors and building effective strategies to perform better than others. You can learn from them with the help of a thorough competitive analysis report. However, it’s crucial to refrain from spying on competitors or indulging in illegal and immoral activities in an attempt to gain an advantage.

If you are competing with public listed companies, you can easily access their financial performance since the law compels them to publish annual financial reports.

Competing with other established businesses can be a major challenge. However, it’s possible to perform better through a proactive approach. You should focus on research and development and come up with innovative ideas. For example, you may launch an innovative product or service. If no other business deals in similar products, you can achieve the first-mover advantage and earn high profits due to the lack of direct competition.

Types of Competition

Keeping an eye on competitors is the key to survival in the business world. If you are unaware what others are doing, it won’t take long before they capture your market share and attract your customer base.

Competition isn’t always bad. When you aren’t alone, you feel the motivation to keep improving the quality of products and customer service. You also get to learn from experienced competitors who have been in the market for a long time.

In business terms, competition can be divided into three major categories:

Direct Competition

Direct competition is the most common form of business rivalry. It includes businesses that target the same market and offer similar products. If you run a pizza restaurant, your direct competition will include all other pizza joints that operate in the same area.

Some most common examples of competition are Pepsi and Coca-Cola, Target and Costco, Burger Kind and McDonalds, and Starbucks and Dunkin Donuts.

Indirect Competition

Indirect competition refers to businesses that may have similar products, but adopt a different strategy or platform to reach customers.

For instance, consider that you own a brick and mortar toy shop. Your direct competitor will include similar shops or stores in the same geographical region. But what about online toy stores that also target the same geographical region? They will be called your indirect competition.

Replacement Competition

Your products meet the needs or wants of customers. Some businesses offer products that are different from your offerings, but can replace your products. These are substitutes or alternatives of your products and pose a big threat to your business.

It’s not always a simple process to determine this competition unless you’re fully aware of the features of your product and understand its pros and cons. When you develop a strategy to differentiate your brand from customers, it’s essential to list down replacement products and come up with a plan to deal with these competitors.

Amazon Kindle platform replaced paperback books with eBooks. Therefore, it poses as a replacement competition to traditional book publishers.

Tea and coffee producers are indirect competitors, but these companies compete with fruit juice brands that can replace them. So, fruit juice brands are replacement competitors for tea and coffee companies.

Why Perform Competitor Analysis

Performing competitive analysis assists in identifying your competitors and learning about their business. It’s a time consuming process and many entrepreneurs don’t find it too important. However, a comprehensive analysis can help you in many ways.

Understand Customer Needs

Businesses often fall victim to market myopia. They focus on the internal expertise or strengths and only consider the firm’s perspective. As a result, they ignore changing market trends and fail to understand customer needs.

Competitive analysis is a great way to broaden horizons and explore customer’s perspectives. By analyzing the activities and strategies of competitors, you can obtain a fresh perspective and evolve processes with time to stay ahead of the competition.

Identify Potential Threats

A business should always be aware of potential threats and risks. You can perform SWOT analysis to determine threats facing the industry. But competitive analysis is also a must.

With this approach, you can stay updated with what your customers are doing. Furthermore, you can also monitor new market entrants and take the right measures to deal with challenges they create for your business.

Set Suitable Benchmarks

Every business sets certain standards or KPIs to evaluate the performance of different departments as well as the entire organization. Through competitor analysis, you can ensure that your benchmarks suit the current industry trends and make necessary improvements.

Recognize Market Gaps

No matter how saturated the market, there are always some unidentified gaps. Through competitive analysis, you can identify those gaps in no time. Certain market gaps can be filled by offering new products or variants of an existing product. Or you may notice that other businesses don’t target specific customer groups.

Imagine that you manufacture furniture. By studying your competitors, you may notice that no competitor specifically currently targets the millennial generation. You can come up with a strategy to sell modern furniture designs to young and first time home buyers to expand your customer base.

Acquisition and Mergers

When you evaluate your main competitors, you may notice that some of them are doing great and you can learn from their success. However, this won’t be the case with every business and you may realize that some of them are likely to go bankrupt in the near future.

You can get in touch with businesses that are struggling to survive. It’s possible that an opportunity for acquisition or merger may come up. The difference between acquisition and merger is that the former approach enables you to take over another business, while the latter allows you to combine resources with another business and form a joint organization.

Mergers or acquisitions can help you expand your business. You can make the most of their resources to improve product quality. Furthermore, you can also benefit from their distribution network to tap into new markets.

How to Perform Competitive Analysis

Before you perform competitive analysis, don’t forget to evaluate your business. When you understand each and every aspect of your organization, the competitor analysis will prove more fruitful.

Start the process by applying SWOT analysis. In this method, you review internal factors including strengths and weaknesses of the company. You also get to explore external factors such as opportunities and threats for the company. With this tool, you can determine the current performance of the business and develop plans to cash in on opportunities and steer clear of threats for business growth.

Another effective method for this purpose is Porter’s Five Forces Model. Developed by Michael Porter of the Harvard Business School, this model taught businesses that a variety of factors can affect their performance. These factors are as follows:

– Bargaining Power of Suppliers – The fewer the suppliers in the market, the more businesses would rely on them. Consequently, they get high authority to increase rates and businesses would have no option but to accept their terms

– Bargaining power of customers – When a business has fewer customers, they have to keep prices low to retain them since customers have higher power to negotiate their conditions

– Existing Competition in the Market – This refers to the number of existing competitors in the market. The lower the competition, the more they have the power to raise prices

– New Market Entrants – It explains the time and resources needed to launch a new business. The easier it is to enter the market, the more efforts will be needed by a business to retain the market share and customer base

– Threat of Substitutes – Businesses that deal in products with no close substitutes can increase prices. The higher the number of substitutes, the more difficult it will be for the business to set prices as per their preference

There are several techniques to analyze direct, indirect, and replacement competitors. You can utilize the latest technology and get digital analysis tools to make the task easier. BuzzSumo, SEMrush, Wappalyzer, Brandwatch Audiences, and Searchmetrics are the most popular tools in the business community and help you monitor major competitors online.

 

Table 7.1 Competitive Analysis Template

Category

My Company

Competitor 1

Competitor 2

Competitor 3

Competitor 4

Company Name
Location
Target Customer
Revenue
Founded
Strengths
Weaknesses
Brand Personality
Mission
Services
Employees
Product
Marketing

 

Table 7.2 Marketing Plan Template

 

Product
Question Example Your Answer
Who is your target customer? ➔     homeowner

➔     35-75 years old

➔     lives in Chicago

➔     100K+ annual income

➔     have children

➔      

 

What does the customer expect from your products and services? ➔     quick response

➔     high quality

➔     great customer service

➔     prestige

➔     status

➔     peace of mind

➔      

 

Describe benefits ➔     best warranty

➔     saves money

➔     more secure

➔     local

➔      

 

Describe major product features ➔     unique design

➔     higher quality

➔     faster

➔     smaller

➔     made of metal

➔     multiple colors

➔      
Describe how is it different from competition? ➔     more experienced

➔     high quality materials

➔     better reputation

➔      

 

How is your product branded? ➔     unique memorable branding that is consistent throughout all the physical and online channels ➔      

 

 

 

Price
Question Example Your Answer
What is the value of your product/service to the customer? ➔     solves problems quickly and affordably unique and scarce

➔     knowledge and expertise

➔      

 

What is your pricing strategy and how does it compare to your competition? ➔     premium pricing

➔     entry-level pricing

➔     competitive pricing

➔     loss leader

➔     upsell strategy

➔      
How does the value compare to your competition?

 

➔     offers additional services for the same price

➔     has more experience

➔     has a longer life-cycle product

➔     needs less maintenance

➔      

 

What are your pricing incentives for new customers? ➔     coupons

➔     other promotions

➔      

 

What payment methods are available? ➔     financing

➔     credit cards

➔     cash

➔      

 

What are your pricing incentives for loyal customers? ➔     discounts

➔     reward point system

➔     VIP offers

➔      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Place
Question Example Your Answer
Where do your buyers look for your product/service? ➔     shopping mall

➔     online

➔     locally

➔     internationally

➔      

 

Do you need distribution channels? (product) ➔     dealers

➔     warehouses

➔      

 

Do you need a physical store? ➔     product needs to be tested before purchase

➔     large display of items

➔      

 

Do you need a website? ➔     informational

➔     ecommerce

➔     blog

➔     social media

➔      

 

Do you need physical product placement?

 

➔     grocery stores

➔     specialized stores

➔     corporate offices

➔      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Promotion
Question Example Your Answer
How will you reach your target audience? ➔     billboard

➔     radio

➔     online marketing

➔     flyers

➔     direct mail

➔     word-of-mouth

➔      

 

What online promotional tactics will you use? ➔     search engine optimization

➔     social media

➔     email marketing

➔     3rd party websites like Amazon

➔     content marketing

➔     paid media

➔      

 

Will you need a sales team for outbound promotion? ➔     sales reps for cold calling

➔     cold emailing

➔      

 

What are your competitors doing to promote their products? ➔     anything and everything they can, so how will you top them? ➔      

 

 

Source:

4 P’s of Marketing Mix (Updated with Example and Template) (angle180.com)

 

 

 

 

 

 

License

Icon for the Creative Commons Attribution 4.0 International License

Intro to Social Media by Cheryl Lawson is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.

Share This Book