Why Create Competitive Analyses?
Today's business environment is fast paced, with both business owners and marketers spending much of their time taking care of tactical issues with no time for strategic ones. A mistake I have seen made by many overworked small and large company marketers is to overlook the importance of a competitive analysis. "I deal with the competition every day, why do I have to write it down?" is the comment I hear. Or, " We did that when we first launched our product - two years ago."
Once you take the time to create an organized competitive analysis that includes ALL current data, you will find that insights as to your product and positioning jump out at you - insights you may not have otherwise had through just day to day interactions.
A well written competitive analysis will pay many dividends in the future, and will serve as an ongoing tool to help understand the market and it's needs. It is a living document, and should be treated as your jungle guide to the marketplace.
Start with Your Target Market
To begin this project, knowing your target market is a MUST. Remember, noone can be all things to all people. Your target market can be carved out economically, geographically, or demographically. It can also be carved out in terms of end product type if you mostly sell to other businesses rather than end consumers.
It is especially critical if you are launching a new product to understand where it fits and why. If you haven't yet established this, I suggest conducting either a formal or informal survey to find out which type customers have the strongest interest in your offering.
If you have an established product, you already know your target market and can move on. In this case, I suggest you remain flexible as the data you glean here may tell you that repositioning would be a good idea.
Next,Identify Your Competitors
Keeping an open mind here is key, as you may have competition that is not "apples-to-apples" yet is still eroding your marketshare and captivating other potential customers. For example, if you sell pretzels and only look at other pretzel companies, you are not taking into consideration that your target market may enjoy potato chips more. Then your task will be to make eating a pretzel sound like the most appealing thing in the world, just like the Claymation California Raisins did for the raisin industry!
List out ALL competitors, making separate spreadsheets in an Excel workbook for "apples-to-apples" competitors and other competitive areas. Another example would be for a high tech chip company - one spreadsheet would be for integrated solutions and one would be for board level solutions that accomplish the same function.
Place the name of each competitor across the top of your spreadsheet, and begin gathering as much information as you can about each.
This is not a time for ivory tower marketing - now is the time to talk to your customers and potential customers to get their insights.
Find out what they like, and dislike about each solution. You may want to conduct a survey, or visit a store where competitive products are sold. If you are selling a system that provides an industrial service, visit the engineers that manage this function and ask their opinions.
The more customer data you gain, the better off you are. Remember, everyone's website paints them in the best possible light!
Features/Benefits
During your discussions with potential customers, be sure to ask them what features and benefits are THE most important to them. Ask them to tell you how your competitors perform here. If you are offering a service, ask them about promptness, response times, cleanliness, etc. If you are offering a widget, ask about color, size, functionality, etc.
Pay special attention when customers request a feature or benefit that is not offered by anyone yet - this could be your golden key to competitive advantage.
To temper this data, review your competitors marketing information and see what features and benefits they are pushing most strongly.
Now, take your spreadsheets and add a row for each feature and a row for each benefit. I find it useful to separate them into two sections of the sheet; top and bottom. Make sure the most important criteria is at the top, moving to the least important at the bottom.
Rank your competitors as to each feature and benefit, and add comments in whenever necessary.
At the very bottom of the sheet, add a row for Target Market for each competitor.
Market Share Data
If your competitors are public companies, market share data can be gleaned by first sizing the market through analyst publications or reports, then reading through their financial reporting information. If you look at their revenue by product family, you can then compare this to total market size and come up with a good guestimate.
If they are not public companies, your job is tougher. You may have to find out through the grapevine what pieces of business they have won and make an educated guess as to the size of each piece of business.
Their Estimated Marketshare should be the very last row, right after your Target Market row.
Analyzing the Results
Congratulations! You now have a useful tool that will help you win, even in highly competitive markets.
First, take a look at the competitors that serve primarily your target market. What is their marketshare, and why? How do the top marketshare winners stack up in terms of the most desirable criteria from your customer's point of view?
The most important thing here is to look for "gaps" that your product or service can easily fill in a short amount of time. For example, the competitive analysis we completed for our construction company showed that only 10% or less of the 1 million contractors in the Bay Area are "design-and-build" contractors. We responded by purchasing advanced architectural software and getting training, now we are creating our own designs and building them.
The next thing to do is assess whether your closest competitors are winning significant marketshare, or meeting the needs of the customer base. If price is the top criteria and your solution fills the need better by speeding up a process at a higher cost, then you are mispositioned. Find out what you can do to offer some of the benefits you offer at a lower price to meet market needs.
If a distant competitor is winning, such as the old fashioned dust rag vs. the new treated dust rags, then a well thought out advertising strategy and campaign is in order to raise awareness of your unique benefits.
Be sure to update your competitive analysis at least monthly depending on market conditions, as your competition never sleeps!
Brenda Keener - Brenda Keener is a 25-year veteran of the Silicon Valley, where she has written business plans for several hundred startups including ...
