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  • Published on: 14th September 2019
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Competitive Analysis

A Competitive Analysis is a study of identifying a company's competitors and evaluating their strategies and techniques to determine their weaknesses and strengths related to those of company's own product and services.

A competitive analysis is a crucial part of a company's marketing plan. With the evaluation of competitive analysis, a company can establish what makes its products and services unique in market and therefor what contributes the company in order to attract the market target.

Evaluate a company's competitors by placing them into a strategic groups according to how directly and straight they compete for. Share of the customer's money. For each and every strategic group or competitor, list their service and products, growth pattern, its profitability, marketing objectives and assumptions, organizational and cost structure, current and past strategies, strengths and weaknesses, and size (in sales) of the competitor's business. Find an answer such as:

 Who are the competitors?

What services or products do they sell?

What is each competitor's market share?

What are their past strategies and techniques?

What are their current strategies?

What type of media are used to market their services and products?

How many hours per week do they purchase to advertise their products through the media used in this market?

What are each and every competitor's weaknesses and strengths?

What potential threats do the company competitors pose?

What possible opportunities do they make available for you?

An easy and quick way to compare the company product or service with similar companies on the market is to make a competition grid. To do the comparison between one company's product and services, take a piece of paper and write down the names of four or five companies that competes with the service and product of company which needs to be compared. After writing down the names and products, find out that if the customers of the first company don't buy the products which it produces then what would they buy and what reasons are standing behind those companies products and services. To do so, list the main features and characteristics of each product and services. Including such things as:

Target Market

Size

Price

Ways and Methods of distribution

And the extent of customer services for a product from the company

A walk through the competition process will help the company determine where the products fits in the overall market.

To know better on how to Conduct and Prepare a competitive analysis there are endless numbers of techniques and strategies which I would like to mention a few.

What to Expect and Look for: To analyze and investigate a company's competition, an in depth investigation is one of the most essential components of a a company's analysis in market. To implement an effective strategies for improving a company's advantage, a competitive analysis provide you to achieve your competitor's strengths and weaknesses in marketplace. To do this process in a well structured manner, first of all, what you should know before getting started.

What types of businesses should be considered as competitors?

To know this, any business marketing that produces a similar to or as a substitute for your own product in the same geographic area is a direct competitor to the company. Companies offering dissimilar or substitute products in relation to the company product or services are considered indirect competitors. An example of direct and indirect competitors would be:

Indirect competition would be between the producers of a butter company and a producers of margarine selling to the same consumer or customer.

Direct competition would be between the procurers of a butter company and of a margarine company selling to the same consumer or customer.

Why is a competitive analysis an essential part of a marketing plan?

To achieve and maintain a cometitive advantage in reaching and selling your target market, the company must possess a thorough knowledge of your competition. An in-depth competitive analysis will provide you with the following:

A knowledge of how your existing and potential customers rate the competition.

A positive identification of your competitor's weaknesses and strengths.

A mechanism to develop effective competitive strategies in company's target market.

Do I need to analyze all competitors? There are several markets where it is relatively easy to name every competitor. These are concentrated markets where only a handful of competitors exist. If this is the scenario for your product or service, you will need to develop an analysis for each competitor. The steel industry and automobile industry are examples of these types of markets.

What Action are Available to Control and Limit the Competition?

Marketers of different brands of products will often pursue a particular market segment. Market Segmentation, which is the means of breaking down larger markets into smaller ones requiring different marketing mixes, is a means for strengthening and focusing your attempt to limit and control the competition. There are however, a broad range of strategies a business can employ in a competitive environment — from price changing and new packaging to improving customer service and new product development.

CONDUCTING AND PREPARING YOUR COMPETITIVE ANALYSIS [top]

Conducting and preparing your competitive analysis will follow these steps:

▪ Conduct Research

▪ Gather Competitive Information

▪ Analyze Competitive Information

▪ Determine Your Own Competitive Position

Gather Competitive Information

Secondary sources of information are recommended as an excellent starting point for developing a competitive and industry analysis. Secondary sources include information developed for a specific purpose but subsequently made available for public access and thus alternative uses. For example, books are secondary sources of information as are articles published in journals. Marketing reports offered for sale to the general public also are considered secondary sources. Although, they have been created for a purpose other than your current need, they are still excellent sources of information and data. With the ever increasing speed of document identification and retrieval through electronic means, secondary sources are not only an inexpensive source of information but are readily available soon after publication. Sources of information include:

▪ AdvertisingNot only does advertising copy tell you a competitor's price and other product information, it provides an indication of your competitor's entire promotional program and budget. When reading a competitor's advertisement be sure to note the following: publication, frequency, special offers, product features and benefits highlighted. If your competitor suddenly places an advertisement in an industry publication that neither of you are currently selling to, it's an indication that they're trying to reach a new market segment. It's also important to notice the design and tone of your competitor's advertisements. What kind of image do they convey? How does your own image compare? Are their advertisements in color while your own are black-and-white? Even if they're not, a clever advertising campaign can communicate that your competitor is an innovative, fresh company.  

▪ Sales BrochuresSales brochures provide a wealth of product information. You can learn how your competitor is positioning their product and company and what features and benefits they're using to sell their product. Try to obtain all new sales brochures and literature your competitor publishes. Significant changes in the content will indicate that new strategies are being employed.  

▪ Newspaper and Magazine ArticlesArticles in newspapers and magazines are a source of information you can use to get an idea of what your competitor is planning for the future, how their organization is run, and what new product information or innovations they have. Journalists may also uncover and reveal unflattering information about your competitor that may prove valuable to you. Be on the lookout for product reviews in magazines; they will reveal a competing product's strengths and weaknesses. Visit a college or public library. The reference librarian will show you how to find pertinent articles online much more quickly and easily than you'll find them by browsing.

Analyze Competitive Information

Once you've gathered all of the competitive data you have been able to locate, it's analysis time. You should analyze to determine product information, market share, marketing strategies, and to identify your competition's strengths and weaknesses.

Product Evaluation

You should know from your sales staff and customer feedback what product features and benefits are most important to your customers and potential customers. A product's or service's competitive position is largely determined by how well it is differentiated from its competition and by its price.

▪ Make a list of product features and benefits in order of importance, and prepare a table to show whether or not each of your competitors fulfill them.For example, Medium-sized companies that purchase copier machines may look for the following product benefits and features when making buying decisions:

Competitive Objectives and Strategies

For each competitor in your analysis, you should try to identify what their market objectives are and determine what types of strategies they are using to achieve them. Are your competitors trying:

▪ To maintain or increase market share? 

▪ To maximize short-term or long-term profits? 

▪ To introduce technologically improved products into your market? 

▪ To establish themselves as the market leaders? 

▪ To protect their market share under attack by strong competition? 

▪ To develop new markets for existing products?

Once you have identified what your competitors are trying to achieve, you will need to determine what type of strategy they have employed so you can eventually counteract with a strategy of your own. There are many specific strategies companies can employ. Some possible strategies your competitor's may be employing are:

▪ Reducing their prices. 

▪ Advertising in new publications, or advertising more frequently. 

▪ Buying out a competitor to increase market share and customer base. 

▪ Improving a product with a new innovation.

It's important to note your competitor's actions over time. For example, if one of your competitors is consistent with pricing, product features, promotion, and their market share it may mean that they're not exploring or exploiting additional market opportunities. Or, if one of your competitors has a decline in sales volume it may mean they will be employing new marketing strategies in the near future and should be monitored closely.

The Advantages of Competitive Analysis in Strategic Planning

Strategic planners consider external factors, such as the competitive environment, in addition to internal factors when crafting strategic plans. Competitive analysis involves taking stock of the number and nature of competitors presenting a direct or indirect threat to a business. Competitive analysis can provide aspiring entrepreneurs with a clearer understanding of the marketplace conditions in an industry they are considering breaking into, or help established businesses refine their strategic directions. Understanding the advantages of competitive analysis in strategic planning can take your strategic plans to the next level.

Market Gaps

Competitive analysis allows strategic planners to develop matrixes for spotting unserved or underserved gaps in the market. A competitor map is a strategic planning tool that lays out competitors in terms of their unique service models -- identifying where they fit on a matrix with extremes ranging from high price to low price, high quality to low quality and high customization to low customization. A competitor map may reveal, for example, that most competitors in the local area charge premium prices for higher quality products, while the bargain segment of the market remains underserved. Geographic competitor maps can be helpful when looking for market gaps for businesses like restaurants, retail stores or other brick-and-mortar establishments. A geographic map of restaurant competitors, for example, may reveal that several square miles of the city do not have local casual dining establishments but are well-stocked with fast-food outlets.

Product Development

Direct competitors in rapidly developing industries, especially technology, engage in a continual race to develop new blockbuster products. In these highly competitive industries, companies can gain a tremendous advantage by learning what their competitors are developing or improving for future product releases. Knowing the directions competitors plan to take for their product lines can help a company develop products that trump competitors in terms of price, functionality or quality. Be careful not to cross legal boundaries into the world of industrial espionage; there are legal and safe ways to stay alerted to competitors' new product developments without prying into private information.

Market Trends

Competitive analysis can reveal broad trends in the marketplace, again providing the advantage of being able to spot opportunities for differentiating your products and services. Sometimes going against the grain in an industry can attract a small but highly loyal counter-culture market segment. A small record label, for example, may discover that every single one of its competitors has switched to exclusively releasing music digitally and on CDs, which could open up a small unserved market for vinyl LPs.

Marketing

Marketers in the 21st century focus on selling "benefits and value" rather than "products and services." Because of this, staying on top of competitors' marketing strategies can provide the same advantages as analyzing their product development initiatives. What consumers think they are buying can be more important than what they are actually buying, and it is advantageous to know what consumers think about your competitors' brands. Consider the case of a software developer. A software developer may know what products his competitors are selling, but it would be useful for him to know that one competitor is marketing products touted as the "easiest to use" in the market. The developer could counter this marketing tactic by revamping his own software's user interfaces and giving out free trials to prove his products are actually more user-friendly.

Avoid Bad Assumptions

Companies that don't use competitive analysis have little else to go on regarding competitor happenings than assumptions. Unfortunately, assumptions are often wrong and can be costly in business. By analyzing what competitors are doing, you can get more researched and factual data about their products, services, company and product strengths, market share and customers. This data aids in assessing your relative strengths and weaknesses and in developing business and marketing strategies that combat or better competitor offerings.

Position Effectively

Market positioning is the use of product development and promotion to create a differentiation product that appeals to targeted customers. With competitive analysis, you can learn the benefits customers believe separate your company and products from competitors. These distinct benefits provide footing to build a brand image and market position where customers with particular needs seek the unique value proposition you offer. An all-natural foods store, for instance, could leverage its benefits to position effectively within the population of more health-conscious consumers.

Improve Your Offering

Proactive companies can also use regular competitive analysis to improve product and service offerings. In some cases, analysis reveals that your business lacks in either company policies and practices or product performance. Findings of weaknesses in areas that you need strength can provide motivation to enhance your offering. A service provider may discover, for instance, that its service policies are behind competitors and not up to par with customer expectations. This may prompt reworking of customer service policies and employee training.

Plan Market Entry

Success in a given market or with a product launch often comes down to timing. Some companies aim to be the first-mover, meaning they want their products on shelves first. Others opt for a second-mover position. They want to see how the market reacts and time a product launch shortly after. Competitive analysis allows you to put together a schedule of product launches for competing brands, which is useful in establishing a timeline for your own project development and product launches.

YOUR COMPETITIVE ANALYSIS IS WORTHLESS IF YOU DON'T ANSWER THESE 5 QUESTIONS

1) WHAT CUSTOMER SEGMENTS DO THEY SERVE?

This sets the stage for competitive positioning. Is there a target audience or market segment they aren't serving? One that if you targeted it would create differentiation and distance between you and them? Consider industry, company size, demographics, psychographics, geography, or key customer behaviors.

1) WHAT CUSTOMER SEGMENTS DO THEY SERVE?

This sets the stage for competitive positioning. Is there a target audience or market segment they aren't serving? One that if you targeted it would create differentiation and distance between you and them? Consider industry, company size, demographics, psychographics, geography, or key customer behaviors.

3) DO THEY HAVE WEAKNESSES YOU CAN EXPLOIT?

Perhaps your competition is missing the boat with customers in some way. There may be an under- or over-met need that you can address better or more efficiently. Look for areas of friction or customer pain points you could address or take advantage of.

4) WHAT'S THEIR CORE CAPABILITY OR TECHNICAL PLATFORM?

It's important to note the primary benefits your competitors provide. But you should also pay attention to how those benefits are delivered. What are the technical aspects or capabilities they are leveraging? Do they have something you don't? Are there any issues with their technology or with how they deliver? The answers often lead to potential points of differentiation for you.

5) WHAT'S THEIR PRICING STRATEGY?

You are looking for white space in your competitors' pricing strategies. There are two ways to go about this. One is to simply look at price points. Most markets have room for premium, low cost and mid-tier pricing. Is there a gap in one of these areas?

Your second look should be at pricing models. How is the pricing structured? As products? Services? Subscription? Contract? Project, retainer, or hourly? Cost-plus? Look for opportunities to make your offering unique and/or more attractive with different approaches.

Real competitive analysis is about learning to love your competitor

When was the last time you were asked to do a competitive analysis? Was it when a new project or product was being considered? Did it feel like you are just checking a box rather than providing deep strategic thought on how to succeed? Did they just end up as another orphaned document in the depths of your Google Drive dungeon?

Competitive analysis can help frame your own product context, discover other problems your customers have, and even bond the team together against a common foe. For all of these reasons and more you shouldn't ignore your competition. However, if you don't properly understand how they impact your organization's strategy, competitive analysis is simply a waste of time.

Competitive analysis must inform strategy

An effective strategy enables you to more easily make difficult choices between good options. How and whether to react to competitors is an integral part of that.

In particular, strategy is how the team aligns so that decisions made at any level are likely to be better for the longer term goals of the organization. If you don't have that alignment, you will be constantly struggling to move the organization ahead, together. A well-executed competitive analysis provides the framing for how your group is the best one to take on the challenges and opportunities ahead.

Competitive analysis is essentially how your strategy works in comparison to your competitor's strategies in today's world. They will go after the same challenges you are but their plan to solve them will be based on the ‘secret' that they believe about the world. It is about the nuance of how each competitor will solve a problem.

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