Businesses cannot operate in a bubble. Regardless of how small a business you have, it is essential for you to think about your competition. But what you should focus on and what to do with that area or information often need to be clarified.
It is worth conducting a competitive analysis at any stage of your business. This is where a marketing competitor analysis helps. The process enables you to identify the competitors, research their marketing and advertising strategies, and evaluate your brand's strengths and weaknesses.
Competitor analysis is like a tool for designing a game plan to let your business move ahead toward accomplishing its goals.
Let's find out more about it in this article.
Table of Contents
What is Marketing Competitor Analysis?
A marketing competitor analysis (also referred to as competitive analysis) is the process of identifying the competitors in your niche or industry and discovering their different marketing strategies. Businesses can use this data and information to compare and identify their strengths and weaknesses concerning each competitor.
One can conduct competitive analysis on a higher and broader level or by delving into one particular aspect of a competitor's business. It is essential to know about the process of executing a general competitor analysis though you will need to customize the process to meet your organization's goals and objectives.
Why Analyzing Competitor's Marketing is Important?
Business entrepreneurs, particularly small business owners, often juggle multiple tasks at once. Amidst a busy schedule and emerging digital marketing trends, a marketing competitor analysis is indispensable.
By studying and analyzing how your competitors are perceived in the market, you can conclude about your brand's positioning. Knowing about your company's positioning and strengths further helps you determine the image of the product or service that you want your target audience to have in their mind.
Communicating to potential customers why and how your product stands out is crucial. Knowing your business's weaknesses is equally important to help it grow. By understanding where you fall short of your customer's expectations, you can identify areas that require more time and resources.
For instance, through a competitor analysis, you might learn that your customers are unhappy with your customer service. This can urge you to find out what others are doing right and apply the same to your business.
What is PEST Analysis in Competitor Analysis in Marketing?
PEST analysis is a crucial but often overlooked area in business. PEST stands for Political, Economic, Social, and Technological factors. PEST analysis enables a company to know the right ways to react when there is a change in any of these four factors. So, how relevant is it for marketing competitor analysis?
While conducting a competitive analysis, you must consider SWOT, for which you need to assess the external factors. This is where the PEST analysis comes to play.
With a PEST analysis, you know how your competitors react when a change occurs. Whether they consider it an opportunity or a threat should be considered. PEST analysis gives you a clear idea of how your rivals operate under various circumstances.
With the acquired ideas, you can strategize your marketing efforts. There might be a social change that you are better prepared to handle than your competitor, and you can take the full opportunity of the strategies and come out stronger than your opposition.
How to Do a Competitive Analysis in Marketing?
Finding out what to emphasize when conducting a marketing competitor analysis can take time and effort. So, here are the well-defined steps to do competitive research in marketing:
Identify the Competitors
As the first step, you need to list the potential competitors, considering where your customers would go if they don't buy from you. An easy way to start is by searching the product name or category on search engines and exploring the results. You can also conduct customer surveys for this purpose.
Once you have made a list, ensure including as many diverse sets of companies as possible to assess clearly what the market looks like. Your competitors will fall into the following three categories:
- Direct Competitors – They sell a similar product/service to your target audience. They come first to your mind when you think about competition.
- Indirect Competitors – They sell a different product/service in the same category and target the same audience.
- Replacement Competitors – They exist outside your product category but cater to a similar customer need. They are the hardest to identify.
While conducting a competitive analysis, you should focus on direct and indirect competitors and less on replacement competitors who could threaten your business prospects.
Create a Competitor Matrix
Before moving on to the analysis, spend some time organizing. A competitor matrix or grid is a table to help you compile your research. It makes it easier to compare the findings and spot the dominant trends.
List all the data points or information categories you would like to find out. You can start by allotting one row or column to each competitor. As you progress in the analysis, you can always add more categories.
Gather Detailed Information
Once you have the list and the matrix ready, it is time to start learning about the businesses. Look for the basic info first, and then build your way from there. Company websites, social media pages, news, blogs, and articles are your resources. Some of the critical information you should gather would be:
- A company history would include information like founding dates, funding sources, or mergers they might be involved with.
- Location will vary significantly based on your industry. For instance, eCommerce businesses could compete against companies selling their products worldwide.
- Organization size determines how many people the competitors employ. This will further give you an idea of the revenue they generate. Knowing your competitor's size helps you contextualize the other data you collect more innovatively.
Profile the Target Customers of Your Competitors
A company exists because of its customers. So, getting an idea of who your competitors target and sell to will significantly inform you about their businesses. To understand a business’s target customer:
- Check their mission statement
- Track who they address and interact with on social media
- Look at their messaging type
- See if their existing customers are often featured in their content
With this information, you can create a profile of the target audience your competitors are trying to reach and satisfy with their products and services. They might resemble your target customers, so note every minute aspect and difference.
Emphasize the 4 P’s
Now that you have identified the competitors’ target audience, you need to find out how they reach those market segments. This requires a deeper dive into their marketing strategies.
The four Ps of marketing is Product, Price, Promotion, and Place, which cover all the elements when you bring a product into the market. So, while researching, consider the following questions for each of your competitors:
- What are they selling?
- What features does the product or service have?
- What are the strengths and weaknesses of those products?
- What is their pricing model? E.g., one-time, subscription-based, etc.
- How much is the cost of the product/service?
- How does their pricing reflect the quality of their product/service?
- What mediums or advertising channels are they choosing to get the word out about their product/service?
- What USPs of their products/services do they highlight?
- What is their precise brand story?
- Where do they sell their product?
- Do they sell to customers directly or partner with third-party marketplaces or retailers?
These questions are the starting points and can be expanded based on the industry and purpose of your research.
Analyze Your Strengths and Weaknesses as Well as Your Competitor’s
As the final step of the marketing competitor analysis process, use all the information to consider the strengths and weaknesses of each of your competitors.
Ask yourself why some consumers prefer a particular company’s product/service over others. Make a clear note of the conclusions.
Finally, consider your own business’s strengths and weaknesses. Evaluate how your company compares to the competitors you have been researching—knowing what sets you apart and where you lack can help you strategize the type of digital marketing you need and better serve your target customers.
Takeaways on Marketing Competitor Analysis
Completing a marketing competitor analysis is not the end of strategic planning but just the beginning. Use the insights discussed here to guide your strategic decision-making and brand mapping.
Also, competitive analysis is an ongoing process. So, you can refer to your research whenever you need to make a significant and informed business decision.
Regardless of the size of your business, keep your competitors in mind and conduct a competitive analysis to set your business up for success.