Competitor Analysis

The main goals of a competitor analysis are to understand who your competitors are, what strategies they are using, how competitors might react to your company’s actions, and how to influence competitor behavior to your advantage.

The competitor profile and overview involves analyzing competitors using Michael Porter’s framework based on four key aspects:

• Competitors objectives
• Competitors assumptions
• Competitors strategy
• Competitors capabilities

Objectives and assumptions drive the competitor while the strategy and capabilities are what the competitor is capable of doing.

Competitor Objectives

These objectives are not always financial; they can commonly be related to a company’s growth rate and market share. The reason you want to know a competitors objectives is so you can better plan for their strategies.

Let’s say your competitor is focusing on short term revenue – you can likely suspect they will spend most their efforts on holding strong positions for the top performing products as opposed to investing in research and development to roll out new products.

Competitors Assumptions

Assumptions are made by management most the time based on past experience, but can also include beliefs about its competitive position, regional factors, industry trends and rules of thumb.

The Honda example I brought to light earlier is a classic. U.S. manufacturers had failed in the past with attempts to sell a smaller motorbike and as such had written off the market segment, leaving a gaping opportunity for Honda to grab market share.

Competitors Strategy

This information is often hard to find. A lot can be revealed in annual shareholder reports, 10K reports, interviews with analysts, statements by managers and press releases.

Cash flow is also a great indicator of a competitor’s strategy, try looking up their hiring activity, R&D projects, capital investments, promotional campaigns, strategy partnerships, mergers and acquisitions.

Competitors Capabilities

Once you have knowledge of the above three aspects, you can make better informed decisions about the capabilities of a competitor. These decisions can help fend off competitor attacks and help you make strategic attacks based on competitor’s abilities to respond quickly and effectively.

Jim Riley defines it as an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher price. We simply call this a value proposition in the business model canvas.

Competitive Advantage

Think about what makes your company different than your competitors. Next, do the same thing for your three competitors.

Did you know that some of your competitors may not actually be your competitors?

In this step I want you to define your primary target market. Again, we can define your target market through demographics, psychographics, geographics, behavioral or customer jobs. All of these can be appropriate.

Target Market

Identify who your target market is (if you don’t already know) and then do some research on your competitors to see who their target market is. A good place to start would be their website and marketing communications – see who their existing clients are, have a look at their messaging.

Note: if you find out your actual competitors are different from what you original selected – make sure you change them and redo section one: competitor profile.

Market share can be defined as the percentage of the market you account for. In the previous task you identified your target market – now it’s time to calculate your market share.

In a survey by the Marketing Accountability Standards Board (MASB), 67% of respondents prefer to calculated their market share metric as a dollar value – for instance – you have $300,000 share in a $1.8 million dollar market which equates to a 16.7% market share.

So why is this relevant for your competitive analysis?

Well, you want to know how you stack up against your competitors to ensure you can make better business decisions – read more this in my article on competitive benchmarking. This metric can help you with setting goals and objectives for the future to ensure you grow your business and take a bigger piece of the revenue available.

Market Share

Complete a market share analysis.

Your closest competitor is ramping up a new radio campaign – wouldn’t it be nice to know that ahead of time?

Well, it certainly would – but unless you have some over friendly competitors that love sharing, chances are you probably won’t.

That doesn’t mean you can’t strategically predict what your competitors might do.

In this section of the template, make sure you fill in your marketing strategies and predict those of your competitors. If you are not familiar with what they are doing, do some research and observe what they are doing – good sources to be looking at include their advertising campaigns and promotions. The goal here is to try and predict what they might have planned for the future and how that will affect you.

Let me demonstrate this with an example. You might have a competitor in your list that primarily services another particular market but have a couple of clients in your market. They recognize an opportunity for growth and think they can steal a bit of the market share that you hold and as a result, launch a radio campaign targeted at your market!

Marketing Strategies

Write down your current marketing strategies and any you have in the pipeline. Now get moving and see what your competitors are doing – give them a call, do some research on their site – do whatever you can to become more familiar with their strategies. You’d be surprised how many competitors would actually tell you what they are planning.

Your product and/or service mix includes your range of products and services. This section of the competitor analysis template involves comparing your offerings to those of your competitor.

It is important here to take a look at your product range, product quality and brand credibility.

I recommend you firstly take a look at your product range and see where your strengths lie. Next, be honest with yourself and rank your quality standard on scale of 1 to 10. Lastly, rank your brand credibility and if you hold any. This really boils down to the quality of your value proposition.

Now do the same for your three competitors, using the same judging scale. Look out for areas where your product or service differs from your competitors.

This section gives you the opportunity to identify new viable markets that can be exploited with a new product, or make product variations to fill a gap in an existing market. These opportunities can be explored further with more research and by completing section four of this template which discusses the SWOT.

Product/Service Profile

Complete the product/service profile – rate your company then your competitors on a consistent performance scale.

Pricing can tell a lot about your competitors. Here you want to be looking at what pricing strategies you and your competitors are implementing.

Key questions to be asking about yourself and your competitors include:

• Am I a low-cost or high-cost provider?
• What are my mark-ups? 75% but currently offering 15% to get stock moving?
• Do I work off volume sales or once off purchases?
• Do my prices differentiate depending on the medium – online vs brick n’ mortar?
• Am I using a cost-based, customer-based or competitor-based pricing strategy?

Pricing and Costs

Answer all these questions about your company and your competitors. Pricing is an observable source so you should be able to get most of the answers by looking at your competitors offerings.

The internet has disrupted the more traditional distribution channels. This section involves looking at how you distribute your product/service to your customers and how your competitors do it.

Jim Riley talks about how each layer of marketing intermediaries that performs some work in bring the product to its final buyer is a ‘channel level’.

I recommend you break down your distribution channels down as a percentage.

Distribution Channels

First, start with your company – how do you get your products or services into your customers hands?

It might be that 50% of the work is done remotely, 30% on site and the remaining 20% done automatically?

Now look at your competitor’s distribution channels – are they automating more aspects? Do they use more middle men? Do they spend more time in front of the clients?

Two questions I love asking are:

1. Does there strategy resonate better with customers than yours?
2. Do they have better customer satisfaction metrics than you?

The final section of the competitor analysis template includes analyzing four aspects from the traditional SWOT analysis (Strengths, Weaknesses, Opportunities, Threats).

A SWOT analysis is traditionally used by companies to audit their current business processes and monitor competitors. I like to break the SWOT down to internal and external factors.

This section is better outlined in SWOT Analysis.

SWOT Profile

Complete a SWOT analysis for your company and your competitors – make sure you get your head around internal vs external factors – a lot of people tend to get confused. This is the final step of my competitor analysis template and really aims to wrap up everything and give you a good understanding of where you lie in comparison to your competitors in the market.

Student Activity

• Complete the Competitive Analysis for your company.

Sources

• http://blog.clientheartbeat.com/competitor-analysis-template/