Unless you are in the enviable position of turning away business because you have more than you want, keeping tabs on the competition could carry considerable benefit for your company.
Knowing who your direct competition is and what kind of threat they pose in the market is the best basis for a sound product development and ongoing marketing strategy. Without it, you may be shooting blind.
This is especially true if you are not number one in your market. By studying the competition, you can find out a lot about how they obtain and retain customers, what types of products and services they are offering and how and even what their plans for the immediate future are. By using this information, combined with your carefully designed branding and company values, you can position yourself to increase your market share, and more.
1. Top strategic planners require this as a first step
From writing your business plan, to seeking investors, strategic planners will all ask one question, what’s the competition like? When asked this, most business owners give one of two responses. They look like a deer in headlights, because they have no clue; or they get a knowing grimace, and mutter something like, “Oh yeah, those guys.” Neither of these is the sign of a well-informed business owner.
If you are basing your business strategy strictly on the business you’ve done and the customers you’ve served, without considering the competition, you could be missing a lot very valuable information. Your customers should remain your number one priority, but what are your competitors offering them? If you don’t know, how can you possibly hope to defend your existing business and expand your market share?
2. You could be missing big opportunities
Holes, or gaps in your market may not be visible from your perspective. Often small business owners fail to explore new possibilities because they make assumptions. They assume there is no market for a product, because no one has asked them for it. They assume there’s no need to expand product lines, or improve on services, because business is good, but taking a look at the competition may reveal otherwise.
- You may find products and services you could offer with little, or no added cost, that competitors are selling a lot of.
- Competitors who improve on existing offerings may be eating into your profits, even with existing customers who use the competitions add-ons, but would sooner buy from you.
- There may be new products or services in your industry that you are not aware of, because you’ve been busy focusing on providing high quality service and products in your existing lines.
3. You need to offer the best available product
In today’s world, every consumer is looking for the biggest and best. We’ve been conditioned to expect continual improvement in everything we use. If you are standing still, even in a well-established business, a new competitor may innovate in a way that shifts the market rapidly.
- Competitive analysis can show you what your competition is working on, at least in loose terms. Using this to develop your own offerings can help you stay up to date and give your customers confidence that you are keeping them on the cutting edge.
- Not sure your competition is headed in the right direction? By knowing where they’re going, you can shape your own brand messaging to assure your customers that they are using the best.
- Caution: legal issues are not to be taken lightly. Parallel development is one thing, stealing a protected idea is another.
4. You need a bigger picture of the market
Knowing what your market wants now and is looking for in the future is key to staying competitive in business. Market trends become more apparent as you study other vendors in your space, as well as your own sales. Latching onto a quickly rising trend and beating the competition with an offering of your own is the dream of many business owners. But, you might just as easily differentiate yourself with a disruptive offering that changes the focus of the market altogether.
- Most competitors serve overlapping markets, even when their products are noticeably different. Seeing where those boundaries lie can give you an edge on appealing to a wider market.
- Staying ahead of what the market wants is a tricky game. You have to be just far enough they can still see you and connect the dots, without losing them by innovating too fast.
- A balance between innovation through improvement and innovation through disruption is the best way to build a strong brand with growth potential.
5. You need to know how customers see the competition
In today’s world, companies are not really selling products and services, they are selling benefits and solutions. Changing just a few words in an ad campaign can make all the difference in the world. Having consumers believe your product is the easiest, strongest, or longest lasting can mean the difference between dominating the market, and going out of business.
- By seeing how your competition sells, you can get a clearer view of your own product and service offerings. Do they need to be tweaked?
- Exploring the competition’s creative ideas, is the best way to stay out of the rut and develop a mindset that allows you to get outside the box and see your business and your market through fresh eyes.
- You may also find that you can meet the competitions claims of superiority with proven facts to the contrary.
6. It helps you get a realistic view of your own company
When you get a thorough competitive analysis of others in your market, it helps you see yourself more clearly. You may find that you are doing more with fewer resources. You may find weak points that you can easily fix, or you may find you need to pivot quickly to avoid a coming disaster. Whatever the case may be, most of us have a very myopic view of our own business endeavours. We tend to think bigger, or smaller than they actually are, which isn’t helpful.
- Give credit where credit is due. Honestly acknowledge your own strengths and weaknesses as compared to the market.
- Don’t put too much stock in someone else’s success. If you believe in your business model, re-examine it but do what you ultimately feel is best for you and your business.
- Analysis can lead to paralysis, so make sure you set a beginning, and an end for your comparison. Getting stuck in constant comparison will lock you down. You will either lose momentum, or become a broken imitation of your competitor if you focus on it too heavily.
Do you know what your competitors are doing? Get the insight you need to improve your competitive advantage with our free, in-depth competitive analysis.