Are you obsessed with your competition? Concerned about encroachment and trying to anticipate their every move?
Or, maybe you are blissfully oblivious. You are unaware or unconcerned of others with similar products or services competing for your customers.
I can't think of any company that wouldn't benefit from competitive intelligence which is actionable and insightful. In fact, you can think of a good competitive analysis
as a scouting report of the actual market terrain that your company must navigate in order to be successful.
That said, some businesses would benefit more from an understanding of their direct, indirect and potential competitors than others.
The nature of your industry and where your business is in its life cycle are two factors that help determine the usefulness of a thorough competitive analysis. Here is one way to think about it.
Many Competitors; Similar Product
There are many businesses where the potential customer base is large and served by numerous providers all offering a similar product or service.
Take for instance, the local tax preparer. There are countless individuals and businesses that could use your services. And, there are countless other tax preparers providing a similar service for a similar price.
If you serve the mass market with vanilla tax returns, then there is probably little benefit to an in-depth competitive analysis. You don't need a report to tell you there is little differentiation in your market and that the keys to success are accuracy and customer relationships.
In this case, a competitive analysis is likely not justified. Your energy is best spent building relationships with your customers, delivering top quality product, providing great service, and establishing an impeccable reputation. Add competitive pricing, and you will have plenty of business.
Several Competitors, Differentiated Product
Most businesses fall into this category. There is a large market for the company's product and an identifiable number of competitors.
Take for example, a sporting goods retailer serving a regional market. The market is broad with many (but not countless) competitors, including local specialty shops, big box merchants and online retailers.
Unlike the first example, these companies all differentiate themselves from one another, be it in customer service, price, location or product selection. Success is determined by how well the business compares to the competition.
A competitive analysis updated every couple of years is sufficient for these companies. A good market review would define the business' place in the market, and identify differentiating strengths that can be touted as well as opportunities to be mitigated.
If your business falls in this category, keep an eye on the competition and the industry, but don't obsess. Rather, know you target market, capitalize on your differentiating strengths, execute flawlessly and be prepared to react to changing customer trends.
A Few Competitors; Niche Market
Some businesses are one of only a very few companies providing a particular product to a niche market.
An example might be a firm that makes optimization software for distribution centers. There are probably only a handful of other companies competing in this space. Potential customers are well informed of what you and your competition can offer. They will make informed decisions based on their buying criteria.
In markets with just a few legitimate competitors, you need to stay abreast of their every move; a thorough competitive analysis needs to be completed and updated routinely.
Follow your competition's product line, pricing, sales efforts, distribution, service levels and cost structure. Know what they promise and what they deliver. Get your customers' perspective on the competition. Armed with this information, you will be able to implement changes which will set your firm apart.
New and/or Changing Businesses
Companies that are still defining their place in the market, as well as businesses anticipating a new venture or change in strategic direction should absolutely complete a thorough competitive analysis as part of the planning process.
Much can be learned by studying those competitors which most closely mirror your business. Understand how they define their market and differentiate themselves. Identify what they do well and what you can do better or differently.
Understand pricing and product offerings. Determine if they have partners or alliances that would be difficult to penetrate or replicate. Define their strengths and weaknesses and compare them to your internal capabilities.
Understanding your competition at a reasonably deep level will help you create your value proposition, define your target market and shape your marketing plan.
In some cases a competitive analysis is not worth the effort, while in other cases you can't afford not to do one.
If you would like assistance developing a competitive analysis for your business, please give me a call. I would be happy to help.