When starting your own business, it is important to have a good understanding of the businesses you will be competing against.
Most customers do not make a buying decision in a vacuum. People usually compare prices, features & offerings of similar products and services to see which one is the best value for them.
Competitive analysis is when you look at what your competition is doing. You should do this as a company founder to make sure your business is doing well.
How to identify your competitors?
You may think that you know most of your competition, especially if you are starting a business in a field you are familiar with.
But in this era of fast startups and the long tail of entrepreneurship, I can virtually guarantee that you have competitors about whom you don’t have a clue.
So before you get too confident, make sure that you know all of your competition. You can do this by using some or all of the following techniques:
Survey potential customers
Before starting your business, it is important to do research and learn about your potential customers. One question you can ask them is who they currently go to for the product or service you offer. You can also ask them how satisfied they are with those providers and what you could do to make your business better than what is currently available.
Look for advertisements and marketing efforts from companies similar to yours
Look online and through all the media to find information about your competition. If you’re a B2B startup, Linkedin is a good place. Find out what their value proposition is, what makes them different, and any weaknesses in their marketing. You can also attend trade shows, conventions, conferences, and business forums to learn more.
Find gatherings where companies like yours meet. If you are launching a business-to-business (B2B) company, find shows and conventions attended by companies like the ones you plan to sell to. It is likely that the firms you will be competing with will be present to market themselves to the attendees.
Join industry associations
Almost every significant industry has one or more of these organizations. Consider joining those that are relevant to your marketplace. These can be great sources not just for competitive intelligence, but also for news about industry trends, educational and informational programs, and networking opportunities.
Keyword research on Google
This is a great way to find out what people are searching for when they are looking for products or services like yours. You can use this information to improve your SEO and make sure that you are ranking high for the right keywords.
The Google keyword planner is a great tool to find out which companies or websites are ranking for words you want to rank for. You can also use tools like SEMrush to find out which keywords are websites using to drive traffic.
You can also use this research to come up with new ideas for products or services that people are searching for but are not currently being offered.
Monitor Social Media
Social media is a great way to keep tabs on what your competitors are doing. Many businesses post announcements, updates, and special offers on their social media accounts. You can also learn about any negative customer experiences and how the company handled them.
You can also use social media to reach out to your competitors’ customers and try to win them over. This is called social media monitoring or social listening.
There are many tools you can use to do this, such as Hootsuite, Mention, and Google Alerts.
Online directories such as Yelp, Angie’s List, and Google My Business can also be useful to find out about new businesses in your area. You can also use these websites to get customer feedback about their experiences with the businesses listed there.
B2B software directories like G2Crowd & Capterra can also be helpful to identify competitors in your industry.
You can also find out about new businesses in your area by reading local news articles. This is especially useful for brick-and-mortar businesses.
You can use Google News or set up Google Alerts for keywords related to your industry. You can also follow industry-specific news websites or publications.
You can follow news on sites like Techcrunch to see which startups are getting funding. This can give you an idea of who your potential competitors might be in the future. Also if a startup that is doing something very similar to what you’re doing, raises a huge funding round, you might want to think of pivoting your business.
Producthunt & BetaList
If you’re looking for new digital products or services, you can check out websites like Producthunt & Beta list. These websites curate new and upcoming products. You can use them to see what new offerings are being developed in your industry. You can also check mobile app stores like Google Play or the Apple app store.
How to evaluate your competitors?
The next step is to learn about your competitors. You should also look at their business model and see what their strengths and weaknesses are. This information can help you figure out how to compete against them in the future.
For example, one or more of your competitors may be much larger and have significant revenue streams from products, services, or customer segments that are not directly competitive with you.
Some companies have a lot of money. This can make it hard for other companies to beat them in a price war. Other companies may have found ways to save money so they don’t lose money in a price war.
There are many ways to learn about your competitors. Here are a few techniques:
Visit competitor websites
Visit the companies that are competing against you. Look at how they do things and see what you can learn from them. If they have a physical store, go and visit it. If they are only online, sign up for their product to see how it works. This will help you understand what you are up against and how you can compete.
The best way to understand the customer experience is to be a customer yourself. Buy the competitor’s product and find out what their quality, sales techniques, delivery processes, and customer services are like.
When doing this, it is very important to avoid any dishonest practices. Do not lie about your identity, or submit false documents. If you are not part of the target customer segment, ask an employee, team member, friend, or family member to do the research for you.
Interview customers of competitors
Try to find people who have been using the competing product or service. Interview them to learn about the strengths and weaknesses of the competitor. Ask them how they discovered the product, why they chose it, what they like and don’t like about it, what other similar products they have tried, and what it would take to get them to switch providers.
Almost every product or service has people who like it and people who don’t. The reviews from people who don’t like it are more likely to be accurate than the comments from people who do like it. This is because the people who don’t like it might be more honest, or they might have a good reason to not like it.
Talk to employees of competing businesses
You can learn a lot about the quality of products and services, customer relationships, management practices, and other characteristics of competing firms by interviewing people who have worked for them.
No matter what industry or market you are in, you will find that it is a small world. This means that you will likely meet people who know about the competing companies from the inside. You can learn a lot about those firms by having open conversations with people, without asking them to violate any confidentiality agreements or disclose any proprietary information.
Competitor hiring practices
You are probably going to use websites like Linkedin or Indeed to find employees. These websites can also be used to find out what your competitors are looking for in an employee. What kind of people are they hiring? What skills and education do they want their employees to have?
You can learn a lot about businesses in your industry by reading the profiles, comments, blogs, and messages posted by professionals on social media sites. This information can give you clues about the culture, business practices, strategies, and methods of the companies that you compete with.
Common Mistakes in Competitive Analysis
When gathering information from different sources, it is important to be as accurate, unbiased, and thorough as possible. Make sure to not give extra weight to data that confirms what you want to believe. This is known as confirmation bias and can be a trap for people without realizing it.
If you say that your business has no competition in your business plan document, it shows that you are naive and don’t know what you are talking about. Investors know that this is not a good thing and it makes them think that you have not done your research or that your idea is not good.
Be aware that, in addition to competing with other businesses that offer the same products or services, your company is also competing with companies that are satisfying the same needs but in different ways.
You can make a mistake when you are thinking about who your competitors are. You might think about the companies that have a different customers, or ones that have a different value proposition. But you might also make the mistake of thinking about them too narrowly, and not including companies who might offer something different but that meet the same needs as you do.
To make sure you are only focusing on true competitors, ask yourself this question: Is this company’s product or service something that a particular customer seeking to satisfy a particular need at a particular time could choose in place of my product or service? If the answer is yes, then you are dealing with a true competitor.
Developing a competition visualization
Once you have gathered information about your leading competitors, find a way to display it that will enable quick and easy comparison of your offering to theirs.
Competitive analysis tables
The easiest way to compare how your home stacks up against the competition is to use a chart. On one side, list your home and all the features it has. On the other side, list all of your competitor’s homes and features. Score each feature from 10 (highest) to 1 (lowest) or in terms of whether a competitor has a particular feature.
The competitive grid simulates the decision process potential customers go through. Most people won’t take the time to write out a competitive grid, but they will have many of the same ideas in mind when they make a buying decision.
Making a competitive grid will help you understand what potential customers are thinking. It will also help you see the weaknesses and strengths of your own product or service. This way, you can work on improving your product or service so that it is at least as good as the other products that people might consider.
The competitive grid can help you understand your competition. You can use this to figure out what advantages or disadvantages you have when competing with them.
This is something that appears in many investor pitch decks because it makes clear the two or three most important areas in which you intend to compete with others in the industry. It typically plots two important attributes against each other, and positions various competitors relative to each other.
Make sure you don’t delude yourself when analyzing your competition. This will help you stay realistic and understand where your company stands in the market.
There is a new competitor visualization that was suggested by Steve Blank in a 2013 blog post. This new visualization is called the petal chart. It acknowledges that in a fast-moving, interconnected world, a company may have many different competitors across many different products and lines. A simple grid or quadrant will not fully capture the picture.
The petal chart puts your company at the center of the universe. It positions all other competitors in different areas, or “petals,” based on the products or markets they compete in.
Professional Services and Online Tools for Competitive Analysis
If your startup is big, complex, and growing, you may want to think about hiring a company to do a professional competitor analysis for you. This company will help you look at your competition closely and figure out what you need to do to stay ahead.
Many startups use cloud-based tools as an affordable alternative to in-house tools. These services can track your competitor’s website, traffic, advertisements, social media profiles, and other online activities. They will then alert you of any major changes in your competitor’s profile. Some popular online competitive analysis tools are kompyte.com, Similarweb, SEMrush, and free alerts from Google.
No matter if you do the research yourself or use an outside company, it is important that you have detailed, accurate, and up-to-date information about your competitors. Knowing what they are doing is the key to outperforming them and getting more customers.
If you liked reading this post, here are a few other posts you might enjoy reading.