Before you launch a product or service (or expand into new markets), it’s critical to understand your competition. A detailed competitive analysis helps identify your company’s differentiators and what you bring to the table.
Knowing your competition will also help you build and refine your business strategy and its key components like your messaging and marketing plan. Plus, understanding your competition will better help you determine your company’s place in the market and what you can do to hit the ground running and immediately build market share after you launch.
We’ll take a closer look at some of the key elements of a competitive analysis. First, be ready to answer the following questions about your competitors and your company’s competitive position:
- What makes your product or service better?
- Why should a customer buy from you?
- How are you differentiated?
- How successful are they?
- What are you doing to exploit their weaknesses?
- What strengths do they have, and how are you responding?
- What are they going to do to beat you?
- Are they public or private?
- Who funds them?
- Who is their lead investor?
- What financial position do they have?
- What is their pricing strategy?
- What is their marketing strategy?
- How is their sales force deployed?
Not being able to answer basic questions about your competition will reduce your chances of winning a sale and possibly raising funding. Worse yet, you won’t have the information you need to form a clear strategy to beat them.
WHAT TO INCLUDE IN A COMPETITIVE ANALYSIS
Like other forms of business-related research, a competitive analysis can quickly become overly complicated. You want to understand your competitors, but not spend huge amounts of time digging into the minute details.
Instead, use information sources like their websites, SEC filings, media articles, consultant briefings, marketing material, their customers and former employees to learn more about each competitor. Be sure, of course, to not gather any confidential information.
As you analyze each competitor, compile these key details:
- Company description, including demographics, size and locations
- Summary of key management
- Financials, with an analysis of strengths and weaknesses
- Description of how they’re capitalized
- Product and services descriptions, assessing their strengths and weaknesses
- Description of their marketing and sales strategy
- Positioning analysis and what makes them different
- Determination of what threats they represent to your strategy
- Description of what opportunities you have to beat them
This is essentially a SWOT analysis (strengths, weaknesses, opportunities and threats). With this information, you’ll not only better understand your competitors; you’ll also have the insight to create both a business and marketing strategy that can push you ahead of the pack.