For any new or existing business, competitor analysis model is a very vital part of your business plan.
Your business plan contains everything your business is about and everything it needs.
If you read my post on ‘A Simple Guide To Making A Great Business Plan’ you would understand everything about business plans. The earlier you realize the need for a business plan + a competitor analysis model (and actually make one), the earlier you would identify the strengths, weaknesses, and needs of your business.
Competitor analysis definition
Competitor analysis is the in-depth study of your competitors and how your business compares.
Not only small businesses or startups need a competitor analysis model, existing and even successful businesses still conduct competitor analysis from time to time.
Evaluating the strengths and weaknesses of your competitors will give you the advantage of beating their strengths, and giving the consumers what they aren’t already getting from other brands.
A competitor analysis model helps your business monitor direct and indirect competitor tactics like- pricing, marketing, distribution, service rendered and many more.
A simple competitor analysis model (framework)
1• List your competitors
Your competitors can be divided into current and aspirational.
Current competitors are businesses that are already running in a similar way as yours, while aspirational competitors are businesses you aspire to compete with in the long run.
As an example, competing with Apple if you’re in the tech industry, that is aspirational.
Your competitor list should consist of about 6 to 10 different businesses that you’ll be able to study properly.
2• The products/services offered
Before listing a business as a competitor, you must be aware of the products they sell or services they render and how it is similar to yours.
You can identify/study what your competitor offers by patronizing as a customer, by meeting them at industry events or simply researching.
After identifying the products/services, do a price check to ensure you are not overcharging or undercharging with your own product/service.
If their prices are considerably low and they sell good quality, find out what they are doing right, find out how they minimize their production costs, as well as shipping fees, and more.. That is why this is called an in-depth study.
3• Compare content/articulate your own
Now that you’re familiar with your competitors product/service, compare it to what you have on ground, or what you have in mind.
Will your product/service be able to retain its authenticity while beating customer and competitor expectation?
4• Know their target customers
Since their businesses are still running, obviously, that means they are constantly being patronized by people.
Since your product/service is similar to theirs, then their ‘people’ are worthy of studying, Who are they? What can they afford? Are they low, middle or high class customers? Through what channels do they engage? What is their lifestyle? What is their age range? What’s their gender? What’s their location?
All these questions should help you structure your own target customers.
Your competitor will always have strengths, that is probably why they are still standing.
Maybe they provide excellent customer service, or maybe they have a large follower base on social media?
Or do they run appropriate marketing messages for the different segments of their businesses? By segments, I mean businesses that have different products for different genders or different classes of people- they have to run appropriate adverts per segment.
Find out what their customers love about them, and why they patronize them.
6• USP (Unique selling point)
What makes these businesses stand out from the crowd? Is it their branding? Expertise? Discounts? Positioning? Or is it still about excellent customer service and great messages for different segments of their market?
Do they add immense value to their customers? Or solve problems for them? If you can identify the success factors of your competitors, then you most definitely will be able to define yours.
As much as a competitor will have strengths, they will also have weaknesses, find out these weaknesses and strive to do better (not just for yourself, but for the customers).
It could be better customer service, better quality, better ads, or any other factor.. If you were put in a position to handle their businesses, what will you change or what will you improve on?
8• How do they market
Since you already know their target customers, you can also determine how they engage with these customers..
It could be through print (brochures, magazines), social media, website, adverts, sales, events, promotions, giveaways or partnerships.
If you communicate your message (products/service) through these channels as well, you have a higher chance of potential customers spotting you.
9• Identify areas of improvement/competitive advantage
Now that you have seen it all, you’re either feeling that you still have a long way to go in order to get your product/service on the right track, or feeling that you are right on track!
Either way, double check for loopholes and factors that can be improved/worked on, and then determine your competitive advantage.
What will you do better than these guys? What will you be offering the customers that will wow them (that these brands aren’t already offering). Also, what is the wowing effect they are giving their customers?
Areas of competitive advantage could be- targeting an underserved market, lower prices, frequent discounts and promos, interesting and relatable company story and pages, building a large social media base, providing broader range of products and services, compelling marketing (i.e- fantastic imagery, taglines or jingles).
Why you need a competitor analysis model
Apart from being able to identify your competitive advantage, other reasons for a competitor analysis model are;
- Better understanding of the market you are operating in or entering.
- To find out what will really work and what not.
- To help you pick your niche in the marketplace.
- Making informed business decisions.
- To protect your business against tough competition that could have otherwise taken you by surprise.
- To get an idea of what you’re up against.
The purpose of competitor analysis model is not to help you copy other businesses, nor is it a way to scrutinize and compare yourself to others, or totally protect you from making mistakes.
Mistakes are inevitable and they actually shape you, but there’s no harm in controlling mistakes that could happen, by informing yourself.
You don’t have to compete with them in all aspects of running a business, this is simply to prepare you and keep you informed.
It is a lot more sensible to create your own business structure from proven methods that are working for other similar businesses, then you can bring in your own personal spice and innovation to it.
I would love to say ‘don’t be scared‘ all these may seem like a lot, but then, owning a business on its own is a lot, and you’re brave enough to want to venture into that or to already be running yours!
As much as launching your own business is important, you must also be responsible for sustaining the business in the long run. Start with your business plan, I have a simple guide to help with you with that HERE.
I’m sure somewhere above, I did mention that competitor analysis model is a part of your business plan.
For every post on the business series, I get really excited because as much as I’m trying to help new and existing businesses, I am also learning a whole lot for myself and preparing myself for the businesses I want to venture into.
The simple trick for all the information you consume, including this post, is turning all the information into action.
That’s all for this post, I hope you found this helpful and can now proceed to create your very own competitor analysis model (using this post as a guide).
All images are stock photos.
~Thank you for Reading~
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