Understand Your Competitors Better with Competition Analysis. If a company wants to be successful, then this always depends on the competitive situation on the market. This means that as an entrepreneur you can have a perfect organization yourself, your operations are well-orchestrated and as far as the costs are concerned, you have created a good structure, but you still do not have the desired success. You simply do not bring your products or services to the customer in the desired quantity, simply because the competitive situation is too strong. In that case, you’ll need to create a competitor analysis for you.
That’s the only way you can tell what strategies and activities your competitors are doing on the market, and you can better assess your own position. With this competitive analysis, you can then create a foundation on what measures you need to take in terms of product, price, distribution and even customer communication. In these measures, one speaks of the four P’s. These are:
- Product: all product policy measures
- Price: all political measures that have to do with the price
- Place: all policies related to your sales
- Promotion: All policies related to communicating with your customers
Stand out from the competition with the right product and pricing strategy
It is very important to you that you stand out from the competition with a right strategy for price and product. However, that does not mean that you should now be active with dumping offers in the market, which will then press you in the long run, the profit in the basement and rob you of any financial leeway.
For you, that means putting a competitive offer on the market when working out your product strategy. In order to work this out, you also need to know the needs of your target audience. With the help of the competition analysis, you can also recognize to which target group your competitors are directed and can improve here to whom you should direct your own offers.
Of course, if you do this analysis, then you also need to know how big your target audience is and compare it to your competitors. What is important here, you can read our article “Market Analysis – How big is your target audience really?” And get the best suggestions here.
Now you have to make a price comparison
Once you’ve worked out a pricing and product strategy, you’ll need to move to price comparison between your products and services and those of your competitors. That way, you can deduce something for yourself:
- At which level can you set your prices?
- Are your own prices too high or maybe too low?
- Are you competitive with your current prices?
Your products and offers must be properly perceived
In a competitive analysis, you also need to look closely and see what it’s like to communicate with your customers or potential customers. The point communication belongs, as already mentioned above, to the four important P’s. Therefore, you should also make sure that you do not equate this point communication with marketing.
It’s all about how you, your business, your products or your services are perceived. That’s why this analysis is so important as part of your competition analysis. The right perception is extremely important to you and the success of your company because here we speak of terms such as brand, brand value, and image.
The necessary attention and thus the right perception can only be achieved if you can differentiate yourself from your competitors.
Secure sales channels that are of benefit to you
In your competition analysis, you must also look at the sales department. Especially the distribution channels and the sales methods you have to pay special attention.
For you, it’s important to either secure your sales channels that are quite successful for you, and not give the competition a chance to use them, or you’ll discover new opportunities for you to discover with your competitors.
Why is competition analysis so important to you?
Competitive analysis is so important to you just because it is part of your business plan. Especially as part of your market analysis and marketing plan. Especially if you want to apply for funding or loans, you should seek the interview with potential investors, the competition analysis is indispensable for you.
The competition analysis is as important as any other analysis you need to create or create your business plan. By the way, this also includes the SWOT analysis, where you have to put your strengths and your weaknesses as entrepreneurs in a relationship with opportunities and risks.
How to create a SWOT analysis and what you can deduce from it is also described in great detail in our article “SWOT Analysis: How to Understand the Vulnerabilities in Your Business”. You should definitely take a look.
Your competition analysis in 5 steps
You can create your competition analysis in 5 simple steps. The five steps are:
- you have to define the goal of your analysis
- set all necessary comparison criteria
- Find out who your main competitors are
- get all the information together
- create an analysis and a rating from this information
In the following, I want to explain to you in more detail, what exactly is involved with these 5 steps.
You have to define the goal of your analysis
When defining the goal of your competitive analysis, you need to keep in mind that there are other priorities for you as the founder in the planning process than for you as an active entrepreneur. When it comes to determining your position in the market using competitive analysis, then you already know which criteria are most important.
For you, it’s all about making better use of the opportunities that come your way and minimizing risks.
Set all necessary comparison criteria
When creating your competition analysis, you should make sure that you rate all your competitors according to the same criteria. Only then can you really make a revealing comparison in the end? Concentrate on the most important criteria and do not go too far into details. And so we would be back with the four P’s. Your criteria should be as:
- the analysis of the general company data
- What about the product and pricing strategy?
- fits the communication strategy to your target audience
- how are you positioned in terms of sales strategy compared to the competition
Find out who your main competitors are
In this step, it’s up to you to find out your most important, if you want, your most dangerous competitors.
You have to keep in mind that you are not only paying attention to the competition that has been active in the market for some time.
There are also competitors for you that you may not even think about at first.
There is the so-called industry structure analysis, also known as the “five-force model”. Here one starts from five forms of competition. These are as follows:
- Competition between existing competitors: In this case, there are many products that are very similar or the same and thus a tough price war is possible. In addition, market demand is falling and there is likely to be an oversupply.
- Competition from Suppliers: Suppliers can become competitors of yours, especially if they have a lot of power in the negotiations. Minimum quantities and prices can be determined by suppliers and you have to be careful not to get into too much dependency.
- Competition from customers: Customers too can put pressure on you. That ranges from prices push up to demands for conditions, such as high discounts etc.
- Competition from new providers: The more attractive the market is, the more new providers you have to expect. This can be detrimental to you especially if you are not yet active in the market, but want to enter the market first.
- Substitute competition: Substitutes are new offers that can lower the demand for your products. These are first and foremost products that offer greater benefits or make the function of your product redundant.
Get all the information together
In the fourth step of your competition analysis, you have to get information. You should always rely on many sources and not just rely on one or two. In order to obtain the information, you can either do your own research or get information from institutions and institutions. If you research yourself, you should focus on the following sources:
- Websites of your competitors and their social media
- various business registers
- Reports about market research
- Specialist articles or industry magazines specially designed for the industry
- Press releases
- Test reports from independent test institutes
- Reviews of customers on the internet about your competitors
- through test purchases
In addition, free tools are available for your research. For example, you can use Google Alerts to receive email alerts when there are new publications on the Internet about specific keywords that say something about your competitors. You can also use Facebook for your research. With the function “keep the page in mind”, you can always watch the Facebook pages of your competitors and you also get statistical evaluations.
Create an analysis and rating of this information
In step 5, to create your competition analysis, you must now also process the data you have gained. For you, the goal here should be that you evaluate the set criteria for a points system. It is true for you that the more information you have about the individual criteria, the better you can also derive a rating from it.
Above all, you should focus exactly on the weaknesses, but also on the strengths of your competitors. From all this information and lessons learned, you can only derive your strategies and actions that you need to take. So you can set new priorities or maybe even say goodbye to certain areas. You have the following options:
- Adaptation of your products or services to market conditions
- Make a differentiation or a cost orientation
- Dodge and settle in a niche or establish in the core market
A competitor analysis will help you get to know your competitors better and maybe even better understand them. The competition analysis helps you to check your own position in the market both when planning to enter the market and as an established company.