Competitor analysis is a business activity that involves identifying and evaluating the strengths and weaknesses of rival companies operating in the same industry or offering similar products and services. The primary purpose of conducting a competitor analysis is to gain valuable insights and knowledge about your competitors’ strategies, performance, and market positioning, which you will use to improve your business’s competitive advantage.
Competitors
The first thing to do is create a list of your competitors with similar services or products. For example, suppose your business is mowing residential lawns. In that case, your competitors will include other companies within your service area that also mow residential lawns. These companies may also offer other services like irrigation and interlocking. As you build your competitor list, you will separate your competitors into direct (lawn mowing only) and indirect (lawn mowing, irrigation, interlock).
How They Compete
Each of your competitors will compete in a way that makes sense to their business or even the industry. Take the time to look at your competitors and identify how they are competing. Here are some questions to answer about them:
1) What are their services and products?
2) How are they priced?
3) How do they promote?
4) What attributes make their offer unique?
5) How do they get customers?
The Market
It is a good exercise to try and understand the potential size of your market and how much business you currently have, and how much you think your competitors have. Take a local restaurant; you can base the amount of available business on the number of customers within a certain radius of the restaurant. You can determine the population within this area by looking at zip or postal code info. From here, you will need to examine what % represents a restaurant customer from this population. Further to this, what % will be your customer? You can then calculate the value of this customer based on the frequency of visits and the value of visits to determine the available revenue within this market. For example:
Within zip code 12345:
Population – 20,000
50% of the population dine at restaurants (10,000)
Frequency is two times per month
The average spend is $80
The value of this market monthly will be 10,000 customers x 2 visits per month x $80/visit = $1,600,000/month in market size. Your restaurant generates $80,000/month or 5% of the overall market share. You can also make the best guess of your competitors using a similar method. In previous roles, I have stayed outside of a business to count the number of customers over an hour to extrapolate what this could be in revenue. The goal here is to understand as best as possible what your market looks like for you and your competitors.
Perception
Looking at your competitor list, can you get a sense of the business’s strengths and weaknesses? Take a holistic view of the business, including assessing its digital and physical presence. Digitally, what are they doing well, and where are they lacking? This is a good opportunity to look at the number of online reviews. Reviews will reveal customer perception, and things to look for include the last date of review, company response to positive and negative reviews, number of reviews, and star rating.
When looking at physical presence, assess their location and ease of access. When looking at their storefront, take note of curb appeal, age of signage, and store cleanliness. It’s a good idea to interact with staff and buy a product or service to understand further how they do what they do versus your business.
This is not an exhaustive list of competitor analyses. Still, it’s a simplified list I’ve used to understand my competitors. I update my competitor list annually with any new information. This is a critical part of ensuring your company stays relevant to any changes in the market. In the digital age, it’s no longer OK to assume you can operate with blinders – you need to know what your competitors are doing. It’s much easier to do that today than it was pre-internet.
