Every business wants to do better than their competitors, but what does that mean, and how do you actually make that happen? In the end, it comes down to who’s the best at meeting customer needs. If you aren’t meeting their needs adequately, they’ll start shopping around, and your competitors may offer what you don’t.
So how do you learn from your competitors’ successes, and beat them at their own game? The answer is something called a competitive analysis. This is where you look closely at other businesses in your industry, evaluate what they offer the customer base, and then decide what you can offer that’s different or how you can do what they do better.
It’s a time-tested strategy, and we’re going to teach you the basics of how it’s done.
Identify Your Competitors
The first step is to make a list of all the businesses that are competing with you for customers. In a small market, you may only be dealing with a handful of fellow businesses vying for market share. In a larger market, there could be dozens. In the former case, make a complete list of every competitor. In the latter, follow the 80/20 assumption—that 80% of the business in the area is being done by 20% of the companies. Make a list of that 20% in this case.
Identify Their Value Propositions
Each business has something of value that they offer to their customers (otherwise they wouldn’t be making any money). Any successful business has a level of differentiation they add to that value. Maybe they’re the cheapest option around, or the highest quality. Maybe they offer a wider variety, or can custom build a product. Maybe they offer the best customer service.
Make a list for each competitor that details where they stand out and perform the strongest. This is what you’re competing against.
Identify Their Weaknesses
Just as each business has its strengths, it will have its shortcomings as well. Do your research, and determine areas where each competitor scores low. Are they known for poor customer service? Do they charge more than they need to? Are their products prone to malfunction or breakage? Write down all the major ones in your list. These are your potential opportunities to shine.
Research Customer Perceptions
Your next step is to measure just how highly customers value or trust a business, and why. You can do this a number of ways. First, evaluate the marketing content they’re producing to determine how effective they are at building an audience. Competitive analysis in marketing is kind of its own animal, and you can spend a lot of time optimizing your marketing tactics against theirs.
Second, measure customer feedback, which tells you how well their product/service (and their marketing) is actually being received. Check comment sections on their blog. Check customer reviews, such as Google My Business reviews. Do this for your business as well. See what customers are saying, both positive and negative, and compare that against your list of pros and cons. Try to effectively identify where you and your competitors are succeeding and failing in the eyes of the customers. This will help you connect more with what the customer needs and if your product is filling those needs.
Once you have an idea of who’s winning and where, start using the negative feedback to make adjustments. If your business is failing somewhere, do a course correct, and try to boost customer loyalty. Respond to the negative reviews and try to improve the customer’s opinion. Do what you can to avoid giving future customers a similarly negative experience. This will boost the loyalty of the customers you already have.
As for your competitors, even if a business is performing well in a category (or, at least intends to), if the customers don’t see it that way, that’s a chance for you to slip in between them. If, say, your competitor suffers from poor customer service, strive for excellence in that area, and attempt to attract some of the customers they have offended or ignored. As you make converts out of those who are dissatisfied with their service, others will follow, and your customer base will grow.
Compare & Apply
Once you’ve compiled all this competitive research, you need to do something with it. Make a similar list of your business’s pros and cons, use customer review software to look at what your customers are saying about your business, and then see where you can make adjustments to take advantage of your competitors’ weaknesses. If they’re struggling to convert customers for this reason or that, they may be blind to it, and that gives you the chance to fill a customer need in their place.
With markets and industries changing as fast as they do, staying competitive and connecting with your customers more sometimes means learning from the competition. Sometimes you’ll have great ideas, and sometimes they will. Inspiration for great ideas can come when you look at what others aren’t doing. If you’re willing to take a look around every once in a while and see what changes can be made for the sake of improvement, you stand to profit while other businesses flounder.