As a strategic planner, you need to consider both internal and external factors like competitive environments when coming up with strategic plans for your business. This is known as competitive analysis. Read on to learn more.
What is competitive analysis and why is it important?
You can view competitive analysis as a continuing process where a company or firm continues to study and learn about the weaknesses, strengths, threats, and opportunities of the competitors. It involves studying the nature and number of competitors that pause an indirect or direct threat to the company. Competitor analysis can offer budding entrepreneurs a clear understanding of the marketplaces' conditions in the industry they're planning to venture in. It can also help renowned companies refine strategic goals.
Knowing why competitor analysis is important when planning your strategies can help elevate your business to the next level.
With a comprehensive competitor analysis, comes many advantages. Knowing your competitor a crucial part of remaining relevant in a particular target market and keeping up with the ever-changing business landscape. Small business owners and entrepreneurs should particularly understand the importance of competitor analysis, as this knowledge will help them as they move up their ladder of success.
Unlike big many companies, small businesses may not be able to hire the best experts to track their competition. They have to do it themselves. Either way, competitive analysis is a great investment. It helps learn effective practices and helps avoid mistakes that other businesses have made in the past. Modern technology such as social media has also made things easier.
Below is why competitor analysis is important;
Keeping up with market Trends
Competitor analysis helps in revealing extensive trends in a marketplace. It gives you an edge of being able to notice opportunities for making your services and products unique. Sometimes going against the norm in a certain market can help you gain a loyal client base no matter how small the market may be.
Spotting market gaps
Competitive analysis helps strategic planners design matrixes that help them spot underutilized or non-utilized gaps in a market. Competitor maps are strategic planning techniques that divide competitors using their service models. They identify where they belong on a ten-point scale matrix based on prices, quality, visibility, customer service, and selection.
For instance, a competitor map can show that most companies in a specific area charge high prices for top-quality goods. In contrast, the budget-friendly area of that market is underutilized.
A geographic competitor map might help establish market gaps in sectors such as retail stores, gas stations, and other physical businesses. For instance, a geographic map of hotels can show that a certain area of the city has many fast-food joints but lacks a casual dining outlet.
Staying ahead with your marketing plan
In the modern world, marketers primarily focus on selling "value and benefits" compared to "services and products." As a result, staying ahead of other competitors' marketing strategies can offer the same edge as analyzing their product's development initiatives and staying ahead of their plans. Remember, what customers believe they're receiving from a product or service may not be what they're actually receiving. So, knowing what clients think about your competitor's offering is very important.
Influencing product development
Competing companies in rapidly growing industries such as technology are always in an ongoing race to design new blockbuster products. In such highly competitive markets, one can gain a massive advantage by understanding what the competitor is improving or designing for a future release.
Knowing what the competitor plans to do can help the other competing firm be better when it comes to functionality, price, or quality. But one needs to be careful and avoid crossing legal boundaries.
Learning about potential threats
Competitive analysis is very dynamic. It helps you to note and update challenges that the industry and your competitors are facing. This can help you plan for potential threats, changes, and campaigns in the market. Even the best companies have failures that small businesses can learn from to avert similar eventualities.
Benchmarking your brand
According to business experts, benchmarking involves building a point of reference or foundation in which you can measure growth. Both big companies and startups can gain a lot from benchmarking. Competitive analysis helps analyze and unlock historical data relating to how clients view your business and competitors. Using this, you can fully understand the scale and growth of your company.
When you know and understand your brand's present and past, it is easy to know where to improve to realize Return on Investment (ROI).
Every business does competitive analysis either knowingly or unknowingly. There is a misconception that the process is complicated. But this is far from the truth. Competitor analysis is the basics of any business, and if you're smart enough to create a company with customers, then you have practiced it to some extent. However, a deep understanding of why competitor analysis is important for your business will help you maintain a competitive edge. Although big companies hire experts to analyze their markets and competitors, small business owners can do it without using massive resources especially if they have knowledge of what the process entails.