No matter how small or unique your niche, you have competition. These businesses are offering the same or similar products and services as you. The question is, are they doing it better than you?
That’s why every business needs to do a competitive analysis on a regular basis. You need to know who your competitors are, and how successful they are compared to you. An overview of what they’re doing differently may show areas where you need to improve, or where you should change your business strategy. It can also reveal their mistakes and weaknesses, giving you insight on what practices to avoid.
Let’s get started.
Who are your competitors?
First, list businesses that offer the same or similar products and services as yours. If you’re a realtor, this would include the other realtors in your area.
Then, think about businesses with different products/services but who are competing for the same customer. For example, the customer who wants to go out for an evening’s entertainment may choose a restaurant, nightclub or movie theater.
What is their relative size?
Rate your competitors according to sales volume, number of locations, and so on. Where do you stand in comparison?
What is their USP (unique selling proposition)?
Analyze how each of your competitors differentiates itself from all the others. It may be lower prices, better customer service, faster delivery or unique designs.
How are they achieving their USP?
Look for specific techniques or processes that they use — and maybe you can imitate — to get their competitive advantage.
What do their customers think of them?
Check out online reviews about the quality of their products and services. Also, listen to word of mouth. Are they very well known and trusted because they’ve been in business for a long time? Are they seen as innovative and up-to-date because they’re making a big splash on social media?
How do their operations work?
Find out their pricing, order process and delivery process. Does it work better than yours?
How can you get a competitive advantage?
Now that you have a clear idea of how and why your competitors are succeeding (or failing), you can look for ways to differentiate yourself. These might include:
• Patent or license: Your business is the only one that can produce that product.
• Exclusive distributorship: Your business is the only one that sells a particular brand.
• Secret process or recipe: Competitors can’t duplicate your results.
• Customer experience: Your large competitors can’t give such personalized attention.
• Lower costs: You can give customers the same product/service for less.
How open is the market to more competition?
The bigger success you are, the more people will want to duplicate it, and ultimately take away your customers. Are you in a growing niche where there’s opportunity for more such businesses to move in or start up? Or is the market mature and saturated?
How well protected is your USP? Would it be easy for a newcomer to use your same idea, design, recipe, or process to produce the same or better products?
In a free market economy like ours, competition is the name of the game. Knowing who your competitors are, their successes and failures, and how you stand in comparison to them, will go a long way toward helping you win that game.