What's up with your competition? Why are they the way they are?
Analyzing your competition is a great way to set your small business apart from them. This analysis looks at factors like what products or services they offer, their pricing, market share, advertising, company culture, customer response, and more. This helps you to figure out how you can improve in these areas and better serve your customers.
You can't expect to really make your business stand out without first knowing what you're up against.
Measuring your competition will give you a better idea of their strengths and weaknesses, as well as the consumer market, which will help you find ways to make your business stand out.
Analyzing the competition is important if you want your business to succeed
Despite the challenges posed by COVID-19 and rising inflation rates, many small businesses have managed to stay afloat. In fact, according to a recent study from The Manifest, 55% of small businesses are planning to add more employees in 2022.
If you're considering starting a new business or want to improve your existing one, then you need to understand how to conduct a competitive analysis. Evaluating your competition can help you find opportunities for your business to differentiate itself.
- Identify Your Competition
Before you can take a look at who your competition is, you need to figure out who they are. Make a list of all the businesses who offer similar goods or services as you, and group them as:- Direct Competitors: These are the businesses who offer the exact same things as you.
- Indirect competitors: Are companies that offer different products or services, but are targeting the same customer base.
2. What metrics are important to track?
Defining what metrics you find important to compare your competition against is the next step.
3. Take a look at what your competition is doing
Your next step is to collect data from your competitors. Keep your key metrics in mind as you do this – some questions will be easier to answer than others (for example, what goods or services do they offer?), but try to get answers for all the metrics you've deemed important. You can use Excel or Google Sheets to store data about your competition so you can compare and analyze it more easily. This can be helpful when you want to revisit this information in the future.
4. Take a look at your business
Now that you've looked at your competition, it's time to do the same evaluation for your own business. Because you have more access to your own business, you should be able to answer all the questions more accurately.
It’s important to be honest and unbiased in this stage, even if you don’t love the findings.
5. Clean the Data
Before you try to interpret your data, take some time to clean it up. This means making sure all the data is in the same format, removing any missing fields, and consolidating any redundancies.
If you want to make things easier when filtering and comparing your findings, you may want to create separate fields. Just remember that your analysis is only as good as the data you use, so take the time to validate and clean your information before you start analyzing it.
6. Get your data in order
Once you have your data all cleaned up, it's time to start sorting out what's important and putting it into a format that's easier to understand. There are a few different ways to go about organizing competitor data, each with its own advantages.
7. Review, Drill Down, and Flag Findings for Additional Research
Now that you have your data collected, cleaned, and organized, you can take a closer look at your findings. This is your chance to see where you rank compared to your competition.
If you find something interesting, take some time to drill down into that data and see what you can learn from it.
8. So, what did we learn?
The final step in the competitive analysis process is to summarize your findings. You should have found several takeaways and important pieces of information by this point that can help guide your decision-making. To make it easier for you to revert back later on, put those thoughts into a summary or or SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis.
A SWOT analysis is a strategic planning tool that helps you map out your business's strengths, weaknesses, opportunities, and threats. With the information you've gathered by this point, you should have everything you need to build a comprehensive SWOT analysis measuring your business against your competitors.
The goal of this final step is to provide yourself with a resource that you can use to make better strategic decisions moving forward.
Don't just analyze, take action!
Competitive analysis is a great starting point for understanding the competition, but it's not the only step. The goal of analyzing your competition is to get actionable insights that will guide your strategic decision-making.
Actionable insights require more than just knowing where you rank in comparison to your competition.