Competitor analysis – a way to get more sales and recognition for your brand
In the industry community you will often hear phrases like “learn from the best”, or “you have to aim higher than the rest”. In the privacy of your home or from some coaches, on the other hand, you may hear: “Don’t compare yourself to others”, or “Don’t look at the rest”. Which side will be right?
Competition – what is it?
The mechanism of competition is a very beneficial mechanism for the operation of the economy. The invisible hand of the free market will reach out to those who are lagging behind, forcing them to improve their offerings. Otherwise, the company will declare bankruptcy, and the entrepreneur can learn lessons for the future. Competition is the mechanism that regulates the operation of the market and verifies the utility of a given solution. Economists say it is an essential element for a healthy and prosperous economy. – “The most promising means to achieve and ensure prosperity for everyone is competition. It is the only thing that leads to economic progress that allows all people to benefit, especially as consumers, and furthermore, competition eliminates all privileges that do not directly result from higher labor productivity. The way through competition leads, in the best sense of the word, to the socialization of progress and profit, and yet promotes individual enterprise.” – wrote Ludwig Erhard in his book “Prosperity for All”. Having competition is not pleasant for market players, but it allows them to grow and develop, which would probably not be necessary if there were no competition. It is well known that people strive for change when faced with tension, uncertainty or threat.
What is competition analysis?
Analysis or competitive intelligence is the process of gathering information about the current players in the same market segment as the company conducting it, and defining the key activities of interest, which can be checked and compared within a specified time range. It should be a continuous process, i.e. conducted constantly or cyclically at specific dates or on the occasion of important market observations. The essence of this document is data that can be updated and checked on an ongoing basis, which allows you to formulate clear conclusions to improve your company’s strategy.
Why should I analyze my competitors??
The goal of competitive analysis is the same as the goal of any other analysis, i.e. to find out. Knowing the market situation allows for better orientation in its space and evaluation of the situation. Getting to know your current and potential competitors is a valuable source of knowledge about what works and what doesn’t work for others. The broader the scope of knowledge, the better for subsequent conclusions. It is important that all important aspects from the strategic point of view of the entrepreneur in terms of running the entire business are analyzed
This study is intended to give us a competitive advantage, which will be possible through the development of appropriate strategies that should be optimized according to the research findings. Competitive advantage will be provided by an appropriate market entry strategy that allows to define the entry threshold and initial implementation phases, marketing strategy that allows to define the mission and communication objectives to build the desired image, and of course sales and distribution strategy. The more details the better – why? Well, having a picture of the entire market, you are also able to find all the common elements, and also find the missing links, which will allow you to develop a niche, or something in which you can stand out. There is also little talk about market exit strategy and company closure, which is checked using the BCG matrix, which is also helped by knowledge of the competition.
What a competitor analysis should include?
PMR Market Expert, one of the most recognizable research agencies, states that in order to make a useful business recommendation you absolutely need elements such as:
- The offer, i.e. products and services and their specifications, including names, descriptions, functionalities, opinions, shadows, etc.
- Target audience, i.e. a collection of data about customers, their needs, demographics, psychological typography, habits, etc.
- Business model, i.e. growth strategies, product strategy, pricing strategy, etc.
- Marketing, and sales, and this m.in.: strategy, tools and channels of communication with the target group.
- Finances – model of acquiring and using finances, financial performance indicators, investment plans, investor relations, etc.
- SWOT – analysis of strengths, weaknesses, opportunities and threats resulting from current activities and those that are possible in the future. It is a broad interpretation of reality based on data that allows to identify competitive advantages, and what the company should still work on in relation to the competition.
What are the most common mistakes made when studying competitors?
PMR agency singles out several research situations as the most dangerous factors that contribute to false conclusions, which may actually do more harm than good.
The first harmful analysis is one that includes a narrow list of companies, which leads to false generalizations and misinterpretations of fact.
Omitting smaller and niche players from your benchmarks can rob your company of valuable insights and value, which doesn’t help you gain a good perspective.
Another mistake is defining the competition too narrowly, that is, focusing on specific details to the exclusion of the broader view. As an example, a mass-produced jam can successfully compete with an organic product, while a locally produced washing powder can compete with its global counterparts.
Another fiasco is the lack of consideration for substitutes, which focuses on the products themselves rather than the needs they are supposed to satisfy. And just another factor is not doing research on your customers and not knowing their opinions about the market.
Portal consider.pl, in turn, adds that it makes sense to focus on the value of the indicators in question and what lies behind the data, rather than on the change itself and how it is presented. It’s all about context and finding the key that leads to the conclusion, not dry data that doesn’t add much to strategic thinking. It is a mistake to average without getting into segments and distributions, which obscures the picture more than it brightens it. The overemphasis on form over substance that accompanies reporting, which is often accompanied by bias when the analyst wants to push the accuracy of a previous hypothesis. This is a serious error in objective assessment of the situation, and in psychology it is called the confirmation effect. The portal also distinguishes that if we compare apples with apples, and oranges always with oranges. This symbolically reflects the common mistake of comparing bad data.
– You cannot compare the growth of a large corporation with a small start-up. Or the performance of December sales against July sales, where there is a high seasonality. By choosing the right reference point, decreases can be turned into increases, or the real dynamics of changes can be wrongly determined – reads.
Who should do the competitive analysis?
In terms of companies on the market, it is profitable for each of them. Efficiency and optimization, as well as better understanding of the ground will be useful for both beginners and those who have been operating for a long time. As for the research entity, it can be either a trader or a special person or department specializing in research and analytics. You can also outsource your competitor analysis to a research agency, which is often a better option, as they have already gathered data and are able to do more extensive and accurate analysis, but this is of course not the rule. Before we choose a research agency or a consulting company to cooperate with, we should check their results in order not to fall victim to our decision.
Should I compare myself to others??
So who is right? People telling us to keep growing and comparing ourselves to market leaders, or people telling us that we are enough as we are now? We should be aware that numbers may be impressive, but not all solutions will be implementable in our case. Even so, it is not said that they will work the same way. It’s good to watch your competitors when they make so-called “mistakes. Fuck ups, so we don’t commit them too. Listening to the other group, on the other hand, we will be acting in the dark without any point of reference, or we will fall into a stagnation of our own actions, convinced of the randomness of events or even our own efficiency, which may be a simple denial of reality that has no empirical basis.
The first attitude is burning through the budget, while the second leads the company to a slow decay. There is a path of consensus between them. The truth is that at the level of the individual, both sides are partly right, but in the case of a collective gathered under the banner of a given company, a comparative approach is more reasonable. The best solution seems to be the “middle way” and competitive analysis, especially in times when it is pouring in through the doors and windows, is inevitable if we want to operate efficiently on the market.
It is worth to study the environment and check why it is successful, but we are not able to copy someone else’s success, which does not have to be bad news, because with skillful inference – we can even beat it.
The key to competitive research is to understand what mechanisms allow them to achieve good results and which of them we can successfully adapt at home. As a company, we must not forget that with a brand, we need to be consistent in our actions and communications, while not forgetting that we are operating within our own scope, budget and purpose. We have to measure the effectiveness of our actions, not looking at whether the implemented changes have brought the same results as the rest. This should be our own test of whether we have achieved the objectives set out in our own strategy. The middle path makes it possible to check whether the marked path leads to development or even to decline. However, the appropriate strategy will, of course, the staff of experts, because as many companies, as many market situations, and the judgment of the writer of these words, is also subject to generalization, or one of the cognitive errors cited.