No matter how big or small, each company functions in a unique market. You have customers whom you need to convince to buy from you in this market. You also have competitors who want to convince those same customers to buy from them instead. There are many elements to a successful go to market strategy. Some elements include understanding the consumer, timing your entry into the market, and defining your sales and marketing plan. Another critical component of success is understanding the competition so you can perfect your competitive strategy.
When you gather information about your competitors, you can examine the methods they use and the customers with whom they achieve their greatest success. By analyzing how competitors operate, you can delve into their strategies in a way that helps you discover how to best approach the market through your own company. Below, we focus on 5 key elements you need to know to develop your competitive strategy. These elements will help you succeed with both your own customers and theirs.
Competitor Analysis Element #1: Identify Your Competitors
The first step to unravel your competitors’ strategy is to identify your competitors. This process is more than a Google search for other companies that provide similar products and services. You need to know your competition’s market positioning: how are consumers already solving the problem your product solves?
Understanding your competitors means asking questions about the market, and then drilling down to:
Who Is Selling What You Sell?
You think of your product or service as unique. But if people have functioned without it up until now, either someone else has something similar, or alternatives have served the market up to this point. You need to understand what those market alternatives are, and who is selling them. For example, nobody knew they needed an iPod before they bought one. After its introduction, portable CD players and the Walkman became obsolete.
What Is the Geographic Competition?
If you are selling from a brick-and-mortar store, you should study other businesses in the area. Who are they and how do they operate? Online retailers need to be included in your competitive strategy as well. You cannot ignore e-commerce and omnichannel retailers in your competitor analysis. Make sure you use solid and representative marketplace intelligence to understand who the key competitors are in your category.
What Price Points Exist in the Market?
Pricing might seem more like a customer component of your competitive strategy. But it is also a key part of a good competitor analysis. Being able to differentiate on price eliminates certain competitors from the market. For example, Rolls Royce is not likely to see a sub-compact car manufacturer as a threat. Understanding the pricing across many products in the market may help you to identify areas where competition is weak and gain a foothold in the industry.
The Harvard Business Review suggests using a positioning map to identify who is in the market and what price points they occupy. This provides a nice visual that places you in the context of your competitors within your market. Understanding how and where your competitors operate helps you situate yourself within that map. You may even decide to scale features up or down to fit within a particular competitive price point.
Competitor Analysis Element #2: Who Are Your Competitors Targeting?
Once you identify your competitors, you can start to develop a picture of their market demographics. Based on your price point and product specifications there are two possible outcomes. A) a competitor might be after customers very different from the ones you seek or B) you may be preparing for a fierce battle over the same people. A solid competitive strategy involves understanding not only who IS buying the product, but who is LIKELY to buy the product. By doing your research into target demographics and overlaying that on your competitors’ demographics, you will discover gaps to exploit. Understanding the following components of your competitors’ strategy is another key to success.
- Age Brackets: You may be (or will be) focusing on a particular age group or generation in your marketing. If your competitors concentrate elsewhere, your preliminary research may show that they are missing a key segment. Or this may suggest that you have an opportunity to fill a market gap—or that you are misdirecting your efforts.
- Gender Differences: Do your competitors sell more to men or women? These distinctions can significantly impact how you should direct your efforts and messaging.
- Income Levels: Some products or services fit better with different income levels. This may be a matter of pricing strategy or a matter of social norms. Understanding the relative affluence of your customers and your competitors’ customers helps you find those most likely to purchase. Combining the income level of the consumers purchasing with your price point data in Element #1 will help you optimize the price and demographics.
- Online or Storefront: Having your product in a physical store carries higher costs as it relates to distribution, POP, etc. but it may be the price of entry into your market. Understand where your competitors are selling, and you may find additional opportunities and revenue streams.
Competitor Analysis Element 3: What Are Your Competitive Features?
In element #1, we mentioned the importance of aligning your pricing and your features on your product. Your ability to compete in any market will depend in part on your ability to either better address an existing unmet need or create a new need in the market. Accordingly, your analysis should always look at the actual products and services with which you are competing. Most successful companies differentiate themselves not only through clever marketing, but by meeting specific needs. By first understanding the existing marketplace, you can work towards fulfilling customer needs through innovation or better featurization of your new product or existing portfolio.
When identifying the competitive features, ensure you take the following steps:
- Do your research: Once you understand the key players, find a list of their key features. Many websites have feature comparisons you can use for this task, but don’t overlook the value of having the product in hand. You may find that build quality, “fit and finish”, and other features can’t be determined from a webpage. Go to the store and buy the product. Many companies will do so and disassemble their competitors’ products.
- Feature Matrix: Develop a competitive feature matrix to help you to compare products at a glance. Be sure to include both tangible and non-tangible features. For example, while two TVs may both offer Ultra HD resolution, one may still have a higher quality picture.
Competitor Analysis Element #4: Where Are They Successful?
Once you have looked at who your competitors are and what they offer, you can start to break down how they succeed. Reasons that customers choose a particular product or service — and reasons that they do not select another — can go a long way toward helping you understand why and when those successes occur. Customers have motivations across the spectrum: from ease of purchase to careful analysis of their individual needs. Those motivating factors help create the successes and failures of each of your competitors. This type of information is available in various sources, most notably through qualitative data collected from the consumer after their purchase.
Again, this information can reveal trends among segments of the population. Individual variances will always enter the equation, but you can still look for ways in which groups gravitate toward and away from particular locations, companies, product features, and service offerings. The more in-depth your competitor analysis models delve into the available data, the more you can glean about the customer behavior relevant to your company.
Competitor Analysis Element #5: Determine Where You Can Add Value
The elements above organically lead to identifying the gaps in the marketplace. Whether identifying key gaps in price points or identifying an underserved segment of the market, each of the elements above should be leading to one question: Where can you add value where the competition doesn’t? This more thorough analysis provides the key to identifying your best opportunities for success in the market. If business success relied solely on your being better than your competitors at doing the same thing, a bull-headed drive to win would be the only path to success—and that success would come infrequently and fleetingly.
Competitor Analysis Strategy Overview
Look at your competitive analysis to identify gaps — in marketing, service, product features, or any other element. You can find openings into which your company can fit. While you may choose to, you do not have to butt heads with larger or more established companies. Instead of fighting battles over the same customers, you can use competitive analysis to fill an existing unmet need or create a demand in the market for a product that does not yet exist. Thorough investigation, followed by targeted action in the available market, gives you the best opportunity for success.
The consumer insight and market research provided by TraQline is a key tool that can inform your strategy with data and insight. When you are ready to take a data-driven approach to surpass your competitors, contact our market research experts.