Opening a business is hard.
Keeping it open is even harder. That goes for online and brick and mortar businesses.
There are many reasons why a good number of businesses will fail this year.
To name a few:
- Poor planning
- Trying to grow too fast
- Lack of money
Another important reason why many businesses will close their door is that they forgot to do one thing…
They didn’t perform a competitor analysis.
Why is it important to know your competitors?
Knowing your competitors can give you many insights that will help you avoid mistakes that could be fatal to your new business.
Today, I’ll answer some questions related to the importance of knowing your competitors:
- Who are your competitors?
- What is a competitor analysis?
- Why is competitor analysis important?
- How to do a competitive analysis?
- When should you check out your competition?
Afterwards, you should have a pretty good understanding of why it is important to know your competitors and also have the information needed to perform a simple competitor analysis.
So, if you’re ready, let’s begin!
Who Are Your Competitors?
Standing out from the crowd can be difficult.
Even if you genuinely believe your business is unique and in demand, there are probably more people than you think competing for the same market.
Types of Competitors
Your competitors can be divided into three categories:
Direct competitors: Sell products or services identical or very similar to your products and services.
For example, you sell eyeglasses, and they sell eyeglasses to the same group of consumers.
Indirect competitors: Their products and services are different than yours, but they are competing for the same group of consumers.
For example, you sell eyeglasses, and they sell contact lenses.
Emerging competitors: Upcoming competitors or competitors that have recently entered the market and are providing innovative services or products using new techniques or technologies to the same group of consumers.
For example, you sell eyeglasses, and they offer a non-invasive technique to correct vision permanently using ultrafast laser.
So, that makes three different types of competitors vying for the same vision correction consumer market as you. This is why it is important to know your competitors because they could come from different industries but still have a big part of the market you are aiming at.
Where Is Your Competition?
Brick and mortar business: If you are the owner of a company with a physical address, your competitors will be located in your town and surrounding areas.
Let’s not forget that your competitors probably have a website.
It is essential for you to have a well optimized online presence where your customers or potential customers can easily find you and buy from you.
Online business: If you have an online store your competitors could be in your town or anywhere in the world!
What Is a Competitor Analysis?
According to the BusinessDictionary , a competitor analysis is:
“Strategic technique used to evaluate outside competitors. The analysis seeks to identify weaknesses and strengths that a company’s competitors may have, and then use that information to improve efforts within the company. An effective analysis will first obtain important information from competitors and then based on this information predict how the competitor will react under certain circumstances.”
Why Is Competitor Analysis Important?
Knowing your competitors’ strengths and weaknesses can give you the competitive edge you need to win against them.
How to Do a Competitive Analysis?
You can learn a lot from your competitors. Not just what they are doing to get ahead, but also what is hindering them. They may not see it, but you may notice mistakes from an outsider’s point of view.
This is why it is important to know your competitors: You understand the service, you will spot things they don’t.
Here’s a general idea of the information you should collect to perform a competitor analysis:
- Identify your competitors
- Identify 10 of your biggest competitors
- You probably know some of them already. To find more, do an internet research.
For each competitor:
- Describe their products and services.
- What are their products or services?
- How much do they charge for their services or products?
- Assess their strength.
- Assess their weaknesses.
- What can you learn from their strengths and weaknesses?
- What could you do better than them?
- What makes them successful?
- How much of the market do they share?
Getting to know the competition is very important. It’s even imperative to keep yourself and business moving forward.
There are plenty of ways to find information about Your Competition:
Check their website: This will give you a great idea about who they are, how long they have been in business and what their mission goal is. You can find out how many people work there, details about their product and who they cater to.
Check their online presence: Be sure to not only read the comments on their web page but read the reviews online about them, as well.
There are plenty of sites that post reviews, so read these. This will give you a good idea what people like and don’t like about them.
It’s insight you can use to improve your own product or service.
Look at their social media, all of it. See what types of posts they make, check out their followers and what people are saying.
You can see who many shares and likes they get from most platforms, and this will help you set goals for your own social media campaign.
Ask your customers to fill in a survey: You can easily set this up online through social media or your email list. Place it on your website as well.
Talk to their customers. You can reach out to them online, on social media and your survey. You can find them on the review sites, as well. It will give you a good idea about what people like, what they expect and how your own product will do on the market.
Be a customer: You can always shop there. Go into one of the stores or order their product or service online. This will show you how they operate, how they treat customers and let you see firsthand the layout of their store.
You can buy their product to compare to your own. What better way to see how it works, how it stands up to yours and what improvements you may need to make?
Check out their location: Just a few blocks away from your own can make the world of difference. Maybe they are on a busy corner or have a bus that stops right outside their front door.
Location is important, as you know. You want to sell children’s clothing? Set up shop next to a daycare.
Look at their marketing campaign: If they have commercials on local television or radio, do they hand out flyers or have signs around the neighbourhood? There are plenty of ways to market without going broke, so take a look at whatever you can find of theirs.
Understand what makes them different from you. Do they have a different way of selling? What makes their procedure work or not work. Maybe they sell online or allow customers to link to your product page through all their social media platforms.
Look at their prices: This is a very important aspect. Depending on your demographic, that can make or break your sales.
Some people want to pay the lowest price possible, assuming that all products are alike.
Other people feel like there is a stigma attached to the lower priced items, that they must be inferior, somehow.
If you are aiming at a higher income audience, then you can charge more. If you are trying to keep product moving, you can’t overcharge for something they can get on the next block.
Check out the competitor’s product or service: Is it different from yours?
For instance, if you run a bakery and your competitor seems to be doing much better, there could be many reasons.
- Price is always a factor.
- The quality of the product is another.
Or, they may have been in that same location for many years, and people just feel comforted by shopping there.
Are they always creating new products? If the bakery is in a predominantly Italian neighbourhood and they make a point of selling Italian delicacies, then that is an advantage. You need to find your niche to stay the course.
- Where do they get their products?
- Are they locally made or imported?
People in today’s society like to buy local and feel like they are making a difference when they do.
Supporting the local neighbourhood is important to the people in that neighbourhood.
Who are their customers?: Are they people that have been coming in for years, or are they continually finding new ones?
People find a lot of comfort shopping in the same place all the time, often due to the people there. They feel welcome and important.
If they have a lot of loyal customers, you need to find out why.
Besides a lower price, maybe they have a point system or reward program.
People love these, and they are very effective for keeping customers coming back.
Loyalty may be because they just have always used their service and why change now.
When Should You Check out Your Competition?
Analyzing your competitors should ideally be done before opening your business or as soon after as possible.
It is a great idea to revisit your competitor analysis and go through it again periodically to ensure that you stay on top of the competition.
It’s an excellent way to continually improve and move forward. Seeing their struggles and successes allows you to see your own product or service with new eyes.
You can evaluate what makes your own brand unique and what your advantages are. It’s invaluable for keeping your edge.
You need to continually keep an eye on them to keep your brand unique. You can believe the good ones are watching you.
The bottom line is, you need to see what they are doing that could potentially take customers away from you and your business.
Keeping an eye on them consistently. To stay in business, you always need to be moving forward and one step ahead of the competition.
It’s not always easy, but it is necessary.
Why is it important to know your competitors?
Your product or service is probably similar to the ones of your competitors.
It’s up to you to make it stand out.
Being a great salesperson is just not enough.
You need to understand your brand completely and that of your competitors.
Business can turn around so quickly, and there is no telling what will interest people or turn them away.
You started your business because you believed you could succeed.
Understanding how the competition works is vital for you to realize that goal.
Do your homework before you open the door or as soon as possible after and then, never stop watching your competitors.