A competitive analysis identifies your competitors and evaluates their strategies to determine strengths and weaknesses relative to your brand. A competitive analysis often includes a SWOT analysis that helps the marketer define a competitive marketing plan.
Types of Competitors
The types of competitors evaluated include:
- Direct – Businesses that sell the same types of goods and services you do, to the same market. Such as gift shops, convenience stores, or florists, for example.
- Indirect – Businesses that sell substitute products or services, or items that can be used in place of yours. If you own a bakery, an indirect competitor might be a restaurant. If you run a scrapbook supply store, an indirect competitor could be a craft store.
- Potential new entrants – Although you can’t predict the future, any news you’ve picked up about new businesses entering your market should be taken into account as you analyze your current and future competition.
Evaluating Your Competitors
A competitive analysis is a critical part of your company marketing plan. With this evaluation, you can establish what makes your product or service unique--and therefore what attributes you play up in order to attract your target market. Evaluate your competitors by placing them in strategic groups according to how directly they compete for a share of the customer's dollar. For each competitor or strategic group, list their product or service, its profitability, growth pattern, marketing objectives and assumptions, current and past strategies, organizational and cost structure, strengths and weaknesses, and size (in sales) of the competitor's business. Answer questions such as:
- Who are your competitors?
- What products or services do they sell?
- What is each competitor's market share?
- What are their past strategies?
- What are their current strategies?
- What type of media are used to market their products or services?
- How many hours per week do they purchase to advertise through the media used in this market?
- What are each competitor's strengths and weaknesses?
- What potential threats do your competitors pose?
- What potential opportunities do they make available for you?
A quick and easy way to compare your product or service with similar ones on the market is to make a competition grid. Down the left side of a piece of paper, write the names of four or five products or services that compete with yours. To help you generate this list, think of what your customers would buy if they didn't buy your product or service.