The Importance of Competitive Analysis in Marketing
Every business should be doing competitive analysis in Marketing on an ongoing basis. What is it? And why is it important? There are several reasons.
- Find out who sells the same type of (substitute) products or services as you do.
- Discover who sells to the same types of customers as your company
- See if your competitors are developing new products or exploring new markets that compete with yours.
- Identify new or emerging companies that may enter your market and begin to compete with you.
- Determine market share and relative position of key players
Which competitors should be analyzed, and in how much detail?
This is a critical question to answer.
Ideally, you would identify and study each one — and in-depth.
But in reality, resources (budget, time) will limit the competitive set to a handful that should be studied in greater detail and with more frequency. Others should be monitored more superficially, and less often, perhaps every 1-2 years. And it would not be a bad idea to keep an eye out for any upstart potential competitors.
With the aid of your sales force, marketing staff, and other key executives, you can create a list of competitors and rank them. See which names rise to the top of the list and focus on them.
Determine exactly what it is about them that you need to know.
Gathering the Information
Much information can be readily identified through secondary sources online, in print and trade publications, and at trade shows and conferences. Here are some examples of data that can be readily collected:
- Industry and/or market overview and trends
- Third-party share of market reports
- Annual and quarterly company reports – financial data, number and location of facilities
- Press releases – new products, management changes, mergers/acquisitions
- Product lines, additions
- List prices, discounts, promotional offers
- Advertising content, media placement, and estimated expenditures
- Packaging changes – observe at trade shows or in retail stores
- Sales collateral – pictures, features, applications, and benefits
You can also get information about the market and individual competitors by surveying people in your company:
- Your sales staff probably has more access to competitive information than anyone else in your organization. Customers often show salespeople sales literature, contracts, price quotes, among other valuable information. In the course of trying to make a sale, they will often learn about your competition’s product benefits, strengths, and weaknesses.
- Financial colleagues, in the course of their work, will meet with accountants, attorneys, bankers, and other professionals whose jobs expose them to diverse industries, companies, products, and trends. As such they may hear about activities or events worthy of further investigation. In addition, they may have insights into specific attributes of a current or potential competitor.
- Other co-workers, through family and social interactions, may become exposed to competitive information. If they network online and offline with others in their industry area fellow employees may hear about something that appears to be an isolated case or simply a rumor. But if you hear of the same information from multiple sources, it is certainly worth exploring.
- Unless they have signed a non-compete agreement, former employees of a competitor can provide information about: your competitor’s new product developments, marketing strategies, or even plans to open or close facilities.
If you cannot gather all you need via secondary or desk research, then use primary research — with quantitative or qualitative methods such as surveys or focus groups among your customers and prospects and (even) your competitors.
Try to ask questions whose answers can be analyzed to provide the kind of competitive intelligence you can act upon. For instance, ask:
- What are their primary targets?
- How many customers do they have?
- Are they expanding (new offices or hires)?
- What attributes make you different from competitors? (Below are some examples:)
- Brand Recognition
- Customer Relations
Then create a template or similar framework into which all findings can easily be placed and examined. The analysis does not need to be complicated, and certain results should pop out, e.g. your product received the second-highest rating in quality, a competitor is offering a special promotional deal, another competitor has added new features to their products.
|YOU||Competitor 1||Competitor 2||Competitor 3||ETC.|
- An in-depth competitive analysis will provide you with the following:
- An understanding of how your existing and potential customers rate the competition.
- A tool to identify each competitor’s strengths and weaknesses.
With this information, you can better develop strategies to position your company and its products in your market.
- Make competitive analysis an ongoing, systematic process to keep current on your industry and competitors and serve as a mechanism for ensuring that the appropriate people in your organization stay informed.
- Often it is more efficient and effective to select an objective professional third-party firm to conduct some of the secondary, and all of the primary research. Ideally, such a firm will have expertise in both your industry as well as in the techniques needed to maximize data collection, its analysis, and presentation.