Why Competitive Analysis Is So Important

Why Competitive Analysis Is So Important

If your area of expertise is entrepreneurship or marketing, it's yesterday's news that today's businesses are constantly vying for their client's attention in a bid to secure a consistent flow of revenue. If Phil Knight, the founder of Nike, was right when he said that “business is like a war without bullets,” then it's safe to say that the internet is the battlefield on which businesses can test their merit. On this modern battlefield, it's essential to stay ahead of the competition and not just follow but predict trends before they arise. Keeping a close watch on the competition is also crucial, as no business exists out of context. Competitive analysis is so vital that it is safe to say that its quality is capable of distinguishing losers from winners in modern-day business.

Doing it effectively is the key to success

Before we even start discussing the specifics of competitive analysis, it's essential to state that whoever is doing it half-heartedly is doing themselves a disservice. This is why we cannot stress enough the importance of education in the field. Consider investing in a course provided by an online program management platform, since without proper training, the best we can do is guesswork, which is next to worthless when you aim to get a definite edge over the competition. The proper tools and knowledge will allow you to surely move through the treacherous terrain of marketing your service to your customers, where every mistake comes at the cost of losing prospects.

Knowing yourself

An analysis of your competitors can only start with the analysis of your business. Ask yourself your unique value proposition, what kind of brand you have built (or are planning on a building), and if you have penetrated the market to secure a market share. What challenges are you facing, and what opportunities may arise? To answer these questions, SWOT analysis might come in handy as it will provide you with an overview of your business and its position from a broader perspective. It will allow you to know your business's situation without burdening you with redundant information. Without knowing your current position, you cannot react adequately to the threats that arise. You can't analyze the competition if you don't know who they are. Hence, know yourself.

And knowing the enemy

Now that you know your company's circumstances, it's time to identify and analyze its rivals. Theoretically, any internet page your prospects are visiting instead of your own could be considered a competitor, but performing such a comprehensive assessment would be time-consuming and impractical. A more useful approach is dividing your immediate competition into a direct and indirect one.

  • Direct competition is any business that aims to sell the same service or product as you, to the same potential customers, through a similar business model.
  • Indirect competition is comprised of businesses that sell a similar product or service but with different goals in mind and to a different audience.
  • Substitutes are a category of businesses that could fill the empty space if you stopped providing for your customers.

Competitive Analysis

Also, thinking of leaders in the field as rivals will do nothing but feed your ego. They are in a league of their own, and unless you are one of them, there's no need to classify them as competition. Better to focus on businesses that are similar in scope, business model, and value proposition to your own. Understand that, in today's day and age, there is hardly any product or service which is authentically unique on the market, and how you market to your clients is going to make all the difference. Providing content that is more valuable than the content your competitors provide on a consistent basis is a sure way to win prospects to your side.

Pay close attention to the keywords your competitors use to rank high in internet searches, and make sure you exploit their tactic to your benefit. After all, the best organic traffic is stolen organic traffic. Also, pay attention to your competitors' customer journey and unique value proposition. What helps them turn leads and prospects into customers, and what sales funnels do they employ? Do they have a new position because they have identified an emerging trend? Perform a SWOT analysis of your competitors, so you know how to rise to the occasion when the time comes.

Why Competitive Analysis Is So Important

Employing your competition

Testing every new idea would be mentally and financially taxing, not to mention impossible, with the speed at which trends change in the fast-paced market environment. The good news is that you don't need an in-house think tank to test ideas for you. Simply let the competition do it. When conducting an analysis, pay attention to everything your competition does so that you can emulate the models that work and steer clear of those that don't. Has there been a noticeable rise in their profits due to their new approach to sales? Copy their model in a way that suits the style of your business.

Has finding an offshore supplier allowed them to offer the same service to their customers at a lower price? Excellent, that means that you can outmatch them if you find a way to beat their price. If your competitors have started preparing for a change, expect a new trend and act accordingly. The sooner you start viewing your competitors as your friends, the sooner you will be able to capitalize on the opportunities they create.

Understanding clients

Finally, performing a competitive analysis will provide you with unique insight into the pain points of your customer persona. Getting to know your clients should always be a top priority, and analyzing how other businesses cater to their needs will let you become better informed. After all, you're competing for the attention and trust of the same clients, and there is no reason why the decisions of your competitors should not provide you with a better understanding of how your customers think, feel, and act. Monitor what they focus on, what they value, and at what point they decide to become customers.

It might seem like there's a lot to cover in competitive analysis, and you're absolutely right. Just keep in mind that the process does not have to be costly. Moreover, it should always be an ongoing process, as flexible as the environment it takes place in.

Thank you for reading!

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