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The importance of competitor analysis for business growth

Many businesses that we come across rarely engage in any form of formal competitor analysis. If you're one of them, read on to find out why competitor analysis is an important part of marketing growth strategy.

The inspiration from this post came from recently taking part in the Round The Island Race. This is an annual race around the Isle of Wight in the Solent, with over 1,000 yachts competing. It draws in everyone from professional crews to amateurs looking to take part in the experience of the day.

As an agency we run competitor analysis as part of our strategic work for customers. As we took part in the race I reflected on how regularly we were watching the tactics of other boats.

We looked at how they were catching the wind, setting their sails and selecting their course. While we rarely copied them exactly, it influenced the decisions we made. With the experience of our crew and skipper, it helped us achieve a very respectable 74th out of 1,200 competitors. A great result considering there were a number of professional crews taking part.

round-the-island-race-competitor-analysis

Why don't businesses run competitor analysis

A lot of businesses are focused on running their own race. It's typical that you are confident in the products and services you're offering. You get good feedback from your customers. You are working on being the best you can be for your customers without worrying too much about what your competitors are up to. 

It's likely that you'll be informally capturing information on your competitors. You'll get information from customers and suppliers. You'll take a look at their websites from time to time.

It's also common to not want to directly copy your competitors, as you're focused on being better and doing things differently. 

Why is competitor analysis important

Most businesses end up looking at their marketing and growth planning from an internal perspective.

  • They use industry specific jargon to describe their products and services
  • They talk about the features of their product or service
  • They assume that the people they are marketing to, speak the same language
  • They assume that the people the are marketing to understand what they are talking about
Competitor analysis is a great opportunity to put yourself in your customers' shoes and look at your market and business from the outside.

Yes it's important to understand what your competitors are doing better than you. It's even more important to put yourself in your customers' shoes and look at things from their perspective.

Where to start with looking at things from your customers' perspective

We'll go into more detail on how to run a competitor analysis in a future post. In this post, we'll outline a couple of important steps to take before you get stuck into your competitor analysis

Start with your customer personas

The first place to start is by creating your customer personas. These are descriptions of the people in the roles involved in the decision making for the product or service you are selling.

In a complex B2B sale it is common to have a decision making unit or DMU. When you have this you'll need to understand each of the personas involved in a typical sale.

If you already have personas created for your business, read them and refresh your memory before starting with your competitor analysis.

If you haven't already created your personas, then work on creating them before running the competitor review.

If you want to put yourself in their shoes, you need to understand them. Understand their challenges, why they'd say yes to you, and what stops them buying from you.

Understand their customer journey

When you've understood your customer personas, map out their typical customer journey. Where does it start and the steps they typically take in researching and then buying the product or service you're selling.

It's important to go through these steps before getting started on your competitor analysis. By taking these steps you'll be approaching the customer journey from the customers' perspective, rather than your own.

Common challenges with competitor analysis

Prioritising competitor analysis

The first challenge is prioritising the competitor analysis and assigning sufficient time to run it. For an experienced person, an online competitor analysis of 10 competitors will take about a full day of work.

Many businesses don't see sufficient value in a competitor analysis. Which means they prioritise other activities and it never gets done.

Understanding what to review

The second challenge is understanding what to review to make it as valuable as possible. We recommend following a formalised system for your competitor analysis. We've found a formal approach allows the competitor analysis to be run frequently, allowing you to compare changes over time.

Which competitors to include

The third challenge is which competitors to include in the analysis. In competitive environments, with lots of companies competing for the same business, it can be difficult to narrow things down to a sensible number of competitors for a meaningful analysis. In niche environments, you can face the opposite challenge of whether there are sufficient direct competitors for a meaningful analysis.

How frequently to run it

The forth challenge is deciding on the frequency to run the analysis. We typically recommend running it annually in detail, with quarterly updates, to identify any important changes earlier.

Getting sufficient value from it

The fifth challenge is getting sufficient value from the competitor analysis. You'll only get value from it by prioritising and taking action on what you find.

How to approach a competitor analysis to get the most value from it.

We'll discuss how to run a competitor analysis in our follow up Vlog and post.

In this post we'll look at how you can get the most value from your competitor analysis.

  1. Commit to a regular competitor analysis, to understand your market from your customers' perspective
  2. Create a formalised systematic approach to your competitor analysis, so that you can run it regularly and identify important changes more easily.
  3. Decide on the competitors to include in the analysis. Review these competitors for each review to make sure they are still relevant
  4. Decide on the right frequency to run the analysis. This will vary between industries. Understanding the value you get from it, and your capacity to take action following the analysis, will help you decide on the right frequency. From our experience a detailed annual analysis, with a quarterly update works well for most businesses.
  5. Decide on the data to capture. We typically capture about 70 data points and consolidate them into Strengths, Weaknesses, Opportunities and Threats - SWOT. Capturing data points, makes it easier to compare competitors and identify changes in the future. The SWOT analysis, works well as an executive summary of the information to decide on the priorities to take action on.

The benefits of running a regular competitor analysis

The main benefits we've identified in running regular competitor analysis for customers are:

  • You keep in touch with your market
  • You understand your market from your customers' perspective
  • You identify priority improvement areas
  • You identify opportunities
  • You identify threats, so that you can work on mitigating them earlier

If you have an ambition to be a market leading business, you need to understand your competitors and where you can improve, especially from the perspective of the customer.

Competitor analysis is much easier in the internet age

Nowadays a significant proportion of the competitor analysis can be carried out from the comfort of your desk. Most of the information you'll need to compare is available online. From the companies' websites, social media profiles, online reviews and information aggregators.

Even if you are pushed for time, you'll be able to run a useful competitor analysis with limited time or resources.

Need help running your competitor analysis?

Many marketing consultants will run a market and competitor analysis as part of their service offering. Making this is a good place to start if you need help designing or running your competitor analysis.

At LexisClick we run competitor analysis as part of every engagement we undertake. If your business has a growth goal of £1million + per year, and you're looking for help with your marketing, speak with us about our services and how we can help.

If you found the content in this video useful, please subscribe at www.tjgshow.com for more regularly weekly vlogs on important business growth topics like this.

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