Any successful business will understand its competitors’ business models as well as its own. Here, Melissa Stewart explores how your business can benefit through competitor analysis.

It’s not enough in business to have a great idea and hope it will work. chances are, somebody else, somewhere, will have had a similar idea and be hoping to make a go of it, too.

Whether you’re selling furniture or fabric, building websites or running restaurants, you need to understand the market in which you’re working, and that means keeping an eye on
the competition.

By analysing your competitors you’ll be able to stay ahead of the curve, spot gaps in the market, improve your offering and ultimately grow your business.

Know your competitors

Start by doing some digging into who your competitors are. remember, they may not be in the same local area as you, they could be online or abroad and offer a similar or substitute product.

Google is your friend here. Search online for them to see if they have a website. if so, how are they pricing and marketing their products? What is their customer service like? if they sell online, take a look at their page source code and find out what key words they’re using to boost their search engine rankings. Also, look and see if they’ve filed any company reports or presentations. Try and glean as much information as possible.

For ongoing competitor updates, sign up for free Google Alerts, and you’ll be notified every time they, or a particular product, make the news.

Also, follow your competitors on social media sites like Facebook, Linkedin and Twitter. this will keep you up to date with their customer communications, news and offers. if they have a lot of followers, it will show you that they’re targeting their customers using these marketing channels.

Don’t be afraid to play secret shop- per either. If they’re in your local area and have a retail space, pay them a visit, note their sales techniques and customer service. likewise, if they’re an online retailer, place an order with them – note how they differ and compare with you.

Find the differentiator

Once you have the intel on the competition, you need to figure out what sets your business apart. What’s your unique selling point (USP)? in other words, what makes you differ from your competitors and hold a unique position in the market?

As business planning expert and founder of Bplans Tim Berry says, “Why do people buy your product or services instead of the others offered in the same general categories? What benefits do you offer at what price, to whom, and how does your mix compare to others? think about specific kinds of benefits, features and market groups, comparing where you think you can show the difference.”

Once you’ve defined your USP, do the same analysis of your key competitors. consider their size, brand positioning, marketing strategy and look at how their business has grown and developed. What are their strengths and weaknesses?

A simple way to compare your product or service is to write a competition grid. down the left side of a piece of paper write the names of products or services that compete with yours. Across the top, list the main characteristics or features of each product or service. include things like target market, price, size, method
of distribution, and extent of customer service for a product.

For a service, list prospective buyers, where the service is available, price, website, and other features that are relevant. A glance at the competition grid will help you see where your product fits in the overall market.

Know your customer

once you’ve established who your competitors are and your market position, consider what drives your customers. think about the nature of your industry and how customers view you and your competitors. how do they choose where to buy from? Are they influenced by price, brand, reputation or word of mouth?

As Tim explains, “competition in the restaurant business might depend on reputation and trends in one part of the market and on location and parking in another. A purchase decision for a car may be based on style, or speed, or reputation for reliability.

“For many professional service practices, the nature of competition depends on word of mouth because advertising is not completely accepted and therefore not as influential.”

Think about what factors influence buying decisions in your sector, bearing in mind these decisions change depending on the economic climate. Are your competitors capitalising on this? if so, what are they doing that you’re not?

If you don’t know what’s driving your customer to one business over another, ask them. Get them to fill out a customer feedback survey after a sale, or if you use social media, gauge customer viewpoints by asking them directly what drives their purchasing decisions.

Gaining the advantage

Now that you’ve benchmarked your competitors and know what your customer base wants, you can use the information to gain the competitive advantage. Look at your competitors’ market share, do they command more than you? is there room for growth in your current market? if not, what other markets could you exploit? could you sell overseas
or target a different demographic? if a competitor is experiencing fast growth, why is this? What are they doing that you’re not?

“At the end of the day, what everybody is after is a loyal customer base. the thing to take from any competitive analysis is an understanding of how a rival business is securing and holding on to its customers,” explains business analyst Terry Robson.

What you should avoid, warns Vicky Kenrick, writing for business blog Fresh Business thinking is copying your competitors’ marketing strategies. Vicky says, “these ‘me too’ strategies often end up being ‘me too late’ strategies.

“it is important to think of our own company objectives and then, from our understanding of competitor ambitions and capabilities, make strategic choices based upon our judgment on the impact of their potential reaction.”

In short, yes, be aware of your competition and what they’re up to, but don’t lose sight of your own business objectives and brand direction. Just because a competitor is doing something, it doesn’t mean you have to, too. Be guided by competitor activity but have faith in your own product or service.