Your clients are your number one focus, and rightly so–after all, they’re the reason you started your business. But if you aren’t also keeping an eye on your competitors, you may be missing out on some huge business opportunities. Use the tips in this post to make sure you aren’t losing clients to the business down the street.
This post will cover how to set up your analysis. Next time we'll dive deeper into how to analyze your results.
What is a competitive analysis?
A competitive analysis identifies your competitors and evaluates their abilities, strategies and objectives. An analysis can be as targeted as looking at a particular website feature, or broadened to competitors’ overall strategies.
Competitive analyses are helpful anytime you’re designing anything, whether it’s a new web page or a new class. Even if you’re updating something you already have, an analysis can tell you what in the market may have changed.
Use competitive analyses to understand their client and business goals. This understanding gives you insight into how to improve your own business.
What are the benefits of a competitive analsysis?
Knowledge about your competition.
When a prospective client asks why your services are better than a competitor’s, you’ll be able to answer knowledgeably. Knowing how your competitors operate helps you distinguish what makes your business unique.
Insight into your own business.
Understanding how the competition does business gives you insight into how to make improvements to your own operations. Does the business down the street have a more informative website? Maybe it’s time to invest in improvements to your own.
Opportunities for advantage.
Competitive analyses aren’t just about finding opportunities to improve your business–they also uncover areas where you shine. Does your studio offer a much better client experience than any nearby competitors? Make sure you’re emphasizing that in your marketing.
Increased Funding.
If you're looking for funding from an investor, you can bet they'll be interested in learning about the health and performance of your competitors.
How do you create a competitive analsysis?
A comprehensive competitive analysis can take a lot of time, but it’s worth the ROI. The steps below walk you through how to get started.
1. Determine the competitors you will be looking at for your analysis
There are two types of competitors you’ll want to consider when doing a competitive analsysis. Direct competitors are other businesses that operate within the same market space as you. Indirect competitors are more abstractly related to your business–they may not offer exactly the same product or service as you do, but the client experience is similar. As an example, consider fast food chains. McDonald’s and Burger King are direct competitors because they both primarily sell burgers. Pizza Hut can be considered an indirect competitor to both because they are still selling fast food, but not burgers.
It depends on the scope of the analysis you are doing, but typically choosing three direct competitors and one indirect competitor will give you the information you need.
2. Determine what you need to know.
There’s a lot of information available, so before you start diving into your analysis determine what you actually want to know. For each of your chosen competitors, consider questions like:
Asking these questions and more will give you the information you need to begin comparing your competitors’ businesses to your own.
3. Gather information
Now that you’ve decided what information you want, it’s time to start collecting and organizing it. An Excel spreadsheet or Google Sheet is an excellent way to organize your data. List your competitors across the top row, and your questions on the left column, and fill in the blanks. The first company included in the spreadsheet should be yours.
4. Analyze your results
Organizing the data in a spreadsheet streamlines comparisons and makes it easier to spot common elements and gaps. As you look at your data, consider the following questions.
Dive deeper into these questions, what they mean, and how to use them in part 2 of this post, Understanding your competitive analysis.
What kind of things do you learn from a competitive analysis?
Find out why customers buy.
Why do you customers purchase your service? When might they prefer to go with a competing service? Gaining a better understanding of your customers and how they think is the key to figuring out what your competitive advantage is.
Find ways to save money and increase revenue.
Do you competitors sell services or products similar to yours? How much are they charging for them? You may find that you are charging too much–or too little–for a service. Slight price adjustments could have a huge effect on your bottom line.
Identify your competitors’ strategic advantages, as well as your own.
Sometimes you may not recognize one of your strengths because it’s only a strength relative to a competitor. If your business does something well that your competitors struggle with, make sure your existing and prospective know that. If your competitor executes a process better than you do, invest in improvement.
Conducting your Analysis: Pro Tips from Pike13
Follow these steps, and you'll be beating the competition in no time!
Featured Photo Credit: Jonathan Blackburn