How To Do Competitor Analysis & Improve Your Strategy
Digital competitor analysis is an important step in any marketing reflection for business creation or development. It allows you to identify your strengths and weaknesses and anticipate the threats that weigh on your market. It also will enable you to understand globally what differentiates competitors from you – from the customer's point of view.
Armed with this information, you can choose appropriate strategies. This information is crucial for optimizing the business strategy, developing a marketing plan, or building an effective business plan. Conducting digital competitor analysis is essential to counter the commercial and attack strategy of the main competitors.
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Digital competitive analysis is a marketing strategy that aims to identify your competitors (direct and indirect) and to conduct research to identify your business's strengths and weaknesses.
Your direct competitors sell the same type of products as you, aimed at the same target audience. As for your indirect competitors, they also sell a similar product but address a different audience. After identifying your competitors, you can use the information gathered to know your position in the market.
Through digital competitive analysis, you will also learn how to use the marketing strategy to scale your business. Also, remember that you can use a competitor analysis model to identify who you are up against before designing a relevant business plan.
Digital marketing competitor analysis allows you to define your competitive advantage or a unique value proposition. It is a tool of differentiation through which you can stand out from other brands and increases the likelihood of buying from you.
Here are the benefits of competitive advantage:
1. It argues the cost of the product
For the client, the biggest pain is parting with money. Before buying, many customers will compare you with competitors in the price segment. You must have a competitive advantage in such a situation. When they are, the client understands what value he receives from you for his money.
2. It encourages the client to return
The main task of competitive advantage is to distinguish your brand. Due to the high competition in the market, it is often difficult for the consumer to choose. He does not understand how brands differ from each other. Therefore, he chooses according to criteria that are basically unprofitable for the company - for example, by price. Customers need to know your competitive advantage if you don't want to compete on price. Then they will differentiate you from your competitors and buy your product.
When the brand is recognizable, the client no longer comes to “try.” His choice in your favor becomes multiple: 89% of consumers are more likely to make another purchase after a positive experience. Moreover, 68% of consumers say they are willing to pay more for products and services from a brand that offers good customer service experiences.
3. It makes the company unattainable to competitors
Understanding their competitive advantage forces the owner to build processes within the company so that they are unique in the long term. Clear competitive advantage encourages a company to do regular digital competitor analysis, create structure, observe how consumer preferences change, and respond to changes. And, accordingly, change or deepen the competitive advantage so that they become unattainable to competitors.
4. It works as a team building
It is important for the team to understand the company's value and not just sell "a quality product for a good price." This knowledge gives the team a sense of security. Employees feel that they are engaged in a common cause and share a common goal. This is the foundation of team building.
5. It’s a reason for communication
Competitive advantage is the basis of brand positioning. Positioning is the perception of the company by the consumer. And the consumer always needs reasons to believe - real arguments in favor of a product or service.
Finding reasons for external communication is always difficult for a company that does not understand its competitive advantage. When there are no topics, companies start talking about price and quality. Competitive advantage automatically closes the issue of developing creative messages, content plans, publications, articles, and interviews. For communication to be effective and bring the client closer to the sale, it must be based on competitive advantage.
6. It’s a business scaling tool
Owners often mistakenly evaluate their business from the inside and put into competitive communication advantages that are of no value to the consumer. So, this is a serious challenge for an entrepreneur - to look at the business from the right angle, through the eyes of the consumer.
At this stage, insights arise: it may turn out that what the owner considered important and unique is not of particular interest to the consumer.
It often happens that a company, having found its competitive advantages, turns them into an idea for a separate business and opportunities for scaling into new markets. This is a plus in the search and study of competitive advantages.
The most effective way to start a digital competitor analysis is to try to answer questions like:
- who are our competitors?
- what are their strengths and weaknesses?
- what are their goals?
- what strategies have they adopted to achieve their current position?
- how can they react to our new marketing action plan?
Competition is also a source of improvement through a benchmarking process. Indeed, the best practices are rich in lessons to make its processes even more efficient.
Digital competitive analysis generally revolves around three stages:
1. Clarify study objectives
Beforehand, you must clearly state the reason for your research on the competition. After all, the results obtained will affect your future decisions.
- You want to design a new product and need to know the existing offers on the market, their strengths, and their weaknesses.
- You are an entrepreneur and conduct a market study to estimate what positioning to adopt in the face of competing offers.
- You have identified a weak point in your organization and want to conduct a benchmarking study using the best in your sector as a reference.
- You seek to know the selling prices practiced by the competitors in place to design competitive prices (price monitoring).
- Your objective is to identify the most threatening competitors to anticipate risks and build a strategy.
This phase of digital competitor analysis is very important because it determines the choice of competitors observed, the information to be collected, and the processing/use of data.
2. Define the information for the search
From the objectives that you have just determined, locate the necessary information that will allow you to answer your questions.
- the image perceived by customers, etc.
3. Identify and select competitors to analyze
This step involves carrying out an external diagnosis to identify the competing companies that need to be studied. You will need to list the players and retrieve general information about their market share, size, and offer for a pre-analysis.
Keep your study goals defined in the previous step in sight. It would obviously be useless and counterproductive to define a much broader perimeter. Once your competitive environment has been determined, you can move on to the next step.
Additional sources for digital competitor analysis:
- if you are a company, it is interesting to conduct an internal investigation. Each service in contact with customers potentially has partial information on competitors in the sector (sales force, after-sales service, etc.).
- if you are a creator or are interested in a new sector, contact the professional groups. They usually have information on the market and competitors.
Another approach is to survey customers in the sector by interviewing them directly. It is conducted in 2 phases: a qualitative study to list the competitors in a market, followed by a quantitative survey to estimate the market share of each and collect additional information on image, commercial practices, etc., to analyze their positioning, for example.
At this stage, it is useful to build a table of the competition by listing, for each entry, the essential information (market share, positioning, etc.).
How to select competitors to study?
Once the companies have been listed, a strategy map should be constructed, representing the positioning of the companies working in a sector.
The objective is to select the competitors closest to your profile to focus your research efforts on the most threatening. This hierarchy is very important so as not to disperse yourself. This is a basic principle in strategy: actions should be focused on for greater effectiveness and efficiency.
Another tool for competitive analysis: the five forces of M. Porter
The advantage of this approach is that it is not limited to direct competitors. Indeed, the sectors are so changing that a new company present in a related field can emerge and upset the competitive positions of the players present.
M. Porter identified five competitive forces:
- competitors in the sector: direct rival companies;
- potential entrants: those able to cross the barriers to entry and counter the defensive reactions of the actors present;
- substitutes: players capable of launching substitute products whose characteristics in terms of value for money would supplant existing offers;
- customers: holding a bargaining power such that some firms could potentially disappear. Their power also gives them a capacity for backward integration.
- suppliers: they, too, can have a bearing on the profitability of companies in the sector by driving up supply costs.
This approach delivers two views for digital competitor analysis: direct competitors and indirect or even potential competitors (possible entrants, substitutes, customers, suppliers). Don’t neglect this vision, because the markets are very moving with permanent recompositions.
How Does Your Company Compare?
You must first set a baseline to do a digital competitor analysis accurately. When it comes time to conduct a SWOT analysis, this is also helpful.
Examine your company's financial, sales, and marketing reports objectively using the same benchmarks you use to judge your rivals.
Just like you would with a rival, make a note of this information and use it as your benchmark when comparing across the board.
Don't forget to analyze customer feedback – it will also help you to implement necessary changes and improve your business. When you collect data from all sources, you can compare them and see the whole picture.
Digital competitor analysis is a smart move to make throughout the year. The market will be monitored monthly for changes or trends. The quarterly one will be used to put more significant adjustments in your approach into effect.
Remember to update your digital competitive analysis regularly. It gives you an overview of the market at a given moment. If it can help you obtain relevant information, which will allow you to make the necessary changes in your business, we do not recommend that you make it a reference. thereafter, unless it is updated frequently. Market trends are constantly changing, so you must therefore update your report if you want to obtain reliable information on your competitors at all times.
To sum up, the digital competitor analysis has several objectives:
- measure the competitive intensity of the market;
- understand the strategy of competitors and know their key success factors;
- identify the competitive advantages to be developed;
- determine a viable marketing strategy and positioning in the face of competition;
- anticipate competitors' reactions following the company's insertion into the market.
In the end, the competition analysis must lead the manager to decide on a competitive strategy:
- What opportunities?
- What competitive advantages?
- What policy vis-à-vis market players: differentiation? integration? alignment?
- Should you be a follower, a challenger, or a specialist in a niche?
Digital competitor analysis must be coupled with competitive intelligence, which consists of constantly monitoring competitors' strategies and the arrival of new entrants.
So, how to boost your marketing strategy? Find the strengths and weaknesses of your competitors to shine. Armed with your competitive analysis, you can optimize your marketing strategy and thus conquer your target audience more quickly.
Any such analysis is actionable, and your observations should lead to specific business goals, not to mention a solid business plan.
It is not enough to consolidate all the information from your competitive analysis: you must also act accordingly. The data shows you your position in the market, but digital competitor analysis should allow you to solve your problems and optimize your company's strategic plan.