Competitor analysis is the approach by which companies better understand their competitors and gain a competitive advantage. In practice, it involves collecting, analyzing, and interpreting data about a company’s current and potential competitors.
Competitor analysis enables marketing teams to have a clear overview of their competitors’ strengths and weaknesses and to design their own marketing strategies accordingly.
Why is competitor analysis important?
Competitor analysis is much more than a purely reactive process. It is a strategic tool that helps companies make proactive and fact-based decisions. By understanding its competitors’ position, strategies and weaknesses, a company can better define its own target audience, highlight its own strengths and sharpen its unique selling propositions.
How is a competitor analysis performed?
A competitive analysis is a multi-step process that begins with identifying competitors and ends with creating an action plan. Here are the basic steps:
- Identify your competitors: this includes both direct competitors (companies offering similar products or services) and indirect competitors (companies offering alternative solutions to the same customer problem).
- Gather information about your competitors: this includes collecting data about their products, prices, advertising strategies, and more. This phase also includes conducting a market analysis.
- Analyze the information collected: This is where the data is interpreted and analyzed. This step involves understanding your competitors’ strategies, their strengths and weaknesses, and how your company is positioned in this landscape.
- Create an action plan: Based on the results of your competitor analysis, create an action plan to improve and optimize your own marketing strategies. This could include changing your prices, improving your products, or creating targeted advertising campaigns.
The benefit of a competitor analysis
The insights from a competitor analysis can shed new light in a wide variety of marketing areas: From pricing to product differentiation, to customer segmentation. Without a thorough understanding of the competitive landscape, e.g. through a SWOT analysis, effective implementation of these measures would hardly be possible.