Unless your business is selling a unique product or service, it’ll be competing with other companies for customers and revenue. Researching competitors can provide useful insights for your start-up business.
Why conduct competitor research?
Competitors have tested the market, made mistakes or enjoyed wins – all of which you can learn from to ensure your business is a success. Competitor research is crucial for start ups or for companies bringing a new product to market. It helps predict how competitors will react when you enter the market, such as by lowering prices or adding new products.
Competitor analysis is a key component in business planning. Examining how competitors operate helps you build your own marketing and sales strategies, avoiding mistakes that competitors have previously made.
Competitor research can help you learn more about customers, too. You can learn about customer demand for types of products or services, the types of marketing they respond to, and the level of pricing that they’re willing to pay.
Competitor research also lets you unearth competitive gaps. These are areas where competitors aren’t meeting customer needs or effectively operating, and where you can take advantage of that gap to win more customers or operate more profitably.
How to conduct competitor research
Information about competitors can be found from a variety of sources, but primarily through observation and desk research.
Observational – This means understanding how competitors operate in the market. This involves visiting competitors’ retail premises, visiting and ordering from their websites, and calling their customer service numbers. You can also examine their marketing materials and social media activities as well as talk to their customers.
The aim is to learn how a competitor does things. What marketing messages and channels do they use? How often do they advertise and where? What product pricing tiers do they use? What do customers like or dislike about them? Crucially, where are they getting things right, and where is there an opportunity to do things better.
Desk research – Access and read annual reports to estimate competitors’ costs and revenue. Hunt down press releases and media coverage. Read interviews with their senior staff for clues as to how they operate. Visit the ‘About us’ section of their website, or use professional networking sites such as LinkedIn to see who their employees are and get an idea of the number of staff employed and their skills.
The aim is to create a more concrete, evidence-based analysis of the competitor. How much revenue do they generate? How much do they spend on marketing? What is their market share? It’s also worth conducting a SWOT analysis, listing the competitor’s strengths, weaknesses, opportunities and threats.
Step 1: Find your competitors
Build a list of all potential competitors by searching online for your business products and services. In Google, search for a relevant market keyword such as ‘plumbers Oxford’ or ‘handmade cushions’. Look at the Google AdWords that appear with your search results to see how competitors advertise their business. Examine their social media channels, too.
Step 2: Categorise your competitors
Sort your competitors into categories, including direct, secondary and tertiary competitors.
- Direct competitors – These are your main competitors, usually offering identical products or services and targeting the same audience at a similar price point.
- Secondary Competitors – These are competitors that sell more expensive or cheaper versions of your product or offer similar products and services to a different audience. For example, you’re selling mass-produced kitchen cabinetry whereas a secondary competitor may offer premium bespoke kitchens. These are businesses that could become direct competitors if they change their business strategy.
- Tertiary Competitors – These are businesses that offer related products and services. For instance, if you offer roofing services, a tertiary competitor may be one that sells roofing supplies.
Step 3: Evaluate your competitors
You can now begin your evaluation by using SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) on their products, sales, marketing, social media and so forth. Identify their weaknesses, such as slow delivery times or poor customer service. Where is the competitor a threat to your business, and has the competitor identified new opportunities in the market?
- Products – List the product and services your competitor is selling and at what price. What pricing structures do they use? What features do they focus on?
- Sales – How are their products/services sold and distributed? What channels do they use? What is the sales pipeline? Do they offer discounts? What are their revenues and sales volumes each year? This can be difficult to research. For publicly held companies, you can find annual reports online detailing sales revenues and sales volumes, but with privately owned businesses, you’ll have to dig around. Buy products yourself or ask a member of your team to do so, or ask your customers if they’ve bought previously from these companies.
- Customer service – How do they handle after sales? If selling products, what are their returns and refunds policy. Read online reviews about the company.
- Marketing – Look at the competitors’ online and offline activity. Explore their website. Do they offer case studies, podcast and videos related to their products? Look at their brochures both in print and online. Do they run advertising campaigns on TV or in newspapers and magazines? Subscribe to your competitor’s email newsletters.
- Social Media – Do they have a blog that’s regularly updated. Do they have a strong social media presence and on what platforms – Facebook, Twitter, Pinterest, YouTube, Instagram and so forth? Check the average number of comments, shares, and likes on your competitor’s content.
Step 4: Analysing competitor research
Organise your results into a spreadsheet. Create columns for the following:
- Competitor name.
- Business and trading address.
- Location covered (local, national, global).
- Web site address.
- Web site traffic.
- Social media channels and metrics such as followers, update frequency and likes.
- Brief summary – what is the business and mission statement.
- Products – key products and services, along with pricing information.
- SWOT – strengths, weaknesses, opportunities and threats.
- Differentiators – what are the USPs and things that make this business stand out from others.
Use this matrix to compare different competitors. A competitor research matrix can help you compare different pricing approaches, how active they are on social media or what the general complaints are from customers across the industry. Use this to identify what your business needs to get right or offer to outperform existing competitors.