In my recent blog post 99 ways to optimize your sales funnel and grow your business, one of my tips was to do a competitive analysis to see what your competitors are offering that you aren’t. Explore how you might offer similar benefits in a superior way.
In this blog, I want to show you how to do that.
COMPETITION: IT’S GOOD AND BAD
Competitors make us better. But it means that we can’t let down our guard even for an instant. We need to innovate relentlessly and we need to differentiate ourselves from our competitors. (Check out this blog post on the 6 reasons that you WANT to have competitors in your marketplace).
If you provide value to your Customers, and if you have effectively differentiated yourself, there is room in the marketplace for you. Competitive analysis is the in-depth review of your competition (individually and from a big-picture industry perspective) to identify their strengths and weaknesses (and to highlight your own strengths and weaknesses in light of your competitors) and to mitigate threats while you extend opportunities.
HOW TO PERFORM A COMPETITIVE ANALYSIS
You can use a variety of competitive analysis tools and I’ll give you a couple of ways to analyze your competition.
The first thing you need to do is decide who you are going to analyze. You have more competitors than you think:
- There are your direct competitors who sell almost exactly the same thing as you. However, not all of them sell the same product to the same market. You need to decide whether you want to study only those who sell to your current target market or you want to study those who sell to other markets.
- You also might want to study those products or services that are not like yours at all but which your target market uses instead of your product or service. (A simple example might be a car dealership — they could study other car dealerships but they might want to also study public transportation).
Even that list will be pretty big so you might need to cut it down further… perhaps by proximity to you or size or where their company is headed compared to yours.
Now it’s time for some competitive analysis. I like to look at three things during competitive analysis. You can go much deeper, but these three things will be an easy place to start and will allow you to make big, competitive changes in your business:
Step 1: Get a basic handle on your competitor’s company. Get a simple overview of who they are and what they do. You can use my Business Diamond Framework for this or you can use well-known Waterman/Phillips/Peters 7S Model and list elements for each of the seven S’s.
Step 2: Figure out how you and your competitors are positioned in the marketplace. Map out your marketplace to determine how your competitors are positioning themselves. Use a simple 2-axis chart comparing two different aspects of the marketplace or of the product your sell, then place you and your competitors on that chart. For an example of how to do this, check out a blog post about a beer market study that showed how Dos Equis positioned itself in the marketplace).
Step 3: Compare sales funnels to highlight differences in marketing and sales techniques and in Customer relationships. Use the Sales Funnel Worksheet to map out your competitor’s sales funnel to help you identify how they are building relationships with Audiences, Leads, Prospects, Customers, and Evangelists.
By using these three simple steps –a brief business analysis, a marketplace analysis, and a sales funnel analysis, you will end up with a very good idea of how your competition works. You can go much deeper — to the point of being able to write the equivalent of a business plan for your competitor. If you really want to know the competition well and win a lot of marketshare from them then this is necessary. (This is akin to the often-told business story of the photocopy repair person who could take apart and put together the competitor’s photocopiers blindfolded). You can go that deep, and if your competitors are really aggressive, you might have to. However, the three steps I’ve listed above are a good first start.
After your competitive analysis, you can use the information gleaned from the above steps to make your business better. In general, I would say that the best ways to make your business better are by mitigating weaknesses, leveraging strengths, pursuing new markets, building stronger relationships in current markets, and innovating.
Here are some ideas to do that.
- Blue Ocean Strategy is (in my opinion) one of the three best books on the topic of gaining a advantage over competitors. (The others are Michael Porter’s Competitive Advantage and Competitive Strategy).
- Growing your business doesn’t necessarily mean getting more of your target market to buy your product or service. It can mean: Getting a different target market to buy your product or service, or, getting your existing target market to buy different products.
- Innovate in your sales funnel to change how you sell your product or service.
- If your products are nearly identical to your competition’s products, and you can’t easily change them, then build highly valuable relationships with your Customers.