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Researching Your Business Competition Without Getting Stressed
“I’m an ambitious person. I never consider myself in competition with anyone, and I’m not saying that from an arrogant standpoint, it’s just that my journey started so, so long ago, and I’m still on it and I won’t stand still.”
~ Idris Elba
If competitor research leaves you pulling your hair out or with a sick feeling in your stomach, we have some tips for you. If you haven’t done it before it’s hard to know where to start with researching your competition, and what information is valuable to gather. It can also be galling to learn just how successful your competition is! But knowing how competitors go to market and the truth behind their advertising can be extremely useful information for your business.
Entrepreneurs and small businesses should find competitor analysis as useful as large companies, but lack of time or expertise can mean the competition gets ignored or is poorly researched. The following guide will take you through the types of competitor to investigate, the factors that can affect business competition and some practical tips on how to do competitor research.
What is business competition?
Direct competition is what most people think of when they think of a ‘real’ competitor. Direct competitors are competing for the same customers as you with a similar offering. Too tight a view of what a direct competitor leads many entrepreneurs to claim they ‘have no competition’. But direct competition does not mean an exact match for your product or service, just similar enough.
Telephone/broadband companies, coffee shops and solicitors all have easy to identify direct competition – others businesses of the same type.
Maybe your product is just so stunningly original that it’s hard to draw parallels with anything else (it’s definitely true for us… definitely…). Or maybe you have a monopoly in your particular sector.
If this is really true, think about what your prospective customers are spending their time and money on now that they should be spending with you instead. Are any of these things close to your offering? Do they fulfil a similar function to your product? If so, you may have indirect competition…
Indirect competition might be hard to recognise at first. Indirect competitors may not go about business in the same way you do, their route to market may be totally different… what matters is that they fill a similar customer need. A classic example is a coffee shop, whose indirect competitors might include smoothie shops and hotels – anywhere that sells refreshments. They compete for the same customers and fulfil the same general need.
Broader than either direct or indirect competition is ‘everything else’, sometimes called replacement or perceived competition. In a real sense, everything is competing with your product or service for people’s time, attention and money. If you run a bookshop you might not feel like a car mechanic is your competitor, but if a customer’s car needs fixing they might end up not buying any books from you. It’s impossible to analyse this kind of competition in the same way as direct and indirect, but replacement competitors can help explain general trends in your sales, particularly seasonal ones.
Local, national & global
The type of competition isn’t the whole story – there’s also proximity and location to consider. Highstreet establishments need to consider competition in their immediate vicinity, but also father afield in nearby towns and suburbs. For online businesses location is less of an issue, but companies local to your customers will likely have lower postage costs and so may be able to compete better with you on price. Language can also be a barrier to competition, but this cuts both ways, making it harder to recognise competition and harder to compete in a different language for both businesses.
SWOT stands for Strengths, Weaknesses, Opportunities and Threats. A SWOT analysis is a method of brainstorming about these aspects of a business. Generally, it’s your business that you’re thinking about in a SWOT analysis – but it’s equally important to analyse your competitors using SWOT. The good thing about this method is that it’s clear, simple and usually fast, giving you great anchor points for the information you find out about your competitors.
Making a simple business competition matrix using SWOT
You can make SWOT as in-depth as you like, but a good starting point is to look at the following aspects of your competition and decide how they relate to the four factors (Strengths, Weaknesses, Opportunities and Threats!) that make up SWOT analysis.
- Convenience / speed
- Customer service channels
- Sales channels
- Financial backing
The key to successful SWOT analysis is to think like a customer. How do your competitors appear to their customers, what language do they use, and why would a customer choose them?
Don’t forget digital analysis
It’s not just the bricks and mortar, marketing style and sales channels of your competitors that you need to analyse. The subtle art of SEO and online presence boils down to links, web content and the activities of Google’s bots and algorithms. Be sure to investigate the following for each competitor (or get someone to do it for you!):
- Domain authority and page authority
- Total number of links to the domain and homepage
- Social presence – shares across social media
- Number of pages indexed by Google
Not only will this help you get a fuller picture of the competitor’s online presence, it may also give you new avenues to explore for yours.
Why competition is a good thing – just don’t be obsessed by it.
The way I look at it, it’s exciting to find a new competitor. It means there’s demand for what you are offering. It can also shine a spotlight on the similarities and differences between your business and others. Sometimes what you find could be disheartening – but don’t be afraid to change and learn from your competitors. This is particularly true if you are entering a market dominated by a small number of large businesses.
While they might have a monopoly right now in terms of customers, you can always offer competition, you just need to find the right way to compete. No company is perfect for every customer. Even giant businesses can be beaten in terms of product quality and competitive pricing, as well as ‘soft’ strengths like customer service, business ethics and environmental awareness. You don’t need to beat the competition on every level, but offer something distinct and, convenient and appealing to your target market.
Market research is the basis of a firm financial plan. Start a Brixx Foundations plan today and we’ll keep you updated with some great tips to help you plan your business effectively.
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