Competition analysis is a process of understanding the substitutes for a product. It consists of several companies competing with a product or service, for customers.
There are several ways to make a competition analysis, let’s start with the most common, the price.
For example, if a product has many substitutes, the price will usually be low because it is considered easily replaceable. Now items that are difficult to find are usually more expensive.
Another way to study the competition is to see how the market share is, because it gives you a global picture of the sector.
If no single product has a significant market share of more than 30%, the sector is likely to be very competitive and there are many substitutes.
In this case, companies may not obtain high net profit margins.
When you do a competition analysis, there are two main stages to consider:
- Identify the value they bring to the sector
- And examine their market share.
Why a competition analysis is necessary
You’ve probably heard the saying “Keep your friends close, but keep your enemies even closer”.
When it comes to making a competitive distinction, for example in the SaaS sector, that’s not the whole story.
In this type of industry keeping your enemy close will not prevent you from being attacked by surprise, moreover sometimes you don’t even know who your “enemies” are.
The “enemy”, after all, could be acquired by Amazon and put you out of business overnight. Or Google could build a competitive product in your market.
Here’s why you should conduct a competition analysis because it can help you understand the art of war, like Sun Tzu’s book.
It can help you identify where your opposition is and how they are approaching your market niche. It also allows you to discover strategic areas where you can position yourself to be relevant in your sector.
An important fact: when doing a competitive study, don’t make quick decisions or don’t copy 100%, as you’ll be improvising… And that’s proven to be no good at all.
Likewise, if you are the leader of your industry, the value of researching your competitors will be limited because you are the leader of the pack, through unknown territory.
Remember the wise words of Charles Darwin:
What you should take into account in your competition analysis
A competitive distinction is only one entry in your growth strategy.
Don’t focus on watching your competitors for marketing tactics or as mentioned above, quickly launch a new feature just to keep up with a competitor.
For a data-based company, you would be surprised how many product decisions are driven by internal policies or micromanagement issues.
Now, here are 2 points you have to take into account when creating your competitive studio:
- Don’t use competition analysis to make decisions about what to build next: Your next idea is not going to come from your competitors, it must come from the feedback you request from your customers or by talking to your prospects. Even from the ideas your colleagues are sharing internally across the company.
- Competition analysis: Treat your analysis as a support activity and it should not be too time and resource consuming. Focus on what your customers are telling you, whether through feedback, interviews or their application behaviour.
Your customers will always be your strongest source of data and knowledge.
The important thing is to know exactly who your direct competitors are, listed from 1 to 5 and from there focus on research.
5 facts you can use when doing your competition analysis
The HR situation
LinkedIn can be very helpful for you to know the different departments for each company, how big or small they are and what sector they are focusing on.
One example: You found that your competitor’s company Pepito.com has a small sales team, combined with a large increase in R&D hiring.
This may indicate to you that Pepito.com is currently focusing on improving or launching a product in the near future.
Study of web traffic
Using different tools such as Semrush or Ahrefs you can research the competition:
- Where do their visits come from?
- What are their social networks profiles look like?
- Are they investing in advertising?
- What are their main keywords?
This can help you to see what web factors are proving very useful to these companies and give you several ideas to implement (or modify if necessary)
Their business model
This could be a key point when doing a competition analysis since you can discover:
- What kind of revenue sources does the company focus on?
- What sector are they covering?
- Are they a franchise or not?
- Etc. …
Here you can find out from your competitor’s website, LinkedIn or in the news, if they have recently succeeded in fundraising or a relevant acquisition, their stock market status, etc.
You can find out what your competition is involved in through face-to-face or online events:
- Any internal changes?
- New CTO or CEO?
- Any new strategic partners?
- And so on.
Of course there are more aspects to investigate, however, the aim of any of these 5 ideas is for you to know the current state of your direct competitors and to make an analysis of your next steps.
CRM, your best ally when analyzing the competition
In summary: Competitive analysis is all systematic activities to create more value and resources to win the business or other specific objectives.
Because it is clear that every organization wants to win or achieve its objectives for economic, social or any other purpose.
Regardless, the importance of developing a competitive edge helps you identify strengths and weaknesses of any company.
However, it is clear that a CRM can help you in this process because:
- You can save all the information you get there (company contacts)
- You can edit and save all the documentation from the same tool, so that you don’t lose any details
- And most importantly, you get your whole team to have your analysis so that it can be used for a presentation, with a prospectus and much more.
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