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How to perform a competitive analysis?
Competitive analysis is an essential step in market research. It helps the company achieve its development objectives by taking into account the practices and reactions of the competition.
What is a competitive analysis?
The competitive analysis consists of comparing the situation of a company or a future company and the market in which it develops. Its role is to analyze the weight of direct and indirect competition and its nature. It must follow a well-defined structure and is organized in several stages.
Why conduct a competitive analysis?
The competitive analysis makes it possible to list all the players present on a market, to define their offer and to identify their strengths and weaknesses.
The objective is to position the company and measure the viability of the project. Is it a saturated market in which it will be difficult to find a place? Is the proposed offer sufficiently differentiating to hope to take market share points? Only a good competitive analysis can answer these types of questions.
The company then uses results from its competitive mapping to:
- Refine its positioning and value proposition.
- Stand out by focusing on its advantages over other market players.
- Exploit the weaknesses of the competition to strengthen its presence in the segment.
Finally, competitive analysis is essential in order to anticipate and quantify the investments to be made to hope to remain competitive.
How to make a competitive analysis?
- Identify competitors.
- Determine the criteria to be analyzed in competitors.
- Make a grid of analysis of the competition.
- Analyze the results.
The analysis of competitors must be carried out with regard to the company's objectives and its positioning in the competitive environment. A 4-step methodology is ideal for studying the competition as a whole and drawing conclusions that will help in decision-making as well as building a sales and marketing strategy.
1 - Identify competitors
Competitive analysis attaches particular importance to the distinction between direct and indirect competitors. On the one hand, direct competitors, i.e. players marketing an offer similar to yours. On the other hand, indirect competitors, who offer goods or services with significant differences, but meet substantially the same needs. In the context of the analysis, taking into account only direct competition would not be relevant, since the customer's need is one of the main concerns of the market research.
During the identification phase of the players present on the market, it is important to separate those who have a similar offer from those who offer a different product, while targeting the same consumers. Thus, the list may have two separate columns, one for indirect competitors and the other for direct competitors. The two categories will not respond to the same strategic issues.
2 - Determine the criteria to be analyzed in competitors
Once your main competitors are listed, describe them individually by integrating their characteristics. The main criteria to list are:
- The history of the company.
- Geographical location.
- Internal organization.
- Business strategy.
- The offer.
- The pricing and distribution policy.
- The communication strategy.
The starting list takes the form of a comparative table, also known as competitive benchmarking. You can then start analyzing the identified actors, using different tools. Feel free to cross-check them to make the analysis more efficient.
First, must-have marketing tools like SWOT analysis and Porter's 5 Strengths method will be effective in analyzing the listed competitors individually. You can also use the BCG matrix, especially if the competitive analysis is being performed as part of the launch of a new product or service.
3 - Make a competition analysis grid
The competition analysis grid consists of bringing together all the competitors listed in a table that compares their strengths and weaknesses. It is a relatively simple tool to set up and very visual. He will be able to summarize all the points of the analysis while schematizing them.
The analysis grid can be supported by a perceptual map of positioning. Also called competitive mapping, it is a marketing tool that allows you to present the position of competitors on a chart. You can create multiple charts based on the relevant criteria chosen to oppose them.
For example, a competitive mapping based on the price of the future product will not bring the same results as another taking into account only the level of quality. To better find your way around, do not hesitate to list your relevant criteria before formatting your perceptual positioning cards.
4 - Analyze the results
The primary and ideal objective of a competitive analysis is to succeed in highlighting the best place of the company in a given market. For this, the competitive analysis must respond to each of the company's positioning issues, formulated upstream of the study.
The data collected on competition is only valuable if it justifies strategic choices. The results of the competitive analysis provide an answer on the positioning to be adopted and lay the foundations for the future strategy.
It is therefore essential to draw conclusions from the competitive analysis and not to stick to an outright analysis. This last phase aims to draw strategic conclusions by taking into account the entire analytical approach deployed during the study.