To be successful in any competitive market, it is essential to understand the competition. In a business setting, this means conducting a competitive analysis. In most cases, you will have some understanding of your competitors before you start this process. For example, if you are opening a coffee shop in an area with several other coffee shops competing with one another for customers and loyalty – then there’s no doubt that you’re going to want to conduct a thorough competitive analysis on those businesses before deciding how much time and money you want to invest into your business venture. This is because knowing what they offer their customers as well as how they work within the community can help give insight as to where gaps exist which could be filled by your business idea and how to make your business stand out.
What is a competitive analysis?
A competitive analysis is an examination of the strengths and weaknesses of businesses to understand how they operate as well as what strategies they are using to attract customers. The goal of this type of analysis is not to tear down other businesses but rather to understand what they offer to create a plan that will set your business apart and make it successful. In some cases, you may find that it’s necessary to adjust your original business idea based on what you learn from the competition – but that’s okay! It’s all part of the process.
How to conduct a competitive analysis?
There is no one best way to conduct a competitive analysis for all purposes. Every industry is different and has its challenges. However, there are some common aspects of this type of analysis that you can apply across the board no matter what your business idea might be – including online businesses. And if you are opening an online store, then knowing how the competition works is critical to success since many customers will search for information about competing stores before making their final purchase decisions.
Keeping the above points in mind, here are four ways you can conduct an effective competitive analysis on any business:
1.) Conduct Online Research
The Internet makes it easy to gain insight into any business that operates within your geographic area or participates in your particular community. You can use popular search engines to find various types of information about your competitors. For example, if you have a local business idea, then typing their name into Google along with the word “reviews” is likely to yield links where customers have shared their thoughts on that business, good or bad. You can use these reviews to form opinions of your own but be sure to take them with a grain of salt because every customer has different needs and expectations.
2.) Get On Their Same Page
Another way you can gather data about the competition is by getting on equal footing with them. What do I mean? Well, let’s say you want to start an online retail store specializing in vintage clothing, many other competing eCommerce sites are selling similar products. As tempting as it might be to follow your competitor’s strategies and models, you should resist the urge. Instead, create your website based on what you know will make yours unique and compelling before doing anything else.
3.) Benchmark Against the Competition
Take a close look at how well your competitors are performing in comparison to one another. What type of products or services do they offer? How many items do they sell per month? Which specific products receive the most attention from their customers? If applicable, use data like the number of site visitors (and where those visitors come from), average order values, and conversion rates to determine which areas for improving your business can focus on. Look beyond just numerical information – take note of any awards or recognition that your competition receives.
4.) Conduct an Internal Assessment
There is no such thing as a “self-made man” and likewise, there is no such thing as a business that was born successful. Behind every successful entrepreneur is the history of their experience and expertise in the industry they work within. When conducting your competitive analysis, pay attention to what makes your specific business idea different from others already on the market – whether you’re selling tacos or accounting services. What will set your business apart and make it appealing to customers? Is it your management team? Your unique selling proposition (USP)? The way you bring products to market? Whatever it might be, take note of those points and use them as elements to help grow your successful enterprise.