7 Steps for Competitor Analysis

Why spy on your competitors?

• It helps you create your own value proposition
• It helps you develop your own business strategy
• It helps you establish benchmarks 

Whether you are disrupting the industry with a completely different approach to your competitors, or following what your competitors do, but BETTER, competitor analysis helps you work on your business, not in your business.

Step 1: Determine who your competitors are

Identify who you is your competitor and who isn’t.

If you are operate a Café in Brisbane CBD, then not all cafes within the 50km radius are your competitors. Look out for the most similar ones to your business idea based on factors such as:

• Who are you targeting? 
• Coffee enthusiasts or hot chocolate drinkers?
• Plant based milk options or standard milk options?
• Office workers or leisure drinkers?
• What are you offering?
• Quick service or comprehensive service?
• Takeaway based or in store dining? 
• Small bites, or sit down meals?
• What is your price range?
• Budget  friendly or premium coffee experience? 
• Specialty coffee beans or standard coffee mix?
• Meal combos or set menus?

This allows you to react faster to changing market conditions, and compete with your competitors on the same plane. 

A new takeaway corner coffee shop for office workers is not a competitor of the Japanese café for students, although they are in the same industry.

Knowing who are your competitors is the first step to familiarising yourself with your own brand strategy and will help you get clear on your business plan.

Step 2: Identify the winning strategy your competitors are using

Once you have identified your competitors, the next step is to identify the reason why they are successful.

You are asking "Why are they currently successful?" and "What are they doing right?".

Is your product or service going to be superior to what is currently on the market? If so, how will you package your product so that you can incorporate this into your own business plan and strategy.

Learning from other people’s success will help you to grow faster from the beginning because chances are they are doing something right and it pays to take notice.

If the winning strategy is 'buy one get one free', then what's the downside of not using the same promotional technique?

Step 3: Analyse your competitor's target audience

There is no 'right' or 'wrong' target market, and our job is also not to make people go from one target market to the next.

Our job is to identify the opportunity and what target markets already exist, and then offer them our product and services.

If you are having trouble identifying your own target market, then an easy way to get started is to see if you can identify the target market/audience of some brands you are familiar with.

Some things you can think about include:

• Are my competitors doing a good job on promoting to their target audience?
• Are my competitors' marketing message clear?
• Are my competitors targeting similar segments?
• How close will my target market be to my competitors?
• Why is my competitor targeting this segment?
• Is it fair to say that my competitor is doing a good job at identifying opportunities in the market?
• Is one target audience segment worth more than the other?
• How many target audience segments are my competitors focusing on?
• How has the target market of my competitor changed over time?

All of the questions above, although are directed to your competitor, are also worthwhile to ask yourself with. The more clear you are on these topics, the easier your marketing job will become.

Even if you decide on a certain target market/audience now, it may change with your capabilities and natural growth of your company.

Step 4: Work out your competitor's price offerings

Remember the question "Is one target audience segment worth more than the other?" in step 3?

This is related to uncovering your competitor's pricing strategy and price offerings.

There is a fair market price for every product and service, since ultimately what you can charge is also equal to what your customers are willing to pay. The benefit of looking at what your competitors are doing is that you can identify where you can price your own products and services, relative to your competitors.

It is important to get clear on this, as you don't want to be price too high, neither too low.

If you are offering more inclusions than your competitor, you may want to charge more for it. However, how much more? $10 more, $100 more, $1000 more? 

Or, will you be offering a cheaper price for a certain target market segment but not the other?

If you are offering hand made organic skin care products, how much is too much to charge your customers?

Your competition, if successful, most likely would have figured out their own sweet spot in terms of pricing. Remember to think about your price as a factor that determines your revenue, and subsequently your profitability.

Step 5: Analyse the engagement of your competitor's content

You can tell when your competitors are doing a good job at promoting their products and services if engagement levels are high.

Take a look at their existing marketing channels:

• Are people talking about their services and products?
• Do people share stories and positive brand experiences with others?
• Is information on the competitor easy to find and access?
• How many channels does your competitor maintain?
• Are customers commenting on the content?
• Does your competitor have a loyalty club?
• If so, how are members rewarded through loyalty levels?
• How often is new content being produced?
• Does your competitor have sell out events?
• etc.

On top of these questions, you can also look at how they interact with various parties - their own company employees and vendors and suppliers.

Just remember that brand recognition is built over time, so you can take your time deciding on the direction you want to take that will maximise the payoff for your company when you are just starting.

Step 6: Compute your competitor's profit and turnover

One of the trickier items, is to look at how your competitors are operating as a business.

Yes, a company can be doing all things right, but is it ultimately profitable?

That's the big question that we need to ask, and the most important metric to look at when you are just starting out.

If you only have 5 months to work on your business and the business is not yet profitable by that time, will you keep running your business? Or will you close down? 

Step 7: Take a look at their marketing strategy

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