Competitor analysis

Competition is a fact of business - but look to turn it to your advantage. You can stay ahead of the pack by making sure you're clued up on what your competitors are up to and finding niches they haven't yet explored. Even if you can't compete with your larger competitors on price, find a good unique selling point (USP) and customers will be streaming through your doors.

Why look at the competition?

• Starting a business without looking at what the competition would be foolhardy: analysing your competition allows you to come up with a set of USPs and decide how you will differentiate your business from its competition. Looking at where your competitors' weaknesses lie will help you determine where your own business' strengths will be.
• Looking at your competitors will allow you to work out where they will pose threats. For example, do they have a larger marketing budget or do they hold more sway with certain suppliers or distributors?
• Conducting an analysis of all your competitors' strengths and weaknesses will help you to determine exactly how and where your product should be placed in the market and how your customers will react to your business.
• If your product or service is wrongly priced, it won't perform properly. Looking at how your competitors price their goods will give you a good idea of how to price your own offering based on where you decide to place it in the market.
• Whether you want to follow the lead set by your competitors or take an entirely different approach, looking at how they promote their businesses will help you to come up with an effective marketing strategy for your company.
• Competitors often serve as a useful springboard for innovation. If they have come up with a good idea, ask yourself how you can build on it - or, if they've used a strategy which was totally ineffective, find out why and whether you could improve on their idea.

Working out who your competitors are

• Competitors aren't just the Pepsi to your Coca-Cola. Everyone who will detract from your profits is a competitor - no matter how large or small they are. Think outside the box. If you're planning to manufacture socks, don't just look at rival sock manufacturers: think about other footwear companies, designer brands, knitwear boutiques, eBay - even sandal manufacturers will pose a threat.
• Competitors are everywhere. Consider some of the following to find out about them:
  • Advertising
  • Industry magazines
  • Trade fairs and industry events
  • Networking events
  • Industry bodies
  • Local Chambers of Commerce
  • Newspapers
  • The internet
  • Customers
  • Brochures and marketing literature
  • Companies House
  • Planning applications

What to find out about your competitors

• What their customers think of them. Search the internet, blogs and social networks to find out what people are saying about them - set up Google Alerts to be updated each time a news article or blog mentions them. Ask customers directly as well - what are your competitors doing well? What are they doing badly? Are there any gaps they aren't filling?
• How they are promoting and branding themselves. Looking at your competitors' promotional activities will allow you to differentiate your own - or nab their ideas and build on them. If they're likely to have one, ask a friend or employee to request a brochure or media  pack, or just look at their website and advertising to get a feel for how they're promoting themselves.
• Find out how much they're charging for their product or service and what that cost provides. Do they have any special offers? Do they bundle in any freebies? What sort of customer service or support package do clients receive as part of the price? Is there a premium equivalent? Many businesses have a price list on their website - if not, find out from customers or just ask a friend or employee to investigate for you.
• Find out who their suppliers and distributors are and whether they have signed an exclusivity deal with your competitor. Would they be willing to stock your product or supply to you? If your product is better than your competitors', is there a chance they might ditch them altogether in favour of your product? Arrange a meeting with them and try to glean as much information as you can.

Checklist

• Use information about your competitors to decide on your USPs
• Use competitor information to determine where your product should be placed in the market
• Looking at how your competitors price their goods will give help you how to price your own offering
• Borrow ideas to help you to come up with a marketing strategy
• Use competitors as a springboard for innovation
• Everyone who will detract from your profits is a competitor
• Find out what competitors' customers think of them
• Look at how they are promoting and branding themselves
• Find out how they price their offerings
• Find out who their suppliers and distributors are and try to arrange a meeting with them

Jargon buster

SWOT analysis: a method of taking an objective look at a business by assessing its strengths, weaknesses, opportunities and threats.

Resources

• British Library Business & IP Centre (gain financial data and information on companies in over 70 countries via Amadeus, FAME, Kompass, MINT and Onesource electronic databases. You can also search their collection of trade literature for UK & overseas companies through their Business information catalogue, and finally use SCoRe to access the national UK catalogue of printed company reports.).
• Companies House WebCheck
• List of trade associations
• Chambers of Commerce

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