A cycling race is a competition par excellence for athletes. They start shoulder to shoulder on command, fight their way up passes, and race down mountains. The longer a race goes on, the sooner the field thins out. The strongest cyclists battle their way to the front, the mediocre stay behind, the weakest give up. Economic competition works similarly.
To remain competitive, an athlete must be fitter than his competitors - a company; on the other hand, must be more innovative, have more to offer, and meet customer requirements better than its direct competitors. In this process, one thing above all is essential: keeping one's head on a swivel. To find out precisely what competing companies are doing is the primary directive of competitive analysis.
In the following, the market research experts from Appinio explain what this is all about, what insights such an analysis provides, and why digital market research is particularly suitable for systematically examining competitors.
I. What is a Competitive Analysis?
The competitive analysis from the customer's point of view is a central part of market analysis.
A competitive analysis:
• is the systematic exploration of the current and potential competition.
• reveals the strengths and weaknesses of your own company and competitors.
• identifies future trends and relevant threats to your business.
• provides insights into the strategies of competitors.
To identify main competitors, see through their strategy, and use the knowledge gained to ultimately overtake them - the cornerstone is a competitive analysis. Those who know their weaknesses compared to the competition know what needs adjustment. If you know your strengths, you can build on them, emphasize them, and make your offer unique. A competitive analysis is vital for the strategic positioning of a company in the market.
• Introduction of new products (Do these products already exist among the competition? How much traction do they have with consumers?)
• Start-up of a new company (How is the structure of the target market?)
• Development of new target groups (Which groups do I serve, and which consumers choose the competition?)
• Development of innovations (What unique and innovative products can my company offer in the market?)
• Review of marketing strategies (How do competitors advertise and how is it received?
• Examining recruiting strategies and employer image (How do competitors hire new employees and how satisfied are the employees at competing companies?)
Gaining knowledge about competitors is hard work. Without knowing the competition and their strategies, it is almost impossible to supersede them. Hence, you address the consumers - they are the source for competitive analysis, by gathering their opinions on your products and those of the competition. After all, their purchase decision ultimately decides whether a product or service is successful. They choose to remain loyal to a brand or switch to the competition. And that's why a critical method of a competitive analysis is to reach consumers directly via surveys. Not only those who are already customers of your own company, but also all other potential customers that might fit your target group. Digital market research is the ideal tool for competitive analysis from the consumers' point of view. In this way, thousands of opinions can be obtained within a brief amount of time, bringing a company closer to its goal of getting insights about the competition.
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II. Step by Step to a Competitive Analysis
First of all, a concrete goal about what should be reached with a competitive analysis should be set. This goal determines the procedure for the study.
Do I want to know who my most significant competitors are? Am I interested in why consumers change manufacturers? Or do I want to find out exactly how consumers perceive my marketing strategy compared to that of other companies? Based on the specific objective of the analysis, questions are developed.
Below are examples of steps in a competitive analysis using digital market research. Using the case of the fictitious supermarket A, the aim is to show what information a company can obtain by interviewing consumers.
If supermarket A wants to sell its products, it must be perceived better than other supermarkets. For instance, its assortment should be more varied, the prices lower, and the fresh food counters better filled than in other markets. Further, it should have more locations and a unique selling proposition - singling out the reason why consumers always shop in this specific store.
To discover what consumers want and what makes them want to go to a particular store, a company needs to survey its customers. What do I have to offer to make my customers loyal to me? What do other supermarkets have that I don't, and what are the chances that my customers will buy there? The basis for answering all these questions is creating a suitable questionnaire.
Step 1: Identify your main competitors
At the beginning of a competitive analysis, it is essential to identify all relevant competitors. Key competitors are those companies that offer services or products that appeal to the same or to a very similar target group as your product or service. On the one hand, these can be suppliers who currently trade in related services and goods as your company, but on the other hand, they can also be suppliers who may enter the market in the future.
Let us assume that fictitious supermarket A wants to know how its market is perceived compared to other supermarkets. First of all, supermarket A has to determine which other supermarkets should be included in the competitive analysis. Therefore, a questionnaire for a competitive analysis should initially contain a question about potential competitors.
Consumers should be asked to indicate which companies in a particular industry they know, where they buy, and which company's products they do not buy. You could also ask which company is closest to the consumer's place of residence. Another tweak in competitive analysis can be introduced by asking consumers to name a few brands spontaneously since it helps to survey how present a specific company or brand is in consumers' minds.
Thinking of supermarkets, which names come to your mind spontaneously?
. . . . . . . . . .
In which supermarket do you regularly buy groceries?
- Supermarket A
- Supermarket B
- Supermarket C
Step 2: Obtain Information about your CompetitorsWhen developing a competitive analysis, you need to define what you want to know about the competition precisely. By surveying consumers, information can be obtained that is not obvious and only comes to light through strategic questions. It might be interesting to know why consumers prefer a particular brand or supplier.
Besides, one could ask whether certain age groups feel attracted by certain brands to find out in which segment your brand is popular. Another option would be to ask how different advertisements of competitors are received in comparison to your own.
In the case of the fictitious supermarket, it could be interesting to discover why consumers choose a particular supermarket. This could be assessed by either utilizing an open question or through a question with multiple answers. Asking open-ended questions has the advantage of revealing information that would otherwise not have been available.
Why are you shopping in this particular supermarket/supermarkets?
- Lowest prices
- Best quality
- Largest selection
- Is closest
- Another reason, namely: ...
As part of a competitive analysis, the supermarket could also test which advertising strategy is preferred by consumers. Let's assume that supermarket A maintains a social media page on Facebook. There it shares recipe tips with consumers, informs them about current offers, and gives online customer support. Supermarket B, on the other hand, does marketing via YouTube. Now supermarket A could ask consumers which they like better.
Do you think it is appealing when a supermarket has a social media presence?
- More likely yes
- Rather no
Step 3: Find Strengths and Weaknesses of your own Company and those of your CompetitorsA competitive analysis should also focus on finding out which attributes make the competition look strong and where possible weaknesses lie. Your own company is always part of the survey. After all, it serves as a reference.
In order to identify possible strengths of the competition and to find out where your own company stands in comparison to them, you should first determine what is important in your target industry. For example, supermarket A could determine that staff friendliness, waiting times at the checkout, quality of products and availability of organic food are particularly important. These topics can then be queried one after another.
In which supermarket do you find the most friendly staff?
- Supermarket A
- Supermarket B
- Supermarket C
- Other, which is ...
Exactly the same procedure can be used to find out where the weaknesses of your own company lie in comparison to the competition. With the help of the weakness analysis it becomes clear what a company still has to work on to catch up with the competition.For example, supermarket A could now ask where the participants think that the waiting times at the checkout are longest.
It is also interesting for a company to find out whether it has a particular unique selling point. This can be found out particularly well with an open question.
Where do you think supermarket A is ahaed in comparison to other supermarkets? Please describe as precisely as possible!
. . . . . .
The goal is to collect certain keywords that occur frequently and thus reveal what customers particularly appreciate about the company. This particular advantage can then be emphasized even more in the future in order to gain a greater lead over the competition.
Further examples of questions that could be asked in a competitive analysis:
- Please name a reason why you would change your telecommunications provider.
- Here are five sneaker brands. In your oppinion, which do you think offers the best design in general?
- Which drugstore is closest to your home?
- When you think of bakeries, which chain comes to your mind spontaneously?
- What does a sportswear brand need to offer you to buy there again?
- Which detergent advertising campaign has been on your mind lately?
- Which of these insurance providers would you trust the most?
- Please think of a modern café. What would it have to offer to be ahead of others?
III. Analysis of the Results
With the help of digital market research, thousands of ideas, opinions and evaluations can be obtained from consumers of all target groups within a very short time. All of this information, which ultimately makes up the competitive analysis, is collected and forms an important basis for the future design of corporate strategies and marketing.
A great advantage of digital market research is the large amount of data that can be collected at once. At the beginning of a survey, demographic information such as age, gender, place of residence or educational level of the survey participants is collected and stored together with the results. In this way, interesting insights can be gained after the survey, which one might not necessarily have expected before.
In order to take up the example of supermarket A again, they might, for example, want to know in retrospect which names of supermarkets spontaneously come to the minds of consumers in London, and which supermarket chains are more familiar in Berlin. Supermarket A could also analyse which food stores older people tend to go to and which are popular with 20 to 30-year-olds. If they find, for example, that their own store is rather unpopular among young people in Berlin compared to the competition, it could be a next step to consider this target group for future marketing strategies.
In our Appinio Dashboard you will find questionnaire templates and sample surveys on the topic of competitive analysis.