8 Steps to Stay Ahead of Your Competitors and Grow Your Business

Regardless of the business sector you operate in, your industry will have competitors. With competitor research, you’ll gain insights into these players and discover general market trends that can help you differentiate your product and increase sales.

Competitor research and analysis provide key insights into each industry, such as differentiating factors, industry weaknesses and gaps, current marketing strategies, and business opportunities.

If we’re being honest, however, it is a time-consuming task that many people have not mastered. We’ve got you. In this article, we’re going to overview the main steps for a successful and efficient analysis that causes the least headache.

Let's get started by defining the term competitor research.

What Is Competitor Research?

Competitor research is a detailed study of your competitors to learn about their products, sales, human resource management, and marketing tactics. Such studies help you stay ahead of trends, identify growth opportunities, and spot threats to your business. It is also a powerful self-evaluating tool to reflect on the strengths and weaknesses of your business.

In short, periodically overviewing the practices of other businesses in your sector will guide you in your business decisions, will help you rank yourself within your specific market, and ultimately help you reach your target customers.

Why Should You Research Your Competition?

In every business sector, you’ll likely find several companies that are providing goods or services that, on some level, overlap the ones offered by your company. This means that you are essentially pursuing some of the same customers.

Understanding the market is the first step to securing a solid customer base and avoiding missing out on business opportunities.

4 Reasons to Start Researching Your Competitors Today:

1. Understand your market better. With a comprehensive understanding of the market, your competitors’ position, and your own, you are in a better condition to make informed decisions and recapture your ideal customers.
2. Find a sound basis for marketing decisions. From your research, you'll get a good sense of how to price your product, how to distribute it, and which platforms to advertise it on. Such information will assist you in making informed marketing decisions, highlighting your strengths, finding the right tone to communicate with your target customers, and the appropriate platforms to use.
3. Identify business opportunities and gaps in the market. By identifying your competitors' strengths and weaknesses, you may find fractions of consumers who are not being serviced or are being under-serviced. This data will assist you in evaluating where your competitors are falling short and give you a headstart in reaching those consumers.
4. Plan for the future. Take your business where it needs to go with the data collected from competitive analysis. This includes areas to improve your product/ service, added features, reformulating pricing models, and improved external communication of your products.

If your business is struggling to grow, reach its target customers, or stand out in a saturated market, your next strategic move should be investing in competitor analysis.

What Are The 3 Types of Competitors?

According to a 2020 report, carried out by Crayon, businesses faced 29 competitors on average, an increase from previous years. When carrying out competitive analysis, we typically look at 3 types of competitors: direct competitors, indirect competitors, and replacement competitors.

Direct competitors are directly at odds with your business. This means they offer identical or comparable solutions, have roughly the same target customers, and use the same communication channels. Usually, direct competitors are a direct risk of swaying your customers, but this doesn’t always happen. For example, Netflix and HBO are direct competitors but a customer could subscribe to both streaming platforms due to the different content they offer.

Indirect competitors, on the other hand, are businesses that offer entirely different products but operate in the same market. For example, fast food chains with different menus compete with each other even if they offer different products. Similarly, private transportation services compete with electric scooter rental companies.

Lastly, replacement competitors offer distinct services/products and operate in different markets, but address the same issue. Harder to identify, these competitors are still relevant to take note of due to their disruptive potential. For example, a cinema chain could identify other forms of entertainment as replacement competitors, such as streaming services.

8 Steps For a Rewarding Competitor Analysis

Whether your sector is prone to rapid changes or more stability, a business that is not adapting to the competition is risking stagnation or becoming obsolete. Follow the next 8 steps to stay ahead of the market and build a competitive advantage.

Step 1: Identify Your Competition

The first step in competitor research is identifying the biggest threats to your business. Even if you know already who the most well-known competitors are, there may be new players in the game that you are not aware of yet. Whether you are looking at high revenue, fast growth, or the most promising potential, take note of the businesses you will be tracking.

For example, if you are a startup in healthcare insurance, try competing with other small/startup healthcare insurance companies rather than considering UnitedHealthcare as your competitor. A common way to determine competitors is doing the mental exercise where you imagine your business does not exist and take note of where your customers could turn to for the same or similar products/services.

Business News Daily advises choosing 10-12 competitors to track and including direct competitors, indirect competitors, and replacement competitors.

Step 2: Define the Indicators to Track