4 Key Questions to Ask When Analyzing Your Competitors to Gain a Competitive Advantage

Building a competitive analysis is a common exercise when starting a business, whether you're pitching to startup investors or putting together a business plan to present to a bank. You'll always see competitors' names, customer demographics, and pricing strategies on that plan, and you can even plot them nicely on a graph to show where your brand fits into the competitive landscape.

The competitive analysis should be much more than just an exercise, though, as it's more crucial than ever to understand your competitors and gain valuable insights that can be used to modify your own business strategy.

Although we frequently discuss how many businesses fail in their first few years, entrepreneurs actually continue to work hard. The Small Business Administration reports that between March 2020 and March 2021, there were about 25% more new businesses than closed ones.

While this is exciting news, it also means that there are more businesses vying for market share than ever before, so conducting a competitive analysis is only the first step. It's crucial to gather the appropriate information and apply it to your business strategy.

The four lessons you must take away from your competitive analysis—and why—are as follows:

1. What services and products do my competitors actually provide?

Simply identifying competitors—i.e., companies that are providing services to the same target market as they are—is one of the common mistakes that founders make.

Why does this matter?

Not every company that caters to your customer base in the same industry is a rival. They might even prove to be a valuable strategic partner.

Start by closely examining what your rival is doing. Do their service or product share the same characteristics? Consider whether a customer can utilize both products or whether using one eliminates the requirement for the other.

Investigate further if you're unsure whether a company is one of your competitors. Register for a demo, buy a sample, or get in touch with some of their clients.

If your customer can rationally shop with both brands, you might not be in direct competition, as you previously believed. This is how you can tell if a company is actually a competitor.

2. Who are the customers that your rivals are most appealing to, and how are they positioning themselves?

HubSpot study found that businesses with a focus on niche marketing strategies have a 75% higher conversion rate than those without one. The study also discovered that companies that concentrate on their niche are more likely to produce qualified leads and see higher returns on investment.

It's time to learn more about your competitors and your own positions in the market once you've identified who they really are. Every brand has a niche where they are the ideal solution for a specific type of customer's pain points. The key is identifying who that customer is by looking more closely at the language your competitors are using and the audience they are attempting to reach.

3. What marketing strategies are competitors using?

Today, marketing is a crucial component of starting a business. It would be foolish to expect our customers to be able to find us on their own given the level of competition out there.

Companies that prioritize marketing efforts are 13 times more likely to see a positive ROI than those that don't, according to a Marketo report. The study discovered that companies that put marketing first can improve customer loyalty and brand recognition, which ultimately results in higher sales and brand expansion.

Additionally, keeping an eye on your rivals helps you stay on top of market developments and industry trends.

Have they abandoned Facebook Messenger and switched to SMS to communicate with customers?

Are they switching from Instagram to Tik Tok for their social media efforts?

Are they investing more time in collaborating with influencers to produce videos rather than writing blogs?

By gaining insight from your rivals, you can continuously hone your marketing tactics, keep your competitive edge, and steer clear of costly blunders with regard to time and money management.

4. Look for opportunities.

We can always improve as companies, and your rivals are no exception. You can use competitive analysis to find out where your rivals are dominating the market as well as any gaps in it that you might be able to fill.

Once you've examined your true competitors, you might discover that they are failing to innovate, providing poor customer service or experience, or ignoring a certain customer segment.

These are all unrealized possibilities that will help you stand out from your rivals and develop a thriving market for your brand.

A McKinsey & Company study found that businesses that create blue oceans outperform their rivals by an average of 14 times over the course of ten years, enabling them to avoid the fierce competition in current market spaces (red oceans) and forge new routes to profitability.

I concur with Simon Sinek that we are our biggest competitors, but we can start differentiating our brand from the competition by conducting a competitive analysis. Gaining a competitive edge can be difficult, but it is a worthwhile goal that can be attained by asking the right questions and using the answers to inform strategic choices. Brand leaders can successfully differentiate their businesses and experience significant growth through this process.