Every business has competitors. ‘Competitors’ are any other business or person who offers a reasonable alternative to what your business offers. We all need to do a competitor analysis. As an SME, it can be hard to know how much valuable time and resource should be spent on your competitors. Here’s a step by step guide to help you figure out what your business should be doing about its competition. By the end, you will have analysed your competitors and built a competitive strategy.
Step 1. Identify who your real competitors are
It’s too easy to skim this. To think, “It’s obvious who our competition is”. Many SMEs say something like, “We offer professional accountancy advice and services to businesses turning over £2m-15m. Therefore our main competitors are other accountancy firms like us.”
This isn’t the whole picture.
Competitors might be: the business employing a Finance Manager or supporting an existing Finance Manager to qualify as a Chartered Accountant; not engaging a professional but keep muddling through as best they can.
Read my popular blog post, “Trains, planes and…trucks: know your competition” which explores in depth how to figure out who your competition really are, using a memorable true example. Correctly identifying your competitors is the first step to a realistic competitor analysis.
To help my clients identify their real competition, I ask the following three questions. Then we make a list.
- What problems do you solve for your clients?
- Who / what else solves those problems?
- What / who else have you actually lost business too?
- From the above, make a list of your real competitors – where possible, put down company names but groups of competitors are fine eg all accountants within a 25 mile radius.
If you need to clarify further what problems you are solving for your clients, then read my blog post, “Five Conversations to unlock your growth. Conversation #1: What are your clients’ problems?”
Step 2. Assess each competitor in relation to your business
Go back through your list. Decide what each of your “competitors” are to your business. Assess them as being one of the following four:
- A Threat – these are the competitors that you know or strongly suspect you have lost business to; you can also put in here up and coming threats (e.g. a new online version of your services).
- An Opportunity – these are the things and businesses that you realise aren’t actually threats; perhaps you aren’t operating in the exact same market or you are after slightly different customer groups. However, as you operate in the same space, can you make an opportunity out of them? E.g. You’re a Graphic Design agency whose clients typically spend £5,000 per project. The freelance Graphic Designer down the road has clients who typically spend £500 per project. See if you can refer prospects with smaller budgets to him and he can refer “up” client projects that he is too small for.
- Inspiration – some competitors are market leaders. They are the best in their field, way ahead of your business. That’s fine. Choose to be inspired by them; it’s called adopting a market follower strategy and it can be a highly effective use of your time and budget.
- Irrelevant- these could be competitors that you are happy to let have that business. For example, the clients who don’t appreciate professional advice and would much rather buy a “DIY” book off Amazon – leave them to it. Sometimes competitors are irrelevant because of geography – they operate in a totally different geographic market place to you. They offer no opportunities, don’t inspire you, and aren’t a threat. Just keep an eye on them in case they choose to expand into your territory.
List your reasons for assessing them in this way.
Step 3. Set your competitive strategy
Now you know where each competitor is in relation to your business you now have to decide how you are going to deal with them.
Your approach, or competitive strategy, will depend on factors such as:
- How much resource you have for competitive strategies
- Which of the above categories most of your competitors fall into (if you had a lot of “threats” or very strong ones, for example, you would need a very active competitive strategy to counter the threats)
- Your company’s own business goals and how much business you stand to lose from competitors.
Your table should look something like this now:
Competitors for IT Managed Services in Hampshire, UK
|Competitor name / group||Classification||Classification reasons||Competitive Strategy|
|Six other IT Managed Services companies within a 50 mile radius||Threat||They offer the same services as us but to differing degrees of quality||• Sharpen up our marketing to show and prove the quality of service we offer and be very clear about the benefits of working with us.
• Monitor to see how they are positioning and marketing themselves – adjust approach if they become aggressive or change their approach.
|Three freelance IT Managers in region||Opportunity||They work with micro-businesses (<£1m t/o) but might get enquiries from bigger ones they can’t handle; might be able to use them as our own freelance resource.||• Get to know them and their capabilities
• Set up a mutual referral scheme
• Monitor to ensure they aren’t moving into the threat classification.
|“IT Your Way” – market leader in SE England||Inspiration||They are five times our size, with considerable investment and run by ex-IBM types. They punch far above our current weight. They also invest in new technology which we can’t.||• Assess their marketing to see what we can learn from them
• Monitor to see what new tech they are using and how successful it is so we can decide whether to adopt it.
• Monitor to make sure they don’t start selling into smaller SMEs, like our clients.
|DIY IT-ers bodging their own networks||Irrelevant||They will do it themselves and don’t need us. If it falls over and they realise it isn’t so easy after all, then they move into potential client.||• Monitor to ensure they aren’t influencing other SMEs to just bodge it (potentially disastrous for some companies)
• Ensure marketing material explains when you can get away with bodging and when it’s not a good idea.
Step 4. The final step…put it into action
As with any plan, you then have to put it into action. Make sure that each competitor strategy is someone’s responsibility. Decide how often you have to monitor and report back on each competitor. And make sure that when the competitive environment changes, your company changes its approach to competitors too.
If your company exists in a highly competitive environment and you’ve identified that you need to actively monitor your competitors, then go to the Useful tools section below. I’ve listed some tools that automatically monitor and analyse competitor activity online.
It’s useful to repeat this assessment exercise at least every 12 months, ideally every 6.
Developing the right approach to your competitors is really important to maintaining good business health. You want to dedicate the right amount of resource to it and be confident you are finding out what you want.
If you operate in a competitive marketplace, then you need to read more than this blog. Start with Chapter 12 Creating Competitive Advantages in “Principles of Marketing by Kotler, Amstrong, Saunders, and Wong”. This is the book and thinking upon which most other competitive theories and management is based.
Finally, contact me. I can help you assess your competitive marketplace and determine realistic and effective strategies to manage them.
Kara Stanford, Strategic Marketing Consultant, KMS Marketing, Hampshire
These tools can help you monitor and assess your competitors’ online presence and performance. Many of them offer more than just competitor analysis and insight, so do look at everything they offer. They are all paid for but some offer a free trial.
Owletter – captures, stores and analyses your competitors newsletters
Hitwise – understand how your competitors operate compared to you
Similarweb – research and understand your competitors
SEMRush – a complete SEO tool for businesses with Competitive Intelligence included