For your brand to stand out from the competition, you need to either have better offerings than the competition, appeal to a niche demographic or innovate. But before you do any of that, you must first identify your primary competitors and keep an eye on their progress to plan your strategies.

The leading marketing agencies in London never build any marketing strategy without conducting a thorough competitive analysis.

So, here are some key points that these expert agencies will adhere to during this process.

Types of competition

 

Direct competition

Direct competitors are your most visible online competition because they directly compete with the same products or services that you offer. This is your primary competition.

So, suppose your business sells vegan or faux leather coats in London. Which are locally sourced and ethically manufactured, you would have direct competition with other stores and shops in the city that sell the same kind of leather coats.

Indirect competition

Indirect competition exists where two companies each offer products or services that satisfy the same need, whether for a similar product or service. It occurs when other brands also offer the same things that appeal to your target market. This is your secondary competition.

In this case, your vegan leather coat business will be competing with brands that offer faux leather products that may not be sustainable or ethically made. Still, they satisfy a specific segment’s need for vegan leather coats. 

Substitute competition

Substitute competition occurs when two brands sell complementary goods or services in similar target markets but different industries. This type of competition can be product vs product or product vs service. More importantly, they can be consumed together.

For instance, a pair of contact lenses can be a substitute for an eyeglass as people can use either one of them or sometimes, both simultaneously to satisfy their needs.

Is it possible not to have competition?

Yes, all pioneers have experienced a lack of competition in their industries at some point. Henry Ford didn’t have direct competition when he invented automobiles. Neither did Alexander Graham Bell when he invented the telephone; Bill Gates during the development of his operating system for personal computers. And neither did Alfred Nobel when he invented dynamite.

It is possible to be the first in your industry. While there are very few entirely ‘original’ ideas, it is possible to differentiate from your direct and secondary competitors by finding a niche in the market that hasn’t yet been capitalised on. Or by thinking innovatively about solutions to problems that you have in your own life.

And having zero competition can be a good and a bad thing. Although it gives you a chance to set up your business the way you want and prove your worth in the market before anyone else, you have to do everything from scratch.

As a business, you will have to be more intellectually and emotionally invested in your industry and be responsible for setting standards – which can be a huge undertaking. 

The importance of identifying primary competitors

To know their strengths and weaknesses

It is not always enough to understand what your competitors do. You also have to know how they are positioned in the market and how they compare to other brands in terms of their ability to capitalise on new opportunities and defend against threats. This is where primary competitors come into play.

Conducting a competitor analysis can help you discover your competition’s strengths and weaknesses and know what sets them apart from each other. It can also give you a chance to understand what content others are building their market presence upon, which can help you design your own.

To know your competitive advantage

Competitive advantage is the reason why your company can make money when others can’t. It’s what makes you different from your competitors and allows you to attract more customers. It is also an extra benefit you have that your competitors don’t, which helps you succeed in the market.

Determining your competitive advantage isn’t always the result of a eureka moment. While you can launch your business with an ‘edge’ in mind, established companies can also determine their competitive advantage by carrying out thorough competitor analyses.

To predict the future

Only by understanding how your competitors perform can you predict your business’s future performance and plan strategies that will help you meet your goals.

Because let’s face it: knowing what’s working for other businesses in similar fields is a great place to start if you are trying to beat them – or at least keep up with them.

Besides, knowing what your competitors are doing can help you future-proof your business and create newer benchmarks for your company’s future.

To reduce your exposure to risk

Generally, not all competitors are equal. But you would only know how powerful your competitors are after performing an in-depth primary competitor analysis.

For an example based in popular culture – one of Kitchen Nightmares’ episodes featured a restaurant from Denver, US., whose owner swore that they sold the best pizzas in all of Denver even as the establishment was on the verge of shutting down.

The owner had never considered the possibility of new and improved pizza places emerging around the city in the last 40-something years. All because he had never done a competitor analysis.

As a result, his restaurant’s popularity tanked until Gordon Ramsay stepped in to make some changes, which has allowed the place to stay in business ever since.

Now, the episode might have been amplified to make good TV. But this isn’t an isolated case. Countless businesses, especially brick and mortar stores, fail to mitigate their risks by never analysing their competition. But that is never a sustainable approach to owning a brand.

To avoid expensive errors

It is always wise to monitor your primary competitors’ activities to understand what you should be doing better and in which areas you must make changes.

A simple example of this would be tracking your competitors’ keywords. If they have failed to target their customers using specific keywords, you can either avoid or use them and save money depending on your target audience.

The best strategy is not to follow others blindly but rather to try and distinguish your company from the crowd and see what works for you.

Remember that some things are not worth copying just because they work for your competitor. You need your own data to support your strategies.

To get familiar with industry best practices

The best part about having competition is that they have probably already conducted market research to create their strategies. So, you don’t have to start from scratch. Instead, you can simply collect all the data from your competitors to reach a conclusive understanding of your industry.

Mapping out how your competitors target customers can give you a better understanding of which range your niche falls in and what type of customers would be drawn or pushed away by specific strategies and messages.

Not only can you utilise this information to set price points and develop your marketing strategy, but these insights can also help shape your overall plan of action.

The best way to conduct a competitor analysis

The easiest way to perform a competitor analysis is by looking up the keywords that you wish to target and rank for.

For instance, If your goal is to be the first business that your prospective customers should come to every time they need a “freshly baked croissants in Nottingham,” search for those words to see who is ranking for them currently.

Once you have a list, you can filter the competition using more specific words, such as freshly baked ‘chocolate’ croissants or freshly baked croissants’ combo.’ This allows you to see which companies are within the market space that you wish to inhabit.

What to do once you have your competitors

After putting together your competitor data, you need to turn it into something actionable and measurable. You can classify the data by industry, keyword phrase type, and SERP position type. Or you can use one of the following advanced analyses to understand more about your competition and industry.

 

Porter’s Five Forces

The Porter’s Five Forces is a prevalent framework that helps analyse the competitiveness of any market and the weaknesses and strengths of your business. It helps determine the competitive intensity and the attractiveness (or lack of it) of an industry in terms of its profitability. Here are the five forces.

 

The threat of new entrants

The threat of new entrants exists when new competitors can enter the market quickly without much threat. This can compel existing competitors to cut prices and improve the quality of products or services. But it can also help improve the efficiency of a company.

For example, anybody can introduce a new alcohol brand.

 

Threat of substitutes

This type of threat occurs when a rival presents the same form of production as that of the company being analysed, but at a lower price or in better quality than the former. If a substitute offers similar value while being more convenient, it will tempt a customer to switch and purchase the replacement instead.

For instance, someone who may be unhappy with their Lenovo laptop can substitute it for a Dell laptop because it is a good alternative that offers the same quality.

 

Bargaining power of buyers

The bargaining power of buyers refers to the ability of buyers to eventually pass on costs to the firms. For example, if a buyer has bargaining power, it can force a seller to reduce price, adopt a more flexible pricing scheme, and set operational standards. And all this can typically happen because the buyers have more options in the market to choose from. 

 

Bargaining power of suppliers

The bargaining power of a company’s suppliers is the ability of the suppliers to drive up prices in the short run by threatening to withhold their services or withholding them. The higher the inflation rate, the more powerful a company’s suppliers become.

So, if you are in an industry dominated by supplier decisions, you will need to focus on creating a strategy that addresses this issue.

 

Rivalry among existing competitors

One of the forces that control the intensity of competition within an industry is rivalry among existing competitors. If rivalry is intense within an industry, it won’t guarantee that the competitors will be equally competitive in all segments.

For example, Coca Cola and Pepsi dominate the cold beverage industry, which means other brands will get a smaller share in the market.

 

SWOT analysis

SWOT is an acronym used for a quick and easy review of a company’s strengths, weaknesses, opportunities, and threats. But here’s how it can help you learn more about a competitor’s business.

 

Strengths

Strengths could either be internal or external in any organisation:

• Internal support from management
• Past successes in the market with the current business strategy
• The business’s ability to innovate

A company’s strength can also be its market share or its reputation among its target segments.

 

Weaknesses

Weaknesses are issues that a company may face from internal or external sources, such as competitors or technology. They make a company lose its edge in the market to other brands that have eliminated those gaps in their products, services, or management. From inadequate employee training to high prices, anything can be a weakness.

Opportunities

Opportunities are external or internal factors in your favour, such as changes in government policies or social trends. They could be long-term or short-term that a company can benefit from in their industry. For instance, luxury clothing brands have the opportunity to introduce vegan options and sustainability in their supply chains. But only a handful of brands like Stella McCartney are making use of this early opportunity.

 

Threats

Threats are external forces that can affect a company but which you can do little about, such as an economic downturn – the pandemic being the most recent example of this.

But sometimes, they can also be internal, like running into cash flow problems due to razor-thin margins, disgruntled customers, or not addressing product/marketing issues in time.

If you want to get a leg up on your competition, identifying your primary competitors is crucial. Not doing so can cause you to miss out on numerous opportunities to engage new customers and boost your revenue. The Good Marketer can help you conduct a thorough competitive analysis and keep you updated with your industry’s trends. Get in touch with us to get started.