Competition motivates you to improve your performance by putting in more effort towards business success. Competitive analysis helps you understand how to better position your business in the market relative to your peers and competitors. It aids in building stronger value propositions and more customer-focused products and better communicates the benefits of your products or services.
How Competition Helps Improve Performance
Opportunity to Learn
Competing against solid rivals forces you to learn your weaknesses and use your strengths to your advantage; it sharpens your operational discipline. Competitive analysis helps you understand your business’s position in the marketplace. It helps you gather and use vital information to modify or enhance offers, plans, processes, channels, etc.
Motivation to Perform Better
Competitors motivate you to work harder, be more customer-centric, stay focused on your desired outcomes, and take measured risks. A competitive analysis encourages you to deliver products and services that solve customers’ problems, develop a compelling value proposition, position your solutions correctly, develop and execute strategies proficiently, make better plans, and adapt to changing consumer behavior to result in better margins, increased profitability, an expanded customer base, etc.
Knowing What to Do and What Not to Do
Understanding what your competitors are doing provides insight into effective strategies and tactics and avoids potential pitfalls and costly mistakes. Since not all your competitors are in the same stage of development as you, you can learn from their successes and failures.
Learning from your competitors’ mistakes saves you precious time and money on what does not work in the marketplace. Learning what has worked for your competitors helps you create more customer value, enhance your growth options, and improve your performance.
How Does Competitive Analysis Benefit Your Business?
By conducting regular competitive analyses, you can:
Develop and Enhance Your Unique Selling Proposition
Competitive analysis helps you gain deep insight into the “why” that defines other brands. It helps you identify your brand’s talking points and what distinguishes your brand from your competitors’ brands by comparing your unique selling proposition to theirs.
Obtain leverage over your competition by comparing services, products, integrations, mission statements, product descriptions, partnerships, etc. that could bring out different talking points. Use the information to fine-tune your brand’s unique selling proposition.
Improve Your Products and Services
Get a detailed analysis of your competitors’ customer reviews as compared to your customer reviews. Look at the FAQs and customer review pages to discern customers’ needs and expectations. Apply that insight to your products and services as your brand expands. Also, find where your competitors are lagging in improvements and try to capitalize on it.
Use advisory boards and customer success initiatives to tune with your customers and make better plans and solid strategies. Know and continuously track your numbers by adopting a data-driven, metrics-based approach.
Establish a Brand Benchmark
Competitive analysis helps you realize the benefits of benchmarking by building a foundation or point of reference for measuring growth. Obtain a greater understanding of your company’s scaling and growth capabilities and identify areas of improvement by comparing historical and current data about how customers view your competitors’ companies and yours.
Identify Gaps in R&D and Recruitment
Competitive analysis helps you discover your competitors’ hiring, expansion plans, workplace culture, and other information that customers are likely to consider before becoming loyal to a brand. This information may help predict your competitors’ upcoming trends.
Discover Potential Threats and Challenges
Competitive analysis helps you understand the challenges your competitors and the market as a whole face. Discover potential threats and market changes so that you can adjust your plans.
How Competitive Analysis Helps Create Value in the Long Run
With the information gleaned through competitive analysis, you know what’s needed to improve your business’ value and make it attractive to potential buyers.
Build a Strong Company Brand
Conducting frequent competitive analyses and making continuous efforts to succeed helps you develop a clear, coherent brand that differentiates your organization from competitors. That enhances your business’ value which makes it attractive to potential buyers. By outperforming your competitors in the marketplace, you get a premium valuation and the desired selling price.
Develop More Desirable Products and Services
Companies that understand their competition tend to develop products and services more attuned to customer needs and marketplace realities. Those products sell more, grow faster, and drive sustainable growth. Potential buyers look for sustainable growth.
Both potential buyers and lenders highly value a business showcasing sustainable growth, enjoying a solid position in the marketplace, offering products and services distinct from their competitors, and having robust operational processes capable of retaining market position.
Become a More Profitable and Sustainable Business
Constant comparison of competitors’ performance with your company’s forces you to build a more operationally disciplined firm that promises sustainable and scalable revenue. It helps you learn lessons from your peers’ mistakes so that you can strategize better.
As you build a strong company brand and offer desirable products and services to customers, you attract customer loyalty and build a large customer base, making your business more profitable and sustainable. Potential buyers are attracted to profitable businesses that promise sustainable revenue growth.
Build an Efficient Management Team
A management team that knows what’s happening in the market sends strong signals to buyers about the company’s ability to perform into the future. Competitive analysis helps you note competitors’ recruits, company culture, partnerships, etc., so you learn from them and simultaneously work towards building a strong and effective management team for your company.
Potential buyers seek companies with efficient management teams who will stay with the business after the transition and continue to grow it. On the contrary, they negatively view a company dependent on the owner for its prosperity.
Related: Your Brand Image Impacts Your Value.
Competitive analysis not only helps your company improve its performance now but also helps build value for the long term when you may want to exit. A high business valuation helps the owners get their desired exit. By giving healthy competition to your peers, you improve your position in the marketplace now and at the time of business exit.
Investing in regular competitive analyses takes time, money, and people. Use this effective tool to improve your company’s performance, accelerate growth, create more customer value, and build enduring business value.