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3 essential steps to performing a thorough competitor analysis

3 essential steps to performing a thorough competitor analysis

One huge mistake I see many entrepreneurs make is thinking that innovation alone can be a vehicle for the success of their product. Just make a great product, and the rest should take care of itself, right?

Well, the reality is that no matter how new and exciting your product may seem, we never get to release our products in a vacuum. Other market forces will always play a big role in how a product is perceived by our audience, and how it eventually performs.

"Getting a solid idea of your competitors then is absolutely essential for your product positioning."

By performing a thorough competitor analysis, we can identify the various threats to our business plan and how to avoid them. We can also pinpoint the gaps in the market to take advantage of new business opportunities and predict changes in the industry landscape.

Step #1: Identify your competitors

This can be more difficult than it seems. Consumers can be incredibly imaginative about the way they solve problems, and you may find that competitors lurk in unsuspecting places.

For example, if your product is a brand-new snack box company targeted at office workers, equivalent products like Graze and NatureBox aren't your only competitors. You've also got to compete with McDonald's next door, Tescos on the high street, the office vending machine, and Maggie's homemade brownies that she baked last night. That's some strong competition!

Start by writing down the problem that your product solves, then brainstorm other potential solutions. Once you have your list, identify actual companies that provide this solution. For example, a single branch of your brainstorm might look like:

Problem: How can I eat healthy, tasty snacks when I'm at work?

Solution#1: Buy Tupperware boxes to keep fruits and nuts

Providers: Buy boxes and nuts in Tesco, Sainsbury's, Asda, Waitrose The more creative you get with your solutions, the clearer an image you'll get of the real market forces in play.

Step #2: Create a comprehensive portrait of each competitor

We'll need to find out all about their strengths, weaknesses, reach, popularity, strategies, relative power, market positioning, product benefits etc. You may even want to know details like how they source their products and what their profit margins look like.

Remember, however, that the amount of research you can do on a company, especially a large one, is essentially limitless. For this reason, it's a good idea to use a tried and tested framework for analysis.

SWOT analysis is a great, traditional framework that asks you to list the Strengths, Weaknesses, Opportunities and Threats associated with your competitors. It has the benefit of being simple, but might be slightly limited in terms of guiding in-depth analysis.

For a more detailed assessment, take a look at Porter's Five Forces. Though a little on the complicated side, it's a great framework for identifying the power of competitors in relation to supply and demand forces.

Step #3: Define your competitive advantage

Perhaps the most crucial step, this is where

"we outline how we can differentiate our product from the competition and leverage market opportunities."

First, make a list of the various needs of your target audience with respect to your product. For example, for office snacks, we may identify the following as being essential characteristics:

Write these needs along one axis of a table, and along the other, write the names of each of your competitors. Next, give a mark out of ten for how well you think each of your competitors fulfil each of these needs. Try to get inside the head of your consumer and consider it from their perspective.

How does the scoring look? Are there any needs that you feel aren't covered by the current market? Any rows that have low scores across the board?

If so, these are all potential selling points for your product. Choose a few that align with the values of your company and your vision for your product. You'll need to test these with your target audience to see which ones really hit home and make for a compelling value proposition.

And that's all there is to it! In theory, competitor analysis is simple, but in practice, it can be a long, difficult process. Try to research existing frameworks first and let prevailing wisdom guide your thought process. When it comes to competitor analysis, the devil is in the details, so be as thorough as you can!

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If you have any questions about staying ahead of the competition, simply drop us an email to Studio Graphene.

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