Most industries are oversaturated, meaning there are a lot of businesses offering similar products and services. Your success is largely dependent on how effectively you can capture your target customers’ attention. Unfortunately, this often means that the brands with bigger advertising budgets gain the lion’s share.
That doesn’t have to be true, though. The key to attracting and retaining your best customers is to prove you’re undeniably different from the rest. To do that, you can perform a competitor analysis to discover what makes you unique — and why your customers should choose you instead!
Beating the Competition: How to Identify Your Value Proposition
It’s virtually impossible to compete on market-related factors such as pricing and availability, especially in the era of Amazon. However, there’s always a market for products or services that uniquely solve a problem. Rather than trying to underbid your competitors, see what you can learn from them — and what they could learn from you.
The core of your brand appeal is your value proposition: the concise description of what you offer your target audience and why they want it. This should complement their buying journey. What compels them to seek out a solution? Why would they reject your competitors and choose you instead? To craft your value proposition, you must know your key differentiators, i.e. what sets you apart from others in your industry.
This is rarely something like price or market availability. Remember, similar companies who aren’t marketing to your geographic or demographic segment are not direct competitors. And pricing can vary widely. However, consumers are willing to pay more for value, so don’t worry too much if your
competitors are cheaper. If the quality of your offering is higher, people will pay your asking price.
What is a Competitor Analysis?
To best position your product in the market, you must first see who else is serving them. Then, assess their benefits and drawbacks. A competitor analysis is a descriptive overview of these businesses. Who are they targeting? What’s most appealing about their brand? Where could they improve?
Take the time to review each competitor’s website copy, social media presence and following, and customer reviews. Compare their apparent brand identity with what people think of them. You can glean ideas on how to best describe your offering while avoiding the pitfalls experienced by your competitors.
What are the Different Types of Competitors?
Your direct, or primary, competitors are those who market to your target audience with similar products and services. For example, two yoga studios marketing to working moms in Portland are direct competitors.
Secondary competitors offer a similar product or service to a different audience. A yoga studio appealing to retirees would be a secondary competitor to one targeting working moms. A secondary competition could also be a low- or high-end version of your offering. For example, a luxury yoga studio offering higher-priced, specialty classes would be a secondary competitor to a studio focused on basic Hatha yoga with no frills.
Tertiary competitors sell related products or services. A tertiary competitor to a yoga studio might be an online shop that sells yoga equipment and virtual classes.
What Should You Include in Your Competitor Analysis?
You should dive deep into your competitors’ marketing strategy, as well as the audience segments who seem to respond to them. Some segments will be loyal to your competitor, but sometimes, they’re only buying from them because they have no other option. By understanding your competitors’ strengths and weaknesses, you can better determine your ideal position in the market.
Your competitor analysis can include each competitor’s:
- Value proposition and tagline
- Target customers
- Brand position (e.g. luxury vs. discount brand, on-demand vs. boutique)
- Marketing channels and tactics
- Brand tone and personality
- Technology stack
- Price point and sales/discount strategy
- Selling process and buying journey (Free trial? Upgrades? etc.)
- Annual revenue
- Customer objections vs loyalty (Tip: check reviews on Google, Yelp, Amazon, etc.)
For each item on the list, name an area where you could improve or close a gap.
What Can You Learn From Analyzing Your Competitors?
Let’s take an example. Starbucks markets coffee and café foods to almost every community. If you’re opening a coffee shop, they’re likely a competitor. However, you may be able to offer value that better appeals to your target audience. Perhaps you can attract the consumers who want sustainably sourced coffee or people who want a more local atmosphere. If you’re offering more non-coffee beverages, that could also be a key differentiator.
By seeing where Starbucks is falling short, you can find the niche your brand can dominate. Perhaps your city’s Starbucks is only in the affluent part of town. You can set up shop to serve the other demographics. Or the Starbucks is relatively small. Your selling point could be your large porch and stage for local musicians.
In short, a good competitor analysis is also a type of market analysis. What are the gaps in the market and how can you fill them with your offering?
Turning Your Findings Into a Brand-Building Strategy
Once you understand where your competitors are succeeding and whom they’re targeting, you can refine your own strategy. If a competitor seems to be effectively capturing your desired audience, you’ll need to identify your key differentiators and market those to that audience, based on their pain points. If a competitor isn’t providing a product or service to a certain segment, that should be one you focus on. If their offering is inadequate, you can highlight your benefits and how your brand can actually solve your ideal customers’ problems.
Your competitor analysis should also give you some clues into how to describe and promote your brand. Do your competitors highlight certain benefits? Does their tone of voice seem to resonate with their customers? Which of their strategies seem to get the best engagement? Consider which of these elements affirm their value proposition vs. which seem to fall flat. For example, if they seem to be combining high-end product copy with a low-end product, that’s a sign they’re not able to dominate the luxury market. But perhaps you could!
After you’ve reviewed your competitors’ internal consistency, compare their content to your brand’s unique selling propositions. Which aspects seem to be fetching good results, and how can you close the gaps? For example, can you more authentically pitch natural-ingredient products or boutique services? If so, let your marketing copy express those key differentiators.
Overall, consider competitor analysis as a means of mapping the market’s landscape. You aren’t necessarily denigrating your competitors or poaching their customers, but rather seeing how you can best serve consumers’ needs. To achieve that, glean insights from your competitors on your target audience, what makes them tick, and where the current industry is lacking.