Understanding your competition is critical for business success. Whether you’re starting a new venture or growing an existing one, competitive analysis helps you identify opportunities, avoid pitfalls, and develop effective strategies to differentiate your business.
Start with Identifying True Competition
Your first step is understanding who your real competitors are. Don’t make the mistake of assuming you have no competition—customers always have alternatives. Consider both direct and indirect competitors. For example, a specialty Italian ice shop isn’t just competing with other Italian ice vendors but with ice cream shops, frozen yogurt stores, and even grocery stores selling frozen treats. Think about your customers’ needs and all the different ways they could satisfy those needs.
Conduct Thorough Market Research
Begin your research by using online tools like Google Maps to identify nearby competitors. Industry databases like Reference USA can provide valuable data on competitors’ estimated annual sales, employee counts, and years in business. Trade associations often maintain statistics and trends that can help you understand the competitive landscape.
For local businesses, conducting “windshield”surveys”—physically driving by competitor locations—can reveal valuable information about traffic patterns, parking, curb appeal, and peak business hours. The Georgia Department of Transportation’s online database provides traffic count data that can help evaluate location advantages.
Mystery Shopping Your Competition
One of the most effective ways to analyze competition is through mystery shopping—visiting competitors as a customer. Create a systematic approach by developing a checklist of items to evaluate, such as:
- Product quality, variety, and pricing
- Customer service levels
- Store layout and atmosphere
- Number of employees and their roles
- Peak business hours and customer traffic patterns
- Promotional displays and marketing tactics
- Store policies and procedures
Visit competitors multiple times at different hours and days to get a complete picture of their operations. Consider asking trusted friends or family to help conduct mystery shopping visits to gather additional perspectives.
Analyzing Competitive Strengths and Weaknesses
As you gather information, analyze your competitors’ strengths and weaknesses relative to your business. Look for gaps in their offerings that represent opportunities. For example, if competitors aren’t offering delivery service or online ordering, this could be a way to differentiate your business.
Pay attention to what competitors do well—you may be able to learn from and improve upon their best practices. Their weaknesses may highlight areas where you can provide better service or fill an unmet need in the market.
Ongoing Monitoring
Competitive analysis example for business plan isn’t a one-time task. Markets and competitors evolve constantly. Set up a system for regularly monitoring competitors through:
- Following them on social media
- Signing up for their email newsletters
- Tracking their advertisements and promotions
- Periodically conducting mystery shopping visits
- Staying current with industry news and trends
Use competitive intelligence to inform your business strategies but avoid becoming overly focused on competition. While it’s important to understand the competitive landscape, ultimately your success depends on effectively serving your target customers’ needs.
Remember that the goal isn’t to copy competitors but to understand the market dynamics so you can identify opportunities to differentiate your business and provide unique value to customers. Regular competitive analysis helps ensure your business strategies remain relevant and effective in an ever-changing marketplace.
By following these steps and maintaining consistent competitive monitoring, you’ll be better positioned to make strategic decisions that give your business a sustainable competitive advantage.