What is competitive analysis in a business plan?
Competitive analysis in a business plan looks at a company’s indirect and direct competitors. It uses thorough research to unveil their weaknesses and strengths in comparison to your own.
Direct competitors target the same product to the same audience as you, while indirect competitors focus on marketing the same product to a different audience. Once you have pinpointed your competitors, the information gathered allows you to assess your position within the market landscape. This writing by our Los Angeles business attorney is informed by representing thousands of business owners; additionally, the best data comes from my first-hand conversations with business owners and their leadership team.
Whether you are managing a company or participating in a sports match, grasping the dynamics of your competition is essential for achieving success. While you might not be scoring goals in the corporate arena, your objective is to secure lucrative business deals or capture customers with your products. The approach for both sportsmen and business proprietors is similar. Gaining a comprehensive understanding of your weaknesses and strengths relative to your competitors empowers you to elevate your performance.
This guide will go over the steps involved in a competitive analysis in a business plan. By the end, you should see how employing this marketing strategy can boost your business performance.
Learn more: Why is a business plan important?
Elements of a Competitive Analysis in a Business Plan
The goal of doing a competitive analysis in a business plan is to achieve a strategic edge in the market and refine your business approach. Without this assessment, understanding the strategies employed by others to attract customers or clients in your target market becomes challenging. A comprehensive competitive analysis in a business plan should include:
- Description of Your Company’s Target Market: Clearly define the demographic and psychographic aspects of your company’s target audience.
- Product or Service Details in Comparison to Competitors: Provide insights into the features and attributes of your product or service, drawing comparisons with those offered by competitors.
- Projected and Current Market Share, Revenues, and Sales: Analyze the existing and anticipated market share, sales figures, and revenue projections to gauge your competitive standing.
- Pricing Comparison: Evaluate the pricing strategies of both your company and competitors to understand market positioning and competitiveness.
- Social Media and Marketing Strategy Analysis: Study the effectiveness of marketing and social media strategies employed by your company and competitors to identify successful tactics.
- Customer Ratings Differences: Highlight differences in customer ratings and feedback, shedding light on the perceived strengths and weaknesses of each player in the market.
By meticulously comparing every aspect of your service or product with competitors, you can effectively assess how well each strategy works. This comparative analysis of success metrics enables you to make informed, data-driven decisions for the advancement of your business.
Learn more: How To Write A Business Plan Template
Guide to Performing a Comprehensive Competitive Analysis in a Business Plan
Use these 5 steps to craft your competitive analysis report and attain a fuller understanding of your position in the market. This pipeline allows you to study a select group of competitors, enabling a more strategic approach to reaching your target customers.
- Develop an Overview of Competitors
In the initial step, choose between 5 and ten competitors for comparison with your company. Opt for competitors with similar service or product offerings and a comparable business model. Include a mix of both indirect and direct competitors to assess potential impacts on your company from new market dynamics. Incorporating a blend of startup and established competitors enhances the depth and diversity of your analysis.
Tip: Identify competitors within your industry using search engines like Amazon or Google. The top search results are likely to be your primary competitors. If you are in a niche market or startup scenario, dig deeper into search rankings to uncover direct competitors.
- Evaluate Product or Service Offerings: Examine the features and attributes of your product or service in comparison to each selected competitor. Identify unique selling points and areas for improvement.
- Analyze Market Share and Positioning: Investigate the market share, positioning, and relevance of your company and competitors within the industry. Assess how your offerings align with market demands.
- Examine Pricing Strategies: Scrutinize the pricing strategies employed by both your company and competitors. Understand the pricing landscape to fine-tune your competitive positioning.
- Assess Marketing and Outreach Tactics: Evaluate the effectiveness of marketing and outreach strategies used by your company and competitors. Identify successful tactics and areas for innovation.
By following these steps, you can construct a robust competitive analysis in a business plan. This will give you valuable insights to refine your business strategy and effectively engage your target customers.
- Undertake Market Research
After choosing the competitors for analysis, begin comprehensive market research involving a blend of primary and secondary methodologies. Primary research draws directly from customer interactions or the product itself, while secondary research involves pre-existing compiled information. Systematically organize the gathered data using a user research template. Learn how to create a marketing strategy.
Primary Market Research might involve:
- Purchasing competitors’ services or products.
- Conducting interviews with customers.
- Executing online customer surveys.
- Hosting in-person focus groups.
Secondary Market Research might encompass:
- Scrutinizing competitors’ websites for insights.
- Evaluating the contemporary economic landscape.
- Identifying technological advancements in the industry.
- Reviewing business records.
Tip: Use search engine analysis tools such as SEMrush and Ahrefs to explore competitors’ websites. These tools provide essential SEO information, including targeted keywords, backlink counts, and overall website health. Incorporating such tools enhances the depth and efficiency of your competitive analysis.
Learn more: How To Perform Market Research and Analysis For A Business Plan
- Evaluate Product Features
Proceeding with your analysis, the next phase involves a meticulous comparison of your item with those of your competitors. This comparative assessment should systematically deconstruct each product, evaluating features individually. While every product boasts unique attributes, common considerations typically include:
- Price: Examine the pricing structure of your product and those of your competitors.
- Service Offered: Evaluate the range and quality of services associated with each product.
- Age of Target Audience: Analyze the target age group for each product’s audience.
- Design and Style: Consider the aesthetic and design elements defining each product.
- Number of Features: Assess the diversity and comprehensiveness of features integrated into each product.
- Ease of Use: Evaluate the user-friendliness and accessibility of each product.
- Customer Support Offered: Assess the quality and availability of customer support services associated with each product.
- Number and Type of Warranties: Examine the warranty options provided with each product, considering both type and quantity.
- Product Quality: Delve into the overall quality and performance of each product.
Tip: If the features table becomes extensive, you can streamline this step by citing the features deemed most critical for your analysis. Key considerations may include product benefits, cost, and ease of use, allowing for a more focused and impactful assessment.
- Evaluate Product Marketing
Continuing your analysis, this stage mirrors the previous one, but the focus shifts to comparing your competitors’ marketing efforts rather than their product features. As opposed to the product features matrix, this step demands a deeper exploration to uncover each company’s intricate marketing strategies.
Areas to scrutinize include:
- Social Media: Assess the presence and engagement on various social media platforms.
- Website Copy: Examine the messaging and content displayed on competitors’ websites.
- Paid Ads: Evaluate the effectiveness and content of paid advertising campaigns.
- Product Copy: Assess the language and content used in promoting the product.
- Press Releases: Analyze the information and messaging conveyed through official press releases.
As you explore the above aspects, pose probing questions to unravel each company’s marketing plan. The specific questions may differ according to field but could include:
- What value do they bring to their customers?
- What is their company purpose?
- What story are they trying to tell?
- What is the voice of their brand?
Tip: Identify your competitors’ target demographic during this step by referring to their customer base through their website or testimonials. This data is valuable for constructing customer personas. Understanding the actively targeted demographic allows a clearer understanding of competitors’ marketing tactics.
Learn more: What is a Marketing Plan?
- Conduct a SWOT Analysis
Competitive intelligence forms a substantial portion of your competitor analysis in a business plan. That said, you should redirect your attention to your company after gathering the information. A SWOT analysis serves as a valuable tool to pinpoint your company’s weaknesses and strengths. It allows you to transform weaknesses into opportunities and the evaluation of threats posed by competition.
During a SWOT analysis, reflect on the following questions:
- What aspects do we excel in? (Strengths)
- In what areas could we enhance our performance? (Weaknesses)
- Are there unaddressed market gaps in our services? (Opportunities)
- What emerging market trends should we be mindful of? (Threats)
Tip: Use the insights gained from earlier steps in the competitive analysis to answer these queries and complete your SWOT analysis. Present your results visually using a SWOT matrix—a four-box chart segmented by category—for a clearer representation of your company’s strategic position.
- Determine Your Position in the Market Landscape
Concluding your competitive analysis involves gaining a clear understanding of your standing in the market landscape. To achieve this, construct a graph featuring an X and Y axis, with each axis representing critical factors for competitiveness in your market.
For instance:
- X-axis: Represents customer satisfaction.
- Y-axis: Represents market presence.
Proceed to put each competitor on the graph based on their (x, y) coordinates, positioning them according to their performance in customer satisfaction and market presence. Simultaneously, plot your company on the same chart. This visual representation will provide a snapshot of your position relative to your competitors, aiding in a comprehensive market landscape assessment.
Competitive Analysis in a Business Plan Illustration: A Case Study
Consider being part of a marketing startup specializing in SEO for dentists, operating within a niche industry with limited competition. Embarking on a market analysis for your business involves several key steps:
Step 1: Identify Competitors
Use Google to put together a comprehensive list of competitors operating within the same niche.
Step 2: In-Depth Competitor Analysis
Use competitors’ websites and employ SEO analysis tools such as Ahrefs to delve into the marketing strategies and service offerings of each company.
Step 3: Internal SWOT Analysis
Shift the focus back to your own company and perform a SWOT analysis. Assess your strategic goals and get a visual representation of your strengths and weaknesses.
Step 4: Market Landscape Visualization
Create a graph with an X and Y axis, representing critical factors like customer satisfaction and market presence. Plot your company along with competitors to gain a visual understanding of your position in the market.
After compiling this information into a detailed table, a unique strategy emerges. Recognizing that two competitors outperform in customer satisfaction and market presence, you decide on a distinctive approach. Instead of marketing nationwide like competitors, you opt for localization. That is, you decide to concentrate your marketing efforts on a specific area. Your goal is to establish your brand as the go-to SEO company for dentists in that locality before expanding.
The true value of your competitive analysis becomes evident as you draw conclusions and consider innovative strategies. Whether it leads to a revamped pricing strategy, an elevated marketing approach, or a product overhaul, these insights can help shape your business’s trajectory.
Drawbacks of Competitive Analysis in a Business Plan
Before delving into your competitive analysis report, it is crucial to acknowledge some potential drawbacks. While these limitations are relatively minor, recognizing them can enhance your skills as a manager or business owner.
- Take Proactive Measures
Merely gathering information from your competitive analysis in a business plan is not sufficient. The key lies in taking actionable steps based on that information. The data serves as a guide to understanding your position in the market landscape. However, the essence of competitive analysis lies in using it to address challenges and enhance your company’s strategic plan.
- Beware of Confirmation Bias
Confirmation bias involves interpreting information through the lens of pre-existing beliefs. This can potentially lead to false understandings. To mitigate this bias, it is essential to rely on a wide-ranging dataset that supports decision-making. For instance, if an entrepreneur perceives their SEO dental market social media strategy as the best, they might inadvertently collect data that confirms this belief. However, their competitors might statistically outperform them. Embracing all available data helps eliminate such biases, fostering more informed and objective decision-making.
Regularly Update Your Competitive Analysis in a Business Plan
Competitive analysis in a business plan serves as a snapshot of the current market landscape. While it provides valuable insights for making immediate changes to your company, its relevance diminishes over time. To ensure continuous accuracy and relevance, it is imperative to update the information regularly. Market trends constantly change, and although maintaining an updated report may seem laborious, it guarantees ongoing, precise insights into your competitors.
Enhance Your Marketing Strategy with Competitive Analysis in a Business Plan
Understanding the strengths and weaknesses of your competitors is a cornerstone for effective marketing. Without knowledge of the competitive landscape, surpassing rivals becomes challenging. Competitive analysis not only sharpens your marketing strategy but also accelerates your ability to reach and engage your target audience.
However, the true power of competitive analysis lies in actionable steps. Use your findings to establish clear business goals and fortify your business plan.
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