Although – as a merchant – you might not necessarily agree, competition is an integral and essential part of a healthy business environment. It drives market innovation, discourages stagnation, and, as in any facet of life, pushes us to improve ourselves. Indeed, as former GE CEO Jack Welch once remarked: "Number one, cash is king. Number two, communicate, and number three; buy or bury the competition".
In order to achieve this, though, you need to know everything you can about your market adversaries. This is where competitor research enters the picture. Also known as competitor analysis, it essentially involves collecting and reviewing information about your rival firms, and can constitute a critical component of your wider business intelligence strategy.
Proper planning and execution of competitor research will provide your firm with not only critical insights about your rivals but also the wider market you share, as well. Given the frenetic and volatile nature of the modern business world, this information could well be the key to your success, ultimately helping you "buy out" or "bury" those firms that threaten your survival.
The Significance and Legality of Competitor Research
In the realm of fiction, competition analysis is a frequent plot point used by authors for thrill factor. Often, this takes the form of industrial or corporate espionage, such as data theft or fraud. These, though, are highly illegal techniques for sizing up your business rivals, and a fine line should be drawn between not only what is legal, but what is ethical, too. After all, when conducted through proper channels, competitor analysis is a perfectly legitimate business strategy.
Take the analogy of sports teams, for example. Watching your rival's past performances and probing their statistical outputs for weaknesses is a perfectly acceptable form of competition analysis, both legally and ethically. However, spying on their training sessions or stealing their play sheets is most definitely not.
The same principle applies in business, too. If information about your rivals is in the public domain, then you are free to scrutinise it to your heart's content. If the information is privately stored on that company's premises or servers, though, then accessing it not just unethical – it's a crime.
In the digital age, the ambiguity of these lines acquires a greater significance, especially when you can find so much data about your competitors with such little effort. In such an era, not conducting at least a perfunctory analysis of your rivals is at best lazy, and, at worst, neglect of your responsibilities.
To illustrate this, forgoing competitor research means potentially losing out on:
- A deeper understanding of your market and its future scope.
- Insights into customer behaviour and potential access to new customers.
- Valuable insights into the competitive pricing of your products and services.
- Improved and better-informed marketing strategies and ideas.
How to Research Your Competition
Now that we have established the need to conduct competitor research, let's take a look at the main steps involved in the process:
1. Identify Your Targets
Firstly, you need to take a close look at your niche. There are bound to be several outstanding firms that compete directly with you for the same customers, so make a list of them. The length of this directory will likely depend on your field and your circumstances; if you are a small cafe, for instance, then your direct competitors may consist of just two or three other such establishments in close physical proximity. If you are an online vendor, however, the list may be much longer.
You can use business directories to access much of this information, but in the digital age, a Google search is usually more than sufficient. You can also finetune your criteria; if you rely on marketplace platforms such as Shopify, Etsy or Amazon, for instance, then you can condense your searches there.
Aside from your direct rivals, you might also want to keep an eye on companies that operate in adjacent fields, or those who sell similar products but to a different audience. In future, these companies might pivot and pose a more defined threat to your business, so it's worth bearing them in mind.
2. Gather information
There are many ways in which you can gather useful data about a competitor. The easiest place to start is on their official website and social media channels, which will immediately provide a clearer picture of their branding, marketing, and pricing strategies.
You should also try to build a picture of the experiences their customers are having. You can scrutinise online reviews through platforms such as Trustpilot, but they should not be taken as definitive; indeed, the most beneficial approach is to be a customer yourself.
Order one of their products and assess the experience, or, if you and your competitors operate brick-and-mortar stores, get someone to purchase a product and pass on their findings. If this isn't practical, such as in a B2B context, try leveraging your business networks to get relevant information from past customers. If you have any clients who have purchased from your rivals, they could also provide some valuable insight.
If you are an online enterprise, then there are multiple competitor research tools available, too, such as SEMrush, SpyFu and SimilarWeb. These programmes give you a clear indication of what keywords your rivals are ranking for, what sort of links they are attracting and pursuing, and how they are performing online overall. This insight can often be invaluable and can help you to either identify markets they have overlooked, or areas where you need to double your efforts.
Finally, don't ignore public records databases, either. Important background information can often be gleaned from local government sources.
3. Create a Database
Once you have collected enough useful data about each competitor, use Microsoft Excel or a similar database software programme to create a reference archive. Here are some of the key details and metrics you should record:
- The name and registered address of the company.
- Links to their website, social media accounts and customer reviews.
- A summary of the company's history, background, and objectives.
- Details and pricing on the key products and services offered.
- Strengths of the company.
- Weaknesses (if any).
- Any unique selling points (USPs) or other ways in which they differentiate themselves from your firm and other rivals.
You can expand these points further once you unearth additional information, but as a basic framework, this should be more than enough to get you started.
4. Maintain the Database (Ongoing Analysis)
The thing about business competition is that it never stops evolving (or devolving). Therefore, competitor research is an ongoing process, and while that may sound onerous, it is not as bad as it implies.
Once you have built the basic framework (as detailed above), you can keep tabs on these companies with minimum effort. Indeed, by using online and social media tracking tools – such as Google Alerts and Awario – you can stay informed of any changes in your rivals' strategies and pricing, with many of the key steps involved becoming automated.
Here are a few other steps you can take to improve the quality of information you collect during your competitor research:
- Scour online review sites like Yelp for insights into customer satisfaction and ratings.
- If your rival runs email or newsletter campaigns, subscribe to them!
- Attend industry conferences and trade shows in your region to network and gather useful information.
- If you share the same customers, contact them for insights.
- Former employees of rival firms can provide key insights into cultures or practices, so consider hiring them. Note, though, that they will likely have signed non-disclosure agreements (NDAs) and certain aspects will be off-limits for discussion in both an ethical and legal sense.
Ultimately, the business world is already strewn with risk, and ignoring the practices and strategies of your competitors only consolidates this uncertainty. A lack of legally obtained intelligence about your rivals will only handicap your firm in the long run, making it harder to compete and increasing the likelihood of your demise.
This is why all businesses, regardless of their size or sector, need to pay at least a cursory glance at their competition. After all, it shouldn't cost too much (unless you want it to, of course) – and the dividends are more than assured in the long term.
What other tips or practices would you advise when conducting competitor research? Let us know your thoughts in the comment section below!