Any business that wants to stay competitive will need to be aware of how other companies in the same market are acting. Analyzing your competition is key in building an operation that can compete against others who are trying to serve the same customers.
Many commonly held beliefs and frequently used practices in competitor analysis, however, aren’t really accurate or useful. Some may even be harming your ability to properly analyze your competition and know what your customers need.
Here are 10 myths about analyzing your competition that may be holding your business back.
1. Research Won’t Tell Us Anything We Don’t Already Know
Often, companies that don’t perform serious competitor analysis or market research do so because they think they know what their industry looks like. Analysis may seem more like bookkeeping than something that would provide actual insight.
However, even if you feel like you have a good grasp of your competitors and the market you’re in, there’s likely a lot you don’t know or aren’t aware of just yet.
For example, many businesses don’t even have the full picture of who their competitors are. As a result, they don’t really know how their competition is strategizing and responding to the market.
Your competitors may not be in the same industry. Customers don’t shop based on how companies section themselves off — they buy based on their needs. Your competitors may also be recent upstarts who aren’t well-known yet but could be developing products and techniques that better meet people’s needs.
Researching and analyzing your competition can help you better understand your current and potential competitors, even if you feel you already know it.
2. Myths About Analyzing Your Competition: SWOT is a Strategy
SWOT — or strengths, weaknesses, opportunities and threats — is a planning technique that’s commonly used by businesses as a kind of competitor analysis. However, the SWOT technique has some serious limitations that make it ineffective as a competition analysis strategy.
Sometimes, the SWOT technique is applied without critical thinking. The model itself can’t take care of biases and opinions. But nothing about the strategy makes it more accurate than a gut feeling.
It’s effectively an organizational tool for your views. Although it can be useful in some contexts, it doesn’t have the necessary components, backed up by data and market research, to make it a robust analytical tool.
3. Cutting Costs is a Strategy
While prioritizing low costs and product prices can give you an advantage over your competitors, cost-cutting is not a strategy by itself. While finding new efficiencies and lowering costs is generally a good idea, there’s only ever going to be one price leader in a given market.
Some customers are only ever going to buy the cheapest available option. These people can be worth targeting. However, a strategy built on cost-cutting that doesn’t make your product the cheapest one available won’t help you secure that market.
If your business is already the low-cost leader and has found ways to cut back its margins successfully, then pursuing price leader status may be an effective strategy. If not, you may want to consider cutting prices as a component of effective business operations — not a strategy in and of itself.
4. Only the Competitors Matter
Sometimes, when businesses analyze their competition, they hone in on their competitors’ strategies. They leave out other critical aspects of the market, such as resources, customers, distributors, vendors and stakeholders.
You aren’t competing against other companies themselves as much as you are for customers and resources. Good strategy and competitor analysis has to consider what customer needs are unmet, how your competitors fill those needs and how your business can respond. Staying aware of how your competitors are approaching this problem is important, but it isn’t the full picture.
5. Only Our Strategy Matters
Some businesses, however, swing too far in the other direction and almost ignore their competition. It may be possible to see some success by keeping your proverbial head down and doing your best. However, you will leave yourself with no way to learn from your competition. An in-depth understanding of how they are strategizing is just as important as what your business is doing.
6. Competitor Analysis Works Best for Large Companies
Businesses of any size can benefit from market research and competitor analysis. Any company that wants to gain a competitive edge should keep tabs on current market conditions and how competitors are responding. This is true no matter how many employees your business has or how large of a market you’re targeting.
7. We Can Analyze as Needed
Often, managers can get into a habit of ad hoc competitor analysis — performing research only as necessary, when their business’s strategy doesn’t seem to be working.
Analysis is a good measure to take when you want to update your approach. However, analyzing your competition in a proactive and structured manner can be much more effective.
Having a process in place where you interview new hires for market and competitor info can be extremely useful in building a better understanding of your clientele. Analytic techniques, like competitor mapping, can help create a resource that you can regularly turn to when you need to make strategic decisions.
8. We’re the Market Leader, So We Don’t Need to Worry
Just because you’ve managed to become the market leader, you can’t assume your growth and success will continue. Thinking the future will look like the present can easily put your business in a bad position.
A competitor taking advantage of a market disruption or innovative new approach could easily outpace your business’s growth or do a better job of serving your customers’ needs. Over time, this may chip away at your market advantage and client base.
Even if you’re doing well right now, competitor analysis and market research can help keep your company on top and prepare for your competition’s approach.
9. Good Analysis is Too Expensive
While advanced analytics tools and market research reports can be expensive, cost isn’t inherent to good analysis. Often, even if effective competitor analysis is costly, it’s worth the price.
There are simple, low-cost steps any business can take if it wants to analyze its competition — like seeing how competitor sites respond to visitor expectations, or investigating competition branding and packaging. This information can then be used to rebuild your business’s web presence, or update your brand and logo design.
You can also invest in competition analysis services. While these can be expensive, most businesses find them to be worth the cost. According to data from The Relevancy Group, mid-market companies spend an average of nearly $100,000 on competitive intelligence each year. Enterprise businesses spend even more.
Good information can help prevent other expenses down the line, as well as the costs associated with being unprepared for how to respond to your competitors or changing market conditions.
10. We Don’t Have Competitors
Every business has competitors, even if they aren’t obvious. This competition may be new to the market or outside of your industry. They may also be competing for your customer base in a way that’s not obvious right away.
Even if you don’t believe your company has competitors, you can likely benefit from competitor analysis.
Wrapping Up: Beating Common Competitor Analysis Myths
A company that wants to stay relevant needs to know about how its competitors are approaching the market. However, analysis can often be made harder by common myths. Some businesses focus too much on ineffective methods or don’t perform analysis regularly.
Actively working around these myths can help improve your competitor analysis and work to ensure your business’s success.