19 Oct The Ultimate Guide to Competitive Analysis
How will your business compete?
The purpose of performing a competitive analysis is to answer this question and provide you with the tools to blow your competition away. If performed properly, you will establish how you are or can be unique, where your competitive advantage lies, and perhaps most importantly, it will build confidence with your investors. You will better understand the market, more aptly target customers, keep tabs on competition, make more practical decisions and ultimately, over time, track trends and market scenarios.
What follows is five case studies that exemplify the importance of performing a thorough competitive analysis. Following from these case studies is a detailed breakdown of how you can perform one of your own.
CASE STUDY 1: MARVEL WORLDWIDE INC.
The question ‘what makes us human?’ fuelled a ten-year debate between Marvel Comics and the United States Court of International Trade. Marvel argued that their action figures were toys (‘representations of nonhuman creatures’) rather than dolls (‘representations of humans’). While dolls were being taxed at a rate of 12%, toys were taxed at just 6.8%. Marvel’s research on this distinction would end up saving the company millions of dollars. Competitive analyses, like the one Marvel undoubtedly carried out, have the potential to reveal more than just direct competition. You’ll see why below.
CASE STUDY 2: CONVERSE
An equally ingenious case of ‘tariff engineering’ was devised by Converse, the shoe company. Converse realized that having their sneakers classified as slippers rather than shoes would decrease the tariff from 37.5% to 3%. Have you ever seen the bottom of a fresh pair of Converse All-Stars? Half of the sole is coated in felt, which wears off after just a couple of uses but classifies their footwear as slippers.
CASE STUDY 3: UBER VS TAXI
A quintessential example of indirect and unforeseen competition is in the case of Uber and the taxi industry. The first fleet of modern cabs were deployed in London in 1897 – it’s safe to say that the original designer, Walter C. Bersey, did not anticipate the ability to electronically summon a car to take you to a preset destination without even having to hand over cash. Nor, we can assume, did the industry anticipate Uber in the 1980’s when computer-aided dispatch was introduced. In industries where future competitors don’t yet exist, it may seem impossible to protect your business from them. This need not be the case. You’ll see why below.
CASE STUDY 4: AIRBNB VS THE HOSPITALITY INDUSTRY
Similar to (3) is Airbnb and the hospitality industry. Although some argue that there exists room for both, Airbnb is an eight-year-old company that’s greatly impacting an industry whose roots lie in the 18th century. As technology continues to disrupt industries it’s important to think outside of the box, to see competition where it doesn’t yet exist, and to target it before it has the chance to.
CASE STUDY 5: BOX VS DROPBOX
It’s no secret that Box‘s platform is giving Dropbox a run for it’s money. While Dropbox’s API lets developers access Dropbox, Box lets developers build apps that don’t yet exist. In other words, Box was able to leverage features that its competition did not embrace. With a strong competitive analysis, you can do the same.
Which brings us to Real Ventures’ Analyst Alex Shee’s Guide to the Competitive Analysis.
HOW TO PERFORM A COMPETITIVE ANALYSIS
1. Build a Relevant Framework
A. Look into direct competitors:
– Track names, URL’s, missions, strengths, weaknesses, brand differentiators, prices, elevator pitches and the products and services they offer
B. Look into indirect competitors:
– Search for them even before they pose a threat
– Find out who offers (sometimes radically) different products or services that meet the same needs that you’re targeting (ex: hotels didn’t foresee Airbnb)
– Ask yourself if your suppliers, partners or even customers could become competition
C. Know your Environment:
– Learn from Marvel and Converse by looking into the macro business environment (trade agreements)
– Track economic and political trends (such as data privacy laws)
– Research any potential cultural sifts (from desktop mobile, for example)
– Note current tech innovations (such as wearables or AR/VR)
– Become aware of existent regulations and legislation (taxi and transportation, online gambling, etc.)
2. Monitor all Results
A. Continuously Monitor your Results:
– Use free tools, public records and research reports to keep track of any changes in messaging and overall visual identity, new products, services and/or pricing, short-term and long-term promotions, new advertising or other outbound communications, new geographies, new team members or significant sales wins and losses.
– Related tools: Google Alerts, Crunchbase, Angellist
– Related public records: SEDAR, for example (where you can find info on all Canadian public companies)
– Regarding research reports: don’t be cheap here – spend money if it will bring you the competitive advantage.
B. Monitor Competitors by Shopping:
– Ask a knowledgeable colleague shop around, do so yourself if possible or ask your customers
3. Take Concrete Steps
– Create an excel spreadsheet or stream in your CRM
– Include all your direct and indirect competitors
– Create a separate section to describe the environment
– Determine the main KPIs you will be tracking
– Make someone responsible for tracking and and updating your Competitive Analysis monthly
Take our word for it and make performing a competitive analysis a priority. You will have a better understanding of tangible ways to avoid failure and of what would be poor strategic decisions. Most importantly, you will realize the bigger picture and the real opportunity. If you’re looking for guidance going forward, feel free to reach out to email@example.com with any questions related to the info above.