How to Create a Competitive Analysis and Increase your Market Share

By Barry MacKechnie

One of the best ways to outperform your competition is to understand how you differentiate your products or services from your competitors. By completing a competitive analysis you will learn how you differentiate yourself from your competitors and where to focus your sales, marketing and business development activities to gain market share from your competition.

Here’s a simple approach to conduct a competitive analysis.

Competitive Factors
First, identify the competitive factors of your industry. Many companies compete on such competitive factors as:

1. Price
2. Quality of products or services
3. Customer service
4. Financial stability
5. Location

Get input from your customers, vendors and employees. Limit your competitive factors to the top five for your company and your industry.

Competitive Factor Weighting
Now you need to estimate how much influence each of the factors has on your customer’s buying decision. In the following examples I am going to base my sample survey on an industry where the customers identify and rate the competitive factors as follows:

Competitors
The next step is to identify your top five competitors—those companies that compete with you to sell similar products or services to the same customer base, region, etc. that you service.

Collect and compile the data
Now that you have defined the competitive factors and named your competitors it’s time to collect and compile the data into a table that you can use as a survey to send employees, customers and vendors. Your survey will ask for their rating of how you compete on the various factors as compared to your competitors. Have at least 10-15 people fill out the table, ranking each company on a scale of 1-10 in each category; ( 1=not competitive and 10=extremely competitive). The following is an example of a completed table:

Ask those people who filled out the table above to also complete an estimation of how much each competitive factor influences their buying decision such as the following example:

This information will let you see which competitive factors influence your customers’ buying decisions the most. In the case above, most customers buy based on price.

Raw data analysis

A “raw data analysis” takes the data you collected and averages the results of all raw data from all of the surveys. Using the data from the tables above, here’s an example of a raw data graphical analysis:

An analysis of this raw data shows the XMPL Company (red) is the highest rated in quality and customer service. In all of the other competitive factors XMPL Company is at least “at par” or just a little below all of its competitors. XMPL Company clearly differentiates itself from its competitors in quality and customer service. These are its competitive advantages.

You can see from the data that competitor #1 (blue) is XMPL Company’s main price competitor but they rank very low in quality and customer service. To exploit the differentiation, XMPL Company should emphasize its quality of product and exemplary customer service.

Once you determine your differentiation, it’s time to focus your sales, marketing and business development programs so that they emphasize your strengths. Make sure your product promotion and product development programs perpetuate that front-running differentiation. If you have no clear differentiation then you and your executive team need to determine how you want to differentiate your products or services and then develop and execute your programs to drive you to the dominant position for that competitive factor. All of your other competitive factors should remain at a par level or no more than a little below par level on all of the other competitive factors.

Adjusted data analysis

To perform an “adjusted data analysis” you need to fine-tune the raw data with the percentage of weighting importance in the buying decision. This adjustment shows the effectiveness of your front-runner competitive advantage on the customer’s buying decision. If you focus a huge amount of effort on an unimportant competitive factor, you’re wasting your time and money.

Here’s an example of raw data that has been adjusted by the weighting of each competitive factor:

The chart above shows that the primary influence on the buying decision is Price with Quality being the second most important competitive factor. XMPL Company’s (red) customers rate it a little below par as compared to its three major competitors (blue, green, aqua) when it comes to pricing. If XMPL Company’s customers base their decision solely on price they will buy from its competitors. If XMPL Company’s customers are concerned about quality and customer service they will buy from XMPL Company more than they will buy from its competitors. XMPL Company’s customers know that they will pay a little bit more but they also understand that XMPL Company’s quality and service are worth the extra cost.

XMPL Company’s tactics for gaining market share from its competitors should focus on the lack of quality of the competitors’ products and the added value the customer receives by purchasing the higher quality products of XMPL Company.