This is how you make a competitive analysis (+ template)
As a B2B professional it is sensible to reflect on your work and once in a while, look at "the bigger picture".
During these moments of clarity, you often look at your own performance and that of your organisation. However, a lot of people forget to reflect on what is happening outside their organisation. If you forget to do this regularly, you can fall behind your competitors. That is why we recommend making a competitive analysis at least once every year. An effective tool to perform such an analysis is to make a competitive matrix.
In this article we describe what a competitive analysis really is, why it is useful and how you can make a competitive analysis for your own company.
What is a competitive matrix?
The American business platform Entrepreneur Now defines a competitive matrix as:
A visual representation of how you stack up against the competition on your two greatest strengths.
A good competitive matrix shows the competitive playing field in which you operate and how your company relates to its competition. Because you determine exactly how the matrix is set up, you can choose a variety of strengths that apply to your company. These strengths need to be relevant for your target groups and they need to be believable.
A famous example of a competitive matrix that was composed by an independent party is the Magic Quadrant of Gartner. Here, companies relate to each other on the axes 'ability to execute' and 'completeness of vision'.
What are the benefits of a competitive matrix?
Once you have made a good and believable competitive matrix, you can apply it to your marketing communication efforts. Of course some people will realise that the communicated strengths are carefully selected by you. However, publishing a competitive matrix can be a valuable tool to enhance your marketing communication.
Furthermore, the matrix can help start conversations with potential clients and investors, it shows that your company is sustainable and it separates you from other businesses in the marketplace. Contrary to your initial perception of the competition, you might find that some businesses are not even logical competitors to begin with.
Hopefully you are convinced and ready to start making a competitive matrix for your company! Below I describe 3 steps of making a competitive analysis.
Follow these 3 steps to make a competitive matrix
The following three steps describe how to make a good competitive matrix:
- Determine the strengths you wish to show and measure
- Select your most suitable competitors
- Evaluate and plot your competitors in the matrix
Step 1: Determine your strengths
To execute this step properly it is important that you identify a maximum of 5 to 6 strengths of your company.
A couple of examples are:
- Do you deliver quality?
- Do you offer a (below market) low price?
- Do you value authenticity?
- Do you have a complete supply of products/ services?
- Do you offer a varied market solution or assortment?
- What is the depth of your market solution or assortment?
- What is your expertise?
- What is your service level?
- Do you offer convenience?
- Do you offer the most innovative technology?
- Are you prepared to offer custom solutions?
Before you start applying scores to your strengths, it is important that you first map out which strengths are most relevant for your most important target group(s). Determine your scores based on the relevance of your target group and eliminate the strengths that are not relevant from your list.
Subsequently, you can start searching the ideal combination of the strengths you are going to use in your matrix. Be thorough and critical and make sure you compare all remaining strengths with each other. Eventually you choose the combination that is most relevant for your target group and will score better than your direct competitors.
Once you have selected the two most relevant strengths you can set up the basis of your matrix: place one strength on the x-axis and the other strength on the y-axis and provide these axes with a label.
A couple of examples:
- no service vs. personal service
- small variety vs. extensive variety of products
- low quality vs. high quality
- highest price vs. lowest price
- conservative vs. progressive
- big vs. small assortment
Step 2: map out your competitors
After setting up your matrix with your most important strengths on the two axes, it is time for the next step: mapping out your competition.
Try to make a selection of 7 to 10 competitors. It is fine if there are differences in their magnitude and type of service, as long as they service the same target groups. Do not just select your weakest competitors, but if possible, also select more famous brands. Do not be afraid to choose competitors who also can be placed in the fourth quadrant of 'leaders'.
Step 3: Evaluate your competition one by one and place them in the matrix
This is the last step of making a competition matrix. Look critically at your selected competitors and provide them with a score on both axes.
Be as honest about scoring your competitors, your target group will see through an unrealistically low score. Ask different people in your sector to check the matrix. It is of course possible to apply a higher score to your business, but only if that is credible ;-)
Would you like to work with making a competitive matrix? Click here for the worksheet.
With the help of competitive analysis you can distinguish your business in the current market, but you can level up even more with the application of Inbound Marketing. Check out more information about Inbound Marketing and learn everything about this marketing method.