Tips for using retail competitor analysis to identify effective marketing tactics
Editor’s note: Jill Liliedahl is senior director industry product marketing, retail and hospitality at Sage.
Have you considered using retail competitor analysis to fine-tune your marketing strategy?
If not, you should. You can derive valuable insights from examining how your competitors operate to understand what they’re doing well and what they’re getting wrong. This approach will help you formulate winning strategies in every aspect of your business, from pricing to customer service.
This article looks at how to build a competitor analysis from the bottom up in a way that delivers great results. Let’s dive in!
How to conduct retail competitor analysis
The basic concept behind competitive analyses is straightforward. You research what the competition is doing and use the competitive intelligence you collect to improve your own product or service offerings and marketing strategies. Here’s how to do it.
Identify your competitors
The first step is selecting several other retailers to study. This doesn’t have to include every single operator in the space, but you should research more than just the two or three biggest competitors. Somewhere between five and 10 is a good number.
When considering the types of competitors to include, don’t just stick with your direct competitors. It can also be useful to look at indirect competition – retailers whose target market overlaps yours but has slightly different product offerings.
For instance, if you discover that one of these indirect competitors delivers an unusually memorable brand experience, you can learn from it and try to replicate it in your own way. In doing so, you could boost your reputation with a different kind of target customer, potentially increasing sales.
Once you’ve made your selection, it’s time to crunch the numbers.
Collect competitor data
At this point, you need to take a multifaceted approach because you want a mixture of quantitative and qualitative data.
In fact, it’s often a good idea to do your own micro-level research. You can learn a lot simply by putting yourself in the position of a customer. You could:
- Sign up to receive competitors’ e-mails.
- Follow their social media accounts.
- Go through the purchase process but abandon your cart to see what happens next.
Some pieces of competitive market data are easier to find than others. For instance, market share for the largest retail industry players is quite often publicly available, but for smaller operators it can be difficult to source. It’s often best to use dedicated tools to capture quantitative data.
Use key competitor analysis tools
If you want to make a direct comparison of e-commerce sites, you can leverage a competitor tracking platform, which provides detailed data about available products, prices and promotional deals across your choice of sites. It’s a way of building up a repository of intelligence on online competitors.
Want to examine how well your competitors are doing with their search engine optimization efforts? Analyze your competitors’ performance and determine which key words your target customers are searching for. This can be very useful when it comes to formulating your own SEO or content strategy.
Identify competitor strengths and weaknesses
You’re probably familiar with the idea of doing a SWOT analysis (strengths, weaknesses, opportunities, threats) to help inform your own business strategy. But building SWOT analyses for your competitors as well can be eye-opening.
Reading existing customer reviews can provide a rich layer of information. What kind of customer feedback are your competitors getting? What kind of customer experience are they delivering? Are there any specific customer pain points that crop up regularly?
Taking the temperature of customer sentiment can take your retail competitor analysis to another level. That’s because it can give you actionable insights into what the competition is getting right and where they could improve. Which gives you a chance to get ahead of the curve.
Learn from competitor pricing strategies
Examining your competitors’ pricing strategies in depth can reveal valuable insights into how to grow your own business. This goes further than simply comparing prices of competitor products like-for-like with your own.
For example, how do your key competitors use special offers or discounts to drive sales? It can be worth selecting a set of popular products and tracking how your competitors change their prices over time. This will help you identify patterns in how the market dynamics are evolving and allow you to fine-tune your own approach to pricing.
It’s also good practice to use retail store accounting software to help you monitor all your business data from a centralized point; consider which pricing strategies will work for you, and which can be immediately discounted as unfeasible.
This technology provides tools for retailers, such as demand forecasting and inventory management.
Glean insights from competitor product and service offerings
Finally, always keep your mind open to new ideas. Your competitors aren’t just businesses you’re aiming to compete with; they can also be a source of inspiration.
When you investigate how other retailers operate, you might come across competitive market strategies you’d like to emulate. However, make sure to think hard about whether these would transfer well to your target audience before implementing them.
Ultimately, it’s about learning as much as you can from other retailers and applying those insights to your business. And it’s an ongoing process, which is why continuous testing and fine-tuning of your strategy is critical.
Implement, test and refine your marketing tactics
Each time you conduct a round of competitive analysis, be sure to track how effective the changes you’ve made as a result have been. Here are the three most important elements of the process.
Set your goals
It’s crucial to decide what your objectives are from the start. For larger retailers, this might mean aiming to achieve a specific market share or increasing conversion rates by a defined percentage.
Small- and medium-sized retailers may be better off focusing on improving their competitive position more generally. This could include boosting their market presence by developing effective strategies for reaching target audiences on social networks.
Ultimately, all retailers want to improve their sales growth rate. Make sure to use every analytics tool at your disposal to track and monitor the metrics you’ve identified as being fundamental to success. From here, you’ll also be able to see where your campaigns may be lacking when compared to your competitors.
Once you’ve established what you want to achieve, it’s time to turn to the technical parts of your plan. Use your finance and accounting tools to understand what a feasible new marketing budget looks like for you. This data will help you make key decisions such as outsourcing budgets and allow you to forecast and track the ROI of your new marketing activity.
Identify what makes you stand out
The more you know about direct and indirect competition, the easier it’ll be to understand what makes your own proposition stand out. This will allow you to make strategic decisions that can significantly boost your market position.
Retail has always been a competitive environment. But the sheer proliferation of online retailers in recent times has made emphasizing your unique selling proposition an absolute necessity.
Play to your strengths. Focus on what makes you different and incorporate that messaging in everything from your mission statement to your social media style guide.
Analyze your results to improve
Effective competition analysis is an iterative process, so you must regularly analyze its impact on your business.
The primary task is monitoring all the metrics you selected initially. If you’re hitting your targets, think about stretching them a little. If you’re falling short, examine why that might be the case and see whether you can tweak your marketing strategy to achieve your goals.
And don’t forget qualitative research. Keep watching those customer reviews and investigating whether the competition has added any new strategies to the mix.
Be sure to study the right competitors
Competitor analysis is as much an art as a science, which is why it’s important to combine a variety of approaches to find what works best for your business. Whatever branch of retail you operate in, the most important aspect of this kind of analysis is to select the right competitors and metrics to study.
Luckily, plenty of excellent tools are available to help you do that. And if you follow the best practices set out here, you’ll have every chance of achieving long-term success.