Competitor profiling is part of the competition analysis. It consists in finding out and processing data about competing businesses or products in order to generate the key information about them, categorize them and identify their key competitive differences.
Why is competitor profiling important?
Decision making should not be based on assumptions but on facts. Competitor profiling is one way of getting valuable data on the competition and therefore plays an important role in our strategic decision-making. As part of the competition analysis, competitor profiling influences pricing, marketing strategy, competing differences, but it can also lead the company to focus on a particular area with weaker competitors.
Product planning can get affected too by competitor profiling since it can lead, for instance, to the enhancement of one of the product features. Large businesses can benefit from competitor profiling while making decisions about acquisitions - e.g. identifying businesses to purchase. A quality competitor profiling can result in creating an effective defense or offensive strategy. Profiling gives you the tools not only to better understand your competitors, but also to overcome them.
Who performs competitor profiling and when?
Typically, profiling is carried out while designing a new product, when entering a new market (analyzing and segmenting of the competing businesses on a given market), or when you are starting a new business.
In fact, at its very beginning, every startup has carried out a profiling of its competition to a certain extent. This is one of the fundamentals that has to be part of every solid business plan. In practice, every investor wants to be aware of some major competitors and of who they are.
What is the result?
Just as profiling customers or vendors, profiling competing companies also leads to sorting them into segments. Of course, a sample of competing firms is usually smaller than a sample of customers. Profiling involves gathering of all important data about the competition - their market position, market share, price, additional services, strengths, weaknesses, and so on. We should always aim for the most complete competitors’ profile possible. Naturally, a different categorizations apply for different industries. Often, the categories are only being defined during the profiling itself because this process help developing the idea of what is important and what is not. Here is the list of the most common segments:
- Competition with identical product
- Competition with similar products
- Competition holding the major market share
- Competition that also enters the market
- Competition growing significantly
- Competition slowing down significantly
- Competition with higher or lower prices