Understanding your competitors and monitoring their activity is key to your success.
In fact, I often point out that if you have no competitors, you may not have a market. Meaning that if you are planning to launch a new product or service, a lack of competitors might mean that no demand exists for your product/service.
Oftentimes for new offerings, your competitors are "indirect competitors," meaning that they fulfill the customer's needs with a different type of product or service offering. Conversely, direct competitors are those who fulfill the same need with a similar type of product or service offering.
Regardless of whether your core competitors are direct or indirect, you should always keep an eye on what they are doing. Mainly, so you can learn from them. If your competitors are able to acquire customers more inexpensively than you, you have a problem. Likewise, if competitors are able to generate more customer lifetime value than you, you will be at a distinct competitive disadvantage.
In this regard, there are three free tools I want you to know about.
The first is ChangeDetection.com (http://www.changedetection.com/). ChangeDetection.com provides page change monitoring and notification services. It really couldn't be simpler. You simply type in your competitor's website addresses, and whenever it changes one of its web pages, you are immediately notified via email. Pretty cool. If one of your competitors changes its prices, or adds a new product or service, or decides to test new text to promote its benefits, etc., you are immediately notified.
The second cool tool is KeywordSpy.com (http://www.keywordspy.com/). KeywordSpy allows you to see how your competitors are marketing themselves online. Among other things, you can see the keywords that your competitors are advertising on, their estimate ad budgets, and what keywords they rank organically on. This analysis allows you to identify where your competitors are getting their best online traffic, so you can replicate it.
The final tool I want you to know about today is Compete.com (www.compete.com). There are two features of Compete.com that I really like. The first is that, using their "Compare Sites" tab, you can compare the traffic of up to 3 websites for a period of up to 2 years.
Using the "Site Profile" tab, you can see online traffic details of individual sites. Within the premium features of Site Profiling, you can see the demographic profile of site visitors and the sites that refer the most traffic to them.
This is really cool. To begin, knowing the demographic profile of your competitor's customers could dramatically help in your marketing efforts. Secondly, if you know the sites which refer the most traffic to your competitors, you can contact them and try to get links to your website included there too, so you can "steal" some of this traffic.
Really understanding your competitors and leveraging this understanding will improve your marketing and operations. Similarly, in your business plan, showing a comprehensive understanding of your direct and indirect competitors positions you as an expert in your market, which is very appealing to investors and lenders.
If you need help with the Competitive Analysis section, or any other section of your business plan, download Growthink's Ultimate Business Plan Template.
If you need help with your Internet Marketing efforts, and using the above tools to increase your profitability, download Growthink's Ultimate Internet Marketing System.