Creating a Competitive Positioning Matrix

Every business has competitors and needs to successfully position itself against those competitors to succeed in the marketplace. Creating a competitive analysis matrix can be a good way to help you identify areas of opportunity for your business and its products and services.

A very basic matrix can be produced simply by identifying your key competitors and the attributes that you feel represent competitive factors. Let’s say you’re thinking of opening a locally owned fast-food restaurant. You know that you will face a lot of competition from national chains, but you’ve decided that you can compete with them on the primary attributes customers are looking for and provide something more – a local connection, locally-grown food, community support. You identify the main competitive attributes as: friendly and helpful staff, quality of food, efficiency of service, price, cleanliness and location. You then make a matrix with the competitors down the left side and the quality attributes listed across the top and you rank each competitor, on each of the factors, using a scale of 1-5, with 5 being high. The matrix might look something like this:

Competitor              Staff      Food   Effic.   Price     Score

  • Competitor 1      3.5          3.7           4.3         4.0           3.875
  • Competitor 2      2.7          3.2           3.2         3.2           3.075
  • Competitor 3      1.8           2.7          2.8         4.0           2.82
  • Competitor 4      3.0          4.5           3.8         3.0           3.575

This simple analysis tells you that based on your own subjective assessment, your greatest competitive threat will come from Competitor 1 and you would be least worried about Competitor 3. But what this analysis fails to take into account is the weighted importance of each of the criteria. For a weighted competitive analysis matrix, you would follow these steps:

  • Identify the elements of success that are most important to you
  • Identify the attributes that are most important to your customers
  • Identify your key competitors (don’t overlook indirect competitors)
  • Give a weighting to each of the items that are important to you and your customers (the total of all rankings should equal 1.0)
  • Rate each competitor on each of these factors
  • Multiply the rating of each competitor by the weighting of the success factor

Factor     Wt.  C#1-r  C#1-w  C#2-r  C#2-w   You-r  You-w

  • Quality    .4       3.5      1.4      3.0           1.2      4.5         1.8
  • Service    .3       4.0      1.2      2.5            .75    4.8         1.44
  • Location   .1      4.5      .45      3.0             .3     3.0           .3
  • Totals      1.0    3.05                               2.25                  3.54

r=rating

w=weight

These results tell you that you have scored the highest, with a slight margin over Competitor #3 (we’ll assume you used actual survey data to come up with these numbers!). In addition to this overall score, though, the weighted analysis gives you an indication of what goes into that overall score relative to the areas of most importance to your market. So, for example, based on the weighting factors, quality is the most important factor. Here you are neck and neck with your next closest competitor. You can also see that while location is a factor, the weighting of the factor is so slight that it doesn’t really provide a competitive edge for those two competitors that scored relatively high here.

If you don’t have actual data to use in this type of assessment, you will need to be as objective as possible in rating both your competitors and yourself, which can be challenging to do. But give it your best shot. While the ratings themselves will be somewhat subjective, the resulting relative rankings should provide at least some indication of where you stand relative to your competition and give you a good idea of where you need to place your focus.

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