Competitive analysis is, in a nutshell, is the process of gathering and analyzing data about your competitors, mainly to compare their strengths and weaknesses when compared to yours.
The main idea is that the better we understand our competitors, the more effective we can outsmart them. However, although it’s a fairly simple concept, the execution can be quite complex and can cover a whole lot of metrics, aspects of businesses, and even different business disciplines. Depending on your business and niche, however, some of these will be more important than others.
The latest study has suggested that more than 40% of surveyed professionals strongly agree that competitive analysis is extremely important. However, starting a proper competitive analysis effort can be quite confusing.
Here, we will share a step-by-step guide on how we can plan and execute a competitive analysis strategy. By the end, you can use our actionable tips to figure out which influencers, metrics, and business aspects you should prioritize in your analysis.
Let us begin.
Step 1: Determine Key Competitors To Analyze
Obviously, we don’t have the time and resources to analyze all of our competitors, and finding the right competitors to analyze is very important here.
First, divide your competitors into two different groups: direct competitors and indirect competitors:
- Direct competitors are any businesses that offer similar products and/or services to yours. If you are a local business, your direct competitors operate in the same geographic area as yours.
- Indirect competitors are any businesses that could satisfy the same customer’s needs or problems but do not sell the same product/service like yours.
It’s actually very important to differentiate between the two, and when comparing your brand you should only focus on your direct competitors. Not doing this is actually a very common mistake made by so many brands, which can lead to a waste in resources.
For example, let’s say we are a restaurant that mainly serves Italian food, then a Chinese restaurant next door is a direct competitor and a pizza restaurant that is 5 miles away from you is also a direct competitor. However, a delivery-only restaurant that is located very close to yours is an indirect competitor.
However, studying your indirect competitors does have its benefits. They might launch new products or services and cross over into your direct competitor zone. Also, there are always new insights you might learn from these indirect competitors. It’s just, they shouldn’t be your priority.
Also, since the market can shift at any time, it’s important to regularly run your competitor analysis. Doing this can ensure that you won’t miss out on important changes that often happen too fast these days.
Make a list of your top 10 competitors, and then we can move on to the next step.
Step 2: Analyze Competitors’ Market Positionings
The second step is to evaluate how your competitors offer their products/services to their target audience (who is also yours). We can do this by analyzing:
- Customer gain VS gain creators
Gains refer to the benefits/values expected by the consumers, while gain creators refer to how the product or service can create these gains. In short, how your competitors offer an added value proposition to the customers.
- Pain VS pain relievers
Pain refers to any problem, negative experiences, emotions, and risks experienced by the customers in the process of achieving a specific objective. Pain relievers are descriptions of how the product/service can cater to these pains.
- Customer jobs vs products/services
The product and service should create pain and/or relieve pain to help the objectives/tasks the customers are trying to perform.
Analyze these three factors of a value proposition canvas, and compare how your company performs compared to your competition. Remember that your customers aren’t actually buying your product or service, but the values tied to them. Understanding how you can beat your customers in delivering value is the key to success.
Step 3: Analyze Competitor’s Content
Nowadays, it’s no secret that content is king. So, analyzing what type of content your competitors are publishing will tell a lot about their business strategy. And, it should be relatively easy to analyze your competitor’s content: you can do it right away by visiting their websites and social media profiles.
Here are some key areas to consider when analyzing your competitor’s content:
- The type(s) of content your competitors focus on (blogs, YouTube videos, podcasts, Instagram posts, etc.)
- Whether they post premium/gated content and in-depth content like case studies, white papers, etc
- The overall quality of their content compared to yours
- How frequently they are publishing and also how frequently they are updating older content
- Are they doing anything you aren’t doing at the moment (content gap) and whether they are targeting keywords you haven’t targeted (keyword gap)
If for example, your competitors are publishing twice as often as yours, then you should improve your content marketing strategy and start publishing more frequently.
Step 4: Competitor Price Analysis
Collecting data about your competitors’ pricing strategy should be simple enough: you should list the prices of their products and/or services and compare them to yours.
In this area, your focus is to consider whether increasing or reducing your product/service’s price will produce a competitive advantage. Also, we should consider whether increasing/reducing your price would hurt your profitability too much.
Step 5: List Their Strengths
Now that you’ve analyzed how your competitor’s business propose their value and their online presence, we can put together a list of their strength.
Obviously, the key here is to be objective. Be honest, don’t overestimate or underestimate their strengths when compared to your company. Depending on your business type and/or niche, there might be different factors to consider here such as:
- Company size
- Location (for local business)
- Value proposition, as discussed above
- Pricing strategy
- Product/service quality
- Specific target market
- Website traffic
- Social media engagement
- SERP ranking for valuable keywords
And so on. Again, be honest and objective, and list as many strengths as you can.
Step 6: List Their Weaknesses
Similar to the above, list your competitors’ weaknesses according to the context of the market where you compete, such as:
- Higher COGS (cost of goods sold)
- Weaker/smaller sales team
- Weaker cash flow
- High employee turnover
- Weaker online/social media presence
- Worse location
And so on. Again, be honest and objective here.
Step 7: Figure Out Potential Opportunities
Based on your competitors’ weaknesses, identify possible opportunities that your company can attempt to seize.
The nature of each opportunity might be very different. Some might require extensive resources, some others might only require time and/or labor hard work. List potential opportunities and you might want to brainstorm with your team to figure out which opportunities you should prioritize.
Step 8: Identify Potential Threats
Similar to the above, assess your competitors’s strengths and figure out those that could be potential threats for your company. This is where you should create response plans to the existing and potential threats.
Obviously different threats will require different responses. Some might be easy to counter and some others might be very difficult. Also, in some cases, you might also want to just admit the strength of your competitors in certain areas and just focus on other opportunities.
Also, not all threats warrant a response.
Step 9: Develop Your Strategy
After you’ve followed the steps above, you’ll be able to understand your competitors better and in this step, our focus is to turn that information into action.
Create a comprehensive list of competitive analysis data, and use this data to make the necessary changes to your business and/or marketing plan. For example, whether you’d need to adjust your pricing strategy to compete better, whether you’ll launch a different product/service, or whether you’ll aim for a different market altogether.
Remember that a head-to-head competition might not always be the best approach (i.e. it might be too expensive), but the idea is to focus on certain areas where you can create a significant competitive advantage.
By adjusting your plans, you can protect your business against tough competition. Remember that your competitors are likely to also perform a competitive analysis of your business.
After you’ve performed a proper competitive analysis, you now have more information and insights into what your competitors are actually doing. Carefully analyze all insights about each competitor, and find areas of your own business that can be improved. Don’t forget that the goal of your competitive analysis is to improve your business over your competitors.
If you look closely enough into the insights you’ve covered, you are bound to find new opportunities and also solutions into incoming threats. Not only this data can help you identify areas where you can improve your business’s performance, but you can also find better ways to establish your online presence (i.e. by targeting your competitor’s audience you haven’t engaged before).