What is a competitor analysis?
A competitor analysis can help you find your primary and secondary competitors by researching their strengths and weaknesses and comparing them to yours. Direct competitors sell the same products to the same target audience, while indirect competitors sell the same products to a different group of people. After analyzing, you can use the information to see how you compare in the market. Successful businesses typically perform a complete competitive analysis once per year. A typical report might include the following:
- A description of your target market
- Pricing comparisons
- Comparison of your product or service to competitors
- Current and future market share, sales, and revenues
- Analysis of marketing and social media strategies
- Differences in customer reviews and ratings
What is the purpose of a competitive analysis?
This tool can help you gain an advantage over competitors and improve your business strategy. Without it, you might find it challenging to determine what others are doing to attract customers in your market. You can compare various aspects of your product or service to your competitors’ offers to see your strategies’ effectiveness. By looking at the success of different companies, you can make better decisions based on the information you gather.
How to perform a competitor analysis
The following steps can allow you to examine several competitors simultaneously and refine your approach to reaching your target customers.
Finding your competition
Choose five to 10 competitors offering similar products or services and have a business model that’s comparable to yours. It can be helpful to include a mix of direct and indirect competitors so you can understand how new markets might impact your business. Including startups and established companies in your analysis can give you a broader perspective. You can search for your product or service to identify competitors in your industry. The top results are likely your main competitors. If you’re a startup or serve a niche market, you might need to go deeper into the search results to find your direct competitors.
Evaluating your competitors
Gather insights about your competitors and evaluate them using the “four P’s” of marketing:
- Place: Consider their geographic reach or service areas. How does it compare to yours?
- Promotion: Observe their marketing tactics. How do they engage with customers? How active are they on social media?
- Product: Compare their offerings to yours. If possible, test their products. What do you like or dislike? How is the quality?
- Pricing: Analyze their pricing strategies. Do they vary for different customers or partners? What discounts do they offer? Can you estimate their costs?
The “four Ps” are evolving, so it might be helpful to consider other factors, such as:
- Reputation: Check online reviews and social media. How do people view their products compared to yours?
- People: Assess the size of their team and the general profile of their employees.
- Positioning: Check their websites, social media, and marketing materials. Who are they targeting? What makes them unique?
- Partnerships: Identify their suppliers and the duration of these relationships.
Analyzing competitors every few months can keep you proactive rather than reactive, possibly giving you a market advantage.
Comparing features
Compare your product features against your competitors, breaking down your comparison by each feature. Although each product has unique aspects, most will include:
- Age of the target audience
- Number of features
- Services provided
- Style and design
- User-friendliness
- Product quality
- Customer support
- Available warranties
Examining their marketing
Shift your focus from their product features to their marketing efforts. This step helps you go beyond the product comparison and into each company’s marketing strategy. To understand your competitors’ target audience, consider looking at their customer base through their website or testimonials. This insight can help you create customer personas. Knowing who your competitors target can give you a better picture of their marketing strategies. Areas to examine might include:
- Website content
- Social media presence
- Product descriptions
- Press coverage
- Paid advertising
As you explore these areas, asking questions can help you uncover more about their strategies. Although questions will vary depending on your industry, they might include:
- What story are they conveying?
- What value do they offer their customers?
- What is their mission statement?
- How do they express their brand voice?
Analyzing your competitors’ strengths and weaknesses
Have your team assess how your competitors compare with your business. Begin by ranking each competitor based on the earlier criteria, using a one to 10 scale in a simple grid or table. Write an evaluation of each competitor’s strengths and weaknesses. Consider their popularity due to location, visibility, or staff quality. Are their prices too low or expensive? Are their products missing a crucial feature that customers want? Summarize the primary reasons a consumer might choose or avoid each of your competitors.
Find your competitive advantage and position in the market
Competitive intelligence is a significant portion of your competitor analysis, but once you’ve collected the information, you can shift your focus back to your own business. A SWOT (strength, weakness, opportunity, and threats) analysis can help determine where you excel and fall short. It can also help you to turn weaknesses into opportunities and identify threats from your competition. The research you’ve done in the earlier steps can help guide you in filling out your SWOT analysis. During this process, consider the following questions:
- What are we doing well?
- Where can we improve?
- Are there gaps in the services we offer?
- What new market trends could impact us?
Understanding the competition can help identify what sets you apart. These traits might include a unique strength that appeals to your target audience and could become a key part of your brand image and messaging. If you notice a weakness in your competitors, consider lowering your prices or launching new promotions to seize the opportunity. Many employers tend to focus only on pricing and products.
Considering all factors that influence your competitors’ market position, such as customer base changes or business investments, can help you understand your competitors. You can then determine your position in the marketplace and use valuable insights to make informed decisions.
Competitive analysis example
Below is a streamlined example of a competitive analysis using “EcoFresh,” a fictional company selling eco-friendly household cleaning products, as the primary company.
Step 1: Finding competitors
Direct competitors:
GreenClean: Offers various eco-friendly cleaning products.
Nature’s Purity: Known for organic ingredients and sustainable packaging.
Indirect competitors:
CleanMax: Offers a mix of traditional and eco-friendly products.
FreshWave: Premium cleaning solutions with natural options.
Step 2: Evaluating competitors
GreenClean: 25% market share, mid-range pricing, loyal customer base.
Nature’s Purity: 15% market share, premium pricing, targets health-conscious consumers.
Step 3: Comparing features
GreenClean: Effective, recycled packaging.
Nature’s Purity: 100% organic, cruelty-free.
Step 4: Examining marketing strategies
GreenClean: Sustainability-focused branding, frequent sales, active on social media.
Nature’s Purity: Health-focused branding, subscription discounts, informative blogs.
Step 5: Analyzing competitor strengths and weaknesses
GreenClean: Strong brand recognition but limited organic certification.
Nature’s Purity: High-quality products but at higher price points.
Step 6: Finding competitive advantages and market position
EcoFresh’s unique selling proposition: Customizable cleaning solutions and an interactive online platform.
Competitive advantages:
- Customization: Personalized product recommendations
- Innovation: Eco-friendly packaging that dissolves in water
- Community engagement: Sustainability workshops and guides
Marketing strategy:
- Target audience: Eco-conscious families and young professionals
- Branding: Most personalized and innovative eco-friendly brand
- Promotions: Loyalty programs and partnerships with eco-friendly subscription boxes
By following these steps, EcoFresh can learn its competitive landscape, capitalize on strengths, address gaps, and strategically position itself in the market.
Understanding your competitors’ strengths and weaknesses and learning about your own can improve your marketing efforts. Acting on your analysis by setting business goals and a solid plan can help you stand out from your competition.