How to do Effective Competitor Analysis in 2022
What do all the top businesses have in common?
They know how to create – and maintain – a competitive edge.
There are all sorts of ways that businesses can maintain a competitive advantage, from having a solid market share to staying on top of industry trends to being able to identify a key target audience.
However, one of the most important tools that business owners can take advantage of is the competitor analysis.
What Exactly is a Competitor Analysis?
A competitor analysis (also known as a competitive analysis) can help you obtain and utilize information about who your major competitors are – both direct and indirect – as well as what they’re doing to stand out among the crowd to that target audience.
So how do you get the information you need to do a competitive analysis – and how do you go about writing a competitor analysis so you can get a leg up on what your direct competitors are doing?
In this post, we’ll tell you everything you need to know in order to complete an effective and thorough competitor analysis.
Why Should You Complete a Competitive Analysis?
A competitor analysis has several key purposes.
First, it will let you understand who your competitors are and what your competitors offer – both in terms of the direct competitor and the indirect competitor alike.
Second, you’ll get an idea of the best marketing strategies to use to meet your individual goals, as well as how competitors might react to the actions of your own company.
Sometimes this information is easy to access. You might be able to find a decent amount of information about what your competitors offer and what they are doing online.
However, you might have to dig deeper into places like press releases, annual reports, product brochures, applications for patents, and more!
The thing to keep in mind when working on a competitive analysis, however, is to put your end goals in sight. Although the work might be time-consuming and, at times, frustrating, it will all be worth it when you can get a good idea of your market share and the best marketing strategy to implement to fuel your company’s growth.
What is the Importance of a Competitor Analysis?
Now that you know what a competitor analysis is, here are a few benefits of conducting one.
A competitive analysis can:
- Help your management team come up with new or updated marketing strategies
- Allow your support team to get some insight into how competitors’ customer service works
- Assist you in making more informed decisions about strategy (and ensure that you’ll be able to create an industry advantage that is realistic and sustainable for long-term growth)
- Help you identify underserved areas in the market
- Show you your competitors’ weaknesses so you can grow your market share
Of course, these aren’t the only benefits of doing a detailed but competitive analysis, but they’re some of the most significant!
What is in a Competitor Analysis?
So what does a competitor analysis actually look like?
These can vary. Ultimately, in creating a competitor analysis, your goal should not necessarily be to follow some sort of rigid formula or complete a long list of “paperwork” items that need to be checked off. Instead, a competitor analysis should piece together information that helps your company grow by doing targeted market research.
So while we’ll list some key elements to include in your competitive analysis below – and walk you through how to implement them – know that you can get a good glimpse at the competitive landscape by doing many other types of market research as well.
With that in mind, know that most competitor analysis reports include the following information:
- A profile of the current market and a competitor profile
- A look at both direct and indirect competitors
- A profile of the product or service that you and your competitors are attempting to sell
- A SWOT profile (strengths, weaknesses, opportunities, and threats that exist within the competitive landscape)
How Can This Marketing Strategy Help You Gain a Competitive Advantage?
Under the right circumstances, a competitor analysis report can help you gain a serious advantage on the competition.
There’s no benefit to operating blindly in the dark. You need to know what your competitors are doing – as well as why and how they are doing it – if you want to stay ahead of the market share.
Your Research Influences Future Steps
A competitor analysis will not only inform you about who your competitors are, but it will also guide you on future steps you should take so you can stay ahead of the curve. It is equal parts reflective and proactive, allowing you to leverage the data you have to get the data you need – and to produce the results you want.
Competitive analysis and other forms of market research are things that far too few businesses actually do, but all should consider doing on a regular basis. This includes major corporations and small business owners alike.
In fact, no business is too small or too large to do this work. It doesn’t matter how many employees you have – a competitor analysis can work wonders in the success of your business.
How Do You Write a Competitor Analysis: Step by Step Template
Ready to create your own competitive analysis? Here is a thorough explanation of our Competitor Analysis Template to help you get started – but remember, this is all flexible to meet your business needs.
The first part of a competitor analysis is a detailed profile of the competitors.
Again, this framework can vary, but a good competitor analysis should, at the very least, contain information about the objectives, assumptions, strategy, and capabilities of the direct and indirect competitors.
As you likely know, it is assumptions and objectives that drive the competitor. Strategy and capabilities, on the other hand, are what the competitor is capable of doing.
Objectives can be hard to pinpoint when you’re writing competitive analyses because they aren’t always clear – and they can come in many different forms.
Objectives don’t have to be financial. They can also be related to the company’s market share and growth rate. There are several search terms and target keywords you can use to find information on the other sites of your competitors.
For example, to find information on a given competitor, you may have your in-house team look at the mission statement, customer reviews (the customer experience tends to say a lot about what a company values most), employee reviews, and other industry resources.
Whatever the case may be, knowing competitors’ objectives is ideal so you can plan ahead for their strategies.
For example, if a company is focusing on growing its short term revenue, there’s a good chance that they are going to spend most of their time, energy, and money on keeping their top-performing services or products in strong positions (instead of doing research and development for up-and-coming products for the future).
The assumptions are those made by management, for the most part, but can also include a company’s beliefs about its own competitive position, market trends, regional factors, and general guidelines.
It can be extremely difficult to find information on strategies for the businesses competing with you. However, this is also a valuable piece of information to include when writing a competitor analysis.
You might be able to find your competitors’ strategies in places such as:
- Interviews with analysts
- Press releases
- Quarterly or 10k reports
- Statements by managers
You can often get a good idea of competitors’ strategies by looking at cash flow, R&D projects, hiring activity, capital investments, promotional campaigns, partnerships, mergers, and acquisitions, just to name a few.
Last but not least, when you’re completing a competitor analysis, you’re also going to want to look at their capabilities to get an idea of their future growth.
Understanding the capabilities of a competitor will help give you an idea of when and how they might attack – and how to respond accordingly and make your own strategic attacks.
Getting a clear picture of a company’s capabilities will require you to examine its strengths – again, this is where this kind of analysis will come in handy.
Finding Information for the Profile
So where do you find all of this information?
You’ll need to look at three separate categories – recorded data, observable data, and opportunistic data.
Recorded data is the easiest to find since it’s going to exist in published form – for example, in places like product brochures, a competitor’s site, social media platforms, and written reports.
Observable data, as the name suggests, needs to be actively sought out and “observed.” Competitors’ pricing is a good example of observable data.
Out of these three types of data, opportunistic data is the hardest to get your hands on. It requires extensive planning and organization, plus a bit of luck. Much opportunistic data comes to you by happenstance, with lots of it being anecdotal information that you get from conversations with suppliers, previous management, and customers.
Ultimately, this part of your competitor analysis is key to help you get an idea of your industry advantage. It will show you how you stand out compared to your competitors.
What makes you different? How do you stand out? Identify this information for your own company, product, or service. For each item or service you sell, do a thorough product analysis to give you an idea of its top features, benefits, and selling points.
If you have lots of products, you don’t necessarily have to do a product analysis for each and every one, but it can be helpful if you have the time and resources to do so.
You may want to make a list of things to look for and identify in your product analysis, such as:
- Customer demand
- Marketing approach and marketing competition
- Average sales
- Similar products
- Profit margin
- Customer reviews and feedback
Then, do the same thing for each of your competitors. If you can’t come up with the information on your own, don’t be afraid of giving your competitors a call and asking them!
You can even ask the customers to get an idea of customer satisfaction or interview other people who might identify as a target customer base for the product or service, too.
A competitor analysis will also contain a detailed marketing profile. This component will help you identify who your true competitors are – and who might seem like your competitors but actually are not, based on your target market.
It should look at all of your marketing efforts, including those in print, in person, and of course, on social media. As you’re likely aware, your social media presence will probably play one of the biggest roles in your company’s success in improving its market share for all audiences and target markets.
It might seem as though you and Competitor A have a similar target audience, but upon a thorough examination, you actually do not.
To get started with this next piece, you need to first identify who your target market is for your product or service. Say you’re an IT company that works with accounting firms in San Francisco.
That is an extremely specific target market. Because of that, your competitors will only be the ones who are competing with you for a share in that specific market.
If you don’t already know who your target market is, do some research to figure it out for your own business. Then, identify this information for your competitors, too.
Look at your competitors’ websites and marketing communications. Do some thorough competitor research and make a list of each company’s existing clients and take a close look at what kind of messaging they are using in their content marketing campaigns.
Identifying the Market Share
Now that you have your target market in mind, you need to figure out your market share. This sounds complicated, but it’s actually relatively easy to determine if you know what sort of market you’re operating in.
The market share is the percentage of the market that you currently account for. You know your target market – so with that information guiding you, you can calculate your share.
Most companies will calculate the market share as a dollar value or a percentage. For example, if you have $300,000 share in a $1.8 million dollar market, your business would have a 16.7% market share.
Once you know this information, you’ll be able to get an idea of how you stack up against your potential competitors and this will help you set benchmarks, goals, and objectives for the future. Understanding these statistical trends for your own brand as well as other companies over time will also give you a good deal of intelligence on your competitors’ behavior.
If Competitor A’s market share has been increasing steadily over the last few years, they’re probably trying to grow market share in your target market – and they’re working with the same audience. With this information, you can enlist various content marketing plans and pricing strategies to counter the attack.
Wouldn’t it be great if you knew that your new competitors were working on an exciting new ad campaign for social media – months before it launched?
Although that sounds like a dream scenario, once you’ve completed a full competitor analysis, you may actually be able to predict some of these strategies in advance (though probably still not as though you had a crystal ball at your disposal!).
When you complete this section of your competitor analysis, fill in the marketing strategies you are currently using with your company and try to predict those of your competitors. Write down current strategies for print, social media, and other channels, as well as ones you hope to push for your sales team to market in the future.
You might ask some of the following questions for your company:
- What search engine do you rank highly on, or for which specific products?
- Are any social media channels performing particularly well?
- Where do customers interact most often with your brand – which social media channels or other avenues do they respond best to? How many followers do you have on each?
Then do the same thing for your competitors.
Do some research and see what they’ve done in the past and what seems to have worked – what were their promotions and advertising campaigns? What worked well and what did not? Which campaigns did customers respond best to?
For this, it’s important to not only look at what market they’ve been targeting in the past, but also the ones they might be looking to enter in the future. That way, you can be proactive and find ways to strengthen your relationship with current clients so you don’t lose them to your competitors.
A product profile is another key component when it comes to conducting a competitor analysis to find new potential customers, expand product offerings, and identify gaps in your current plans.
Your product profile should include your range of products and services along with a comparison to those of your competitors.
First, take a close look at all of your products to identify areas where your products or services are strong – and which areas need some work. Make a detailed list of strengths and weaknesses for all of your products.
What is the unique value proposition of each product? What does your product do well? Can you make a new product or make product variations to improve key features or reach new subsets of the market?
After rating your own company, you also need to rank your competitors. Use a consistent performance scale to get a clear idea of where you stand.
You can get a lot of information about your closest competitors and their products based on how the competitor products are priced.
Take a look at the strategies that you and your competitors are using.
- Ask yourself all of the following questions about your pricing strategies (and those of your competitors) to get an accurate assessment:
- Am I a high-cost service provider or a low-cost one?
- What are my current mark-ups? Is there any wiggle room here?
- How do my prices differentiate depending on where my products are being sold (online, traditional storefront, between multiple storefronts, etc.)?
- Do I perform best on volume sales or one-time purchases?
- Are my pricing strategies based on costs, customer feedback, or competitor pricing (or a combination)?
Once you have this kind of qualitative data about you and your competitors, it will be easier for you to get an idea of how to price your products to attract and retain more customers in the future.
Next, you’ll need to take a look at product distribution and marketing channels.
The internet has changed so many things about how you and your competitors do business. Therefore it’s important to think carefully about how you get your products or services to your customers – and how your competitors do it, too.
Is this remotely done? On site? Automatically, through an integrated technology stack?
Conduct a thorough analysis of this to see if there are ways that other companies get their products into customers’ hands that might work better for your industry. Take a close look at the strengths and weaknesses of these various tactics and figure out whether your competitors have better customer satisfaction ratings than you do – if they do, it might be time to think about ways to change things up.
Finally, a competitor analysis is going to contain a SWOT analysis (or at least something similar to what a SWOT analysis might offer) in order to identify strengths and weaknesses for a brand.
This kind of analysis is often used outside of competitor analysis for businesses to audit their current practices and to identify outlets for new business.
Writing and Completing a Detailed SWOT Analysis
You can break this part of your report down into both internal and external factors.
Internally, you’ll want to look at your company’s strengths and weaknesses. These are considered internal factors, since you have control over them. You might include things like your brand reputation, product quality, and product range.
On the external side of things, you’ll have to consider factors that you have limited control over. Although you can’t exactly do anything to change them, it’s important to be aware of them so that you can monitor them and, hopefully, find ways to prevent them from affecting your business and making it harder for you to attract new customers to your industry.
Examples might include government strategies that make it difficult to break into global markets or even a new competitor entering the market with a brand-new product offering new features that you can’t compete with quite yet.
SWOT for Competitors
Once you understand your own SWOT, you’re halfway done – but it’s important that you don’t stop there. You also need to closely examine the SWOT for each of your competitors.
A SWOT analysis, after all, is only useful if you can also apply the information to figure out your role compared to your competitors.
Once you know where you stand, you’ll obtain a competitive advantage because you have both strengths and opportunities on your side. You can put strategies in motion that convert your weaknesses or external threats into new opportunities and strengths.
Completed Analysis of SWOT
You’ll find new competitive advantages to grow into brand-new markets in the industry – and to defend yourself against attacks. A SWOT analysis can also help you create strategies that will exploit your competitors’ weaknesses and help you move toward your objectives.
Do a thorough analysis for your company as well as for all of your competitors. This will give you the information you need to weigh both internal and external factors that affect your growth as well as the growth of your competitors.
When you’re trying to grow your business, it’s easy to sit back and assume that, with the right marketing strategies and analytics systems, you’ll be able to grow your business naturally and compete well in the market, regardless of your company size or anything else.
However, if you want to attract new customers and maintain a solid position in the industry and the market, you need to complete a thorough competitor analysis. This will help you analyze what your competitors are doing and help you stay up-to-date on trends for companies that are not yours but compete heavily with yours.
When done correctly, a competitor analysis will help your company create strategies that not only capitalize on opportunities, but also minimize the likelihood of outside threats from other companies.
Complete a competitor analysis as often as possible. Remember, market and industry trends change often, so this information must be updated frequently to give you an idea of what your customers need – so start soon!