How To Conduct a Highly Effective Competitor Analysis in 10 Steps
All business owners are aware of their competition. But how deeply do you understand your competitors' strengths, their potential for growth, and how their current strategies are powering their success?
The competitive intelligence provided by a competitor analysis is a highly profitable, insightful tool in steering your business in the right direction and differentiating you from your competition, whether you’re running a start up, established business or a global brand.
In 10 steps, you can build an effective and comprehensive competitive analysis template to conduct regular analysis to keep you on top of your market and the moves your competitors are making.
What is a competitor analysis?
Competitor analysis is an important part of any business plan, whether you’re running a startup, established business or a global brand. It gives business owners like you crucial insights not only into how your direct competitors operate and how they are over and underperforming in their target market, but also into your own business.
By conducting quality competitive market research, you will reveal what makes your offering’s value proposition unique and attractive to new customers and loyal ones, where you can meet the needs your competitors aren’t delivering on, and where you, too, can do more. This is important for making sure you know where you currently stand in the market so you can gain and maintain a competitive advantage in the future.
10 effective steps of competitive analysis
1. Identify your target market
Your business relies on attracting customers, so you should be clear on who your target audience is and generate data on the demographics that you will do well to focus on.
You can use competitor websites, social media accounts, marketing campaigns, and more to narrow down who your competitors’ target markets are.
Additionally, modern consumers are candid about their opinion on user experience and pricing, so digging into client and customer reviews can be especially enlightening. Reviews (from sites such as Linkedin, Trust Pilot and Trip Advisor) will be able to tell you where your competitors excel and fall short, and what types of customers are most and least impressed by what they do.
With this research done, you’ll be able to define your ideal customer profile and align your messaging, brand, and marketing towards that profile.
2. Identify your direct competitors
When compiling your list of competitors, organise them into two camps: direct and indirect competitors. Both are important to be aware of and check in with regularly, as they’re all competing for the same market share as you, whether they’re already offering similar services, or they’ve just launched a new product.
So, what’s the difference between a direct competitor and an indirect competitor?
A direct competitor is a business that offers a similar product or service to yours. A customer could choose either you or your direct competitors and have their needs met in similar ways.
An indirect competitor is a business that offers a different product or service to you, but is solving the same problem or meeting the same customer needs.
When carrying out competitor analysis, focus on your direct competitors, but don’t completely disregard your indirect competitors. If their business adapts or expands into new markets, they could quickly become a direct competitor.
3. Identify your aspirational competitors
It is natural to see other businesses as competitors to overtake or as entities to worry about while you carve out your own space on the market. But along with direct and indirect competitors, you will also have aspirational competitors.
These businesses are still competitors, but they are businesses that provide you with inspiration for your vision. They are where you want to be in the future.
You can use your aspirational competitors as benchmarks for best practice and to identify key areas in which you can learn from and grow your own brand.
4. Evaluate their verbal and visual identity
Evaluating their verbal and visual identity will allow you to benchmark how your brand is presenting itself to the world against your competitors.
It’s important to take a detailed look at the below across each channel and platform:
- Logo and strapline: is this the same across all platforms and channels?
- Colour palette: what does this say about them? Is everyone using the same colours?
- Typography: how does this reflect their personality as a brand? are they being consistent?
- Image style: do they use professional photography? Are they using patterns, icons and / or illustrations? What does this say about them?
- Tone of voice: how are they communicating across different channels? Do they speak with authority, are they playful in their tone?
It will identify best practices and those to avoid, as well as illustrate whether your competitors are communicating a clear and coherent brand across all channels and platforms.
5. Do a SWOT analysis
SWOT stands for strength, weakness, opportunity, and threat, and that’s exactly what you should look for in a SWOT analysis. You can carry out this type of analysis for both your competitor and your own business.
This type of analysis determines your competitor’s position in the market, and takes into account a company’s future potential as well as their current position.
- Strength: Identify strengths and see how your competitor is standing out from the crowd.
- Weakness: Identifying weaknesses will tell you what is holding your competitor back.
- Opportunity: Opportunities are external factors that give your competitors the edge.
- Threat: Threats are simple, and refer to any factors, internal or external, that could have a negative impact on business.
You can use a SWOT analysis to guide your next steps to transforming your strategy and business goals.
6. Do a PEST analysis
A PEST analysis stands for political, economic, social, and technological analysis. This analysis can help you to manage the external factors that can influence your success. It can be used in tandem with a SWOT analysis to give you insight into the macro environment that you and your main competitors operate in.
7. Evaluate their sales and marketing strategies
Take a look at their marketing strategies
Researching how your competitors are getting their message out there can tell you a lot about which corner of the market they’re targeting, what their unique selling proposition is, as well as what works and what doesn’t.
Social media is a powerful tool in a marketing campaign. Are your competitors running ads, promotions, or using the pull of an influencer campaign to market their business?
You can also consider what part of the buyer’s journey your competitor’s content is targeting, using the TOF, MOF, and BOF framework to guide you.
- Top of the funnel (TOF) content will educate your audience about your product or service.
- Middle of the funnel (MOF) content focuses on solving your audience’s needs. MOF content will position your product as a solution to your consumers’ needs.
- Bottom of the funnel (BOF) is the last stage in your buyers’ journey. Your customer is almost ready to buy; BOF content provides details on pricing, trials, product demos, and providing a simple purchasing process.
On top of all this, considering how your competitors are beating the algorithms with SEO content can show how your website compares to your competitors’ websites, and inform how you can climb up organic rankings.
Ask yourself the following questions about your competitors marketing strategy:
- How active are they on social media and which social networks do they use?
- How frequently are they publishing content?
- Do they use images or video?
- Do they publish case studies, podcasts, or webinars?
- Does email marketing feature in their marketing strategy?
- Do they focus on digital marketing or offline marketing?
- What do they focus on in their campaigns?
- How do they capture attention and build brand awareness?
Overall, it’s essential that your messaging and marketing plans are always relevant to your target customers. Simply replicating what your competitors are doing will not guarantee you success, and it may contradict your brand or alienate your audience.
Take a look at their sales strategies
Working out how a competitor’s sales strategy works can be tricky, especially if they provide services over products.
If they sell products, you can buy a competitor product or two to experience first hand their sales process. This can be done for ecommerce and brick and mortar shops, and if a competitor uses both, you can gain insight into what type of consumer they are attracting at each outlet.
You can also look into the referral and affiliate programmes your competitors use to attract customers, and analyse your competitors’ websites for service-based businesses.
8. Assess competitors’ pricing
Pricing naturally has a strong influence on how attractive a product or service is to consumers. To assess your competitors’ pricing strategy, look at how your competitors price their products, how their messaging justifies their prices, and what price points are used for similar products to yours.
But, pricing doesn’t just apply to the tag you put on your products and services. If you’re in ecommerce, look at how much your competitors charge for shipping, too. It’s a major factor in consumers’ decisions to go through with a purchase.
For service-based offerings, you may find their focus is not on the price itself, but the value their service brings to a consumer, and how they provide the best solution to a particular consumer need.
9. Use benchmarking and analysis tools
There are plenty of online tools that you can use to help you carry out, organise, and interpret your competitor analysis, allowing you to take your competitive research to the next level.
Here are just a couple to consider:
BuzzSumo: A content marketing platform that generates leads on the best content and engagement opportunities across social media and search engines. You can use this to see what people are talking about in your market and beyond, informing your content creation to keep you on top of current topics and trends.
SEMRush: This is an SEO tool for increasing your online visibility, and will help you to optimise your website for search engines, research keywords, provide backlink suggestions, and gather valuable metrics on your competitors’ keyword strategy.
10. Keep up to date
You should build a regular competitive analysis into your strategic planning to make sure you’re always ready to effectively guide your business strategy, act on market developments, seize opportunities to grow and enter new markets, and keep an eye on both your direct and indirect competitors.
These ten stages of an effective competitor analysis template are useful for businesses of all sizes, and when put together, can create a powerful competitor analysis that will inform your most important business decisions for years to come.
How we can help with your competitor analysis?
If you need to help with your brand and competitor analysis please get in touch with firstname.lastname@example.org.