How to Conduct a Competitive Analysis in 2024 (10 Easy Steps!)
Want to learn how to conduct a competitive analysis to blow your competitors out of the water?
But not sure where to start?
No doubt, like most entrepreneurs, you’re incredibly passionate about your business.
But with passion comes the desire to speed ahead, get your product or service to market, and not let anyone or anything stand in your way.
Before you go any further, you need to know who you’re up against.
So, let’s look at what a competitive analysis is and how to conduct one.
What Is a Competitive Analysis?
A competitive analysis framework is a tool that helps you keep an eyeball on what your competitors are up to.
The information you gather helps identify their strengths and weaknesses relative to your product or service.
Learning from the competition opens up the gateway for you to kick some serious digital marketing butt.
Why You Need to Conduct a Competitive Analysis
Like a good coach studies the opposing teams, you can’t effectively compete without knowing your competitors.
And you can’t stand out from the crowd if you don’t know what makes your brand unique.
A competitive analysis is a deep dive into how a company does business. You look at their market share, target audience, distribution processes, digital marketing strategies, and more.
You can then use this research to enrich your marketing strategy.
It’s a hella powerful way to maintain a competitive advantage over other companies in your industry.
Spot your brand’s strengths and weaknesses
Start by identifying where your company shines!
Then you’ll be able to show a potential customer why your product or service is the bee’s knees.
Conversely, understanding your weaknesses can reveal where your product or service is lacking.
Check out what the competition is doing right, and see what you can apply to your business.
Find gaps your business can fill
Assess your competitors’ offerings to identify areas where your market is underserved.
You may find gaps between what your competitors offer and what customers are searching for.
Take that information and expand your own offerings to satisfy any unfulfilled consumer needs.
Pinpoint industry trends
Market trends are dynamic, and it pays to stay ahead of the curve.
And studying the opposition can help you monitor which way the industry is headed.
But don’t just jump off the cliff because everyone else is doing it. Simply replicating what the competition is doing won’t get you where you want to be.
Instead, explore opportunities to outperform them and create greater value for your customers.
Develop your model for success
In your competitor analysis, include companies larger and smaller than your own.
Studying well-established businesses in your industry can show you what success looks like. Plus, it’s a great reference point to compare your future growth against.
But don't sleep on smaller companies or new entrants.
These businesses have the potential to jeopardize your future market share.
How to Conduct a Competitive Analysis
So, how do you do competitive analysis? Figuring out what to focus on can be tricky.
The goal is to discover insights that can inform your product development and marketing decisions.
The following eleven steps will guide the way.
1. Identify your competitors
Where would your customers turn if they didn’t buy from you?
Begin with a search for your product name or category and have a poke around Google, Amazon, and Alexa.
Look for competitors that:
- Sell similar types of products
- Have a similar business proposition
- Market to both similar and slightly different audience demographics
- Are both new to the marketplace and have more experience
You can also hit up existing customers to ask them what alternatives they considered before deciding on your product or service.
Stick with a group of seven to ten competitors.
Include a diverse range to ensure an accurate market assessment.
To ensure diversity consider businesses that fall into each of the three competitor categories.
Direct, indirect, and replacement competitors.
Direct competitors - or primary competitors - sell a similar product or service to a similar target audience.
- Nike and Adidas
- Mcdonald’s and Burger King
- Xbox and Sony Playstation
If someone else is selling the same product as you, it’s likely in demand.
But, pay attention to entry barriers. If your direct competitor sells the same product for $10, you won’t get away with charging $25 for it.
Get a bird’s-eye view of your market research and build a list of competitors using Semrush’s Market Explorer Tool.
An indirect competitor is a business selling high-end or low-end versions of your products.
A secondary competitor's products aren’t quite the same but could serve a similar target audience and satisfy a similar customer need.
- Victoria’s Secret and Walmart
- McDonald’s and Domino’s Pizza
Why bother if your competitors’ products are different?
Indirect competitor research can help you evaluate new product ideas and markets to keep you ahead of the game.
Replacement competitors have the potential to replace your product with something different altogether.
These tertiary competitors want to get their mitts on the existing profits of more established companies. To do that, they look to offer an improved product or service.
- Uber vs. taxis.
- Airbnb vs. the hotel market.
Choosing the replacement route may be challenging, especially if you are up against bigger competitors.
But, higher risks mean higher rewards.
Bumping a prominent competitor off their perch while they’re not looking can generate insane growth for a small business.
2. Put it all in a spreadsheet
Dust off your Excel skills and pop your competitive intelligence into a competitor matrix.
Compare competitors based on criteria such as:
Devote one row or column to each competitor.
On the other axis, list data points or categories of information you’d like to uncover about each competitor.
Don’t stress if you have no idea what you should be looking for at this point. You can also always add and remove categories as you progress through your competitive research.
The point is to start.
If you need a l’il guidance, Shopify has a free competitive analysis template available for download.
3. Compile competitor demographics
Once you have your list of competitors, it’s time to go Sherlock Holmes on their businesses.
Investigate the following:
Learning how your competitors got to where they are today will help you better understand their business.
Click on the “About” section and note the founding date, funding sources, and any mergers or acquisitions. Or browse past press releases.
Do you have an eCommerce business? Then, you could be competing against companies that sell their products worldwide.
If you have a brick-and-mortar business, your competition may be highly localized.
Either way, it’s just good business to know where your competition is and where their customers are.
Knowing the size of your competitors will help you better interpret the other data you collect.
Check out LinkedIn and Glassdoor to learn how many people your competitors employ.
Then, perform a Google search to discover how many customers they have and how much revenue they generate.
4. Conduct a SWOT analysis
Consider why consumers choose the product or service of your competitors over the other available options.
A SWOT analysis is a fantastic competitor analysis tool that helps you visualize how you stack up against everyone else.
Strengths: What gives them an advantage over your product? (e.g., unique branding)
Weaknesses: Which processes or experiences could they improve? (i.e., the online shopping experience), or what areas do they neglect? (e.g., not investing enough in SEO to drive organic traffic)
Opportunities: What can your company do better based on your resources? (e.g., new types of content)
Threats: How can they pose a threat to your business? (e.g., offering expedited shipping)
Your SWOT analysis should cover the following areas:
- Brand positioning
- Customer experience
- Sales strategy
- Pricing strategy
- Marketing strategy
- Content strategy
- Shipping strategy
- Discounts/Promo strategy
Pay attention to the opportunities they are missing. How can you capitalize on them?
5. Research your competitors’ target audience
To identify your competitors’ target customers, check out their mission statement. Then, research the following:
- What kind of messaging do they use?
- Who do they interact with on social media?
- Do they feature any existing customers in their online content?
Use this information to construct a profile of your competitors’ buyer persona.
These profiles may resemble your target market, so pay attention to even minor differences.
6. Remember the 4 P’s
Now it’s time for a competitive analysis marketing plan and to look at how the competition reaches its target audience.
To do that, you need to roll up your sleeves and get stuck into uncovering their marketing strategies.
Which brings us to the 4 Ps.
Product, Price, Promotion, and Place cover the essential elements for any business bringing a new product to market.
Ask yourself the following for each of your selected competitors:
- What are they selling?
- What are the product features?
- What do customers find most appealing?
- What are the product’s or service’s weaknesses?
- What’s their competitive pricing model?
- Is it a one-off purchase, or do they offer a subscription?
- What are they charging? Do they offer sales or discounts?
- How does their pricing reflect the quality of their product or service?
- What advertising channels do they use? (social media, email marketing, etc.)
- What’s unique about their product or service? What elements do they emphasize?
- How do they talk about their brand?
- Do they have an eCommerce store or brick-and-mortar location?
- Do they sell to customers directly, drop-ship, or partner with third-party marketplaces?
7. Evaluate your competitors’ market positioning
Competitive market positioning means finding a unique way to appeal to the specific needs of your target customer.
Differentiate yourself from the rest to smash the competition. It will give you more opportunities to boost brand awareness and, ultimately, revenue.
Analyze these channels to determine your competitors’ market positioning and messaging:
- Social media
- Press releases
- Website copy
- Product copy
8. Compare your competitive advantage
What’s your competitive advantage? If you have a unique selling proposition, it can drive brand recognition.
Online shoe retailer Zappos, sets an excellent competitive analysis example for how they gain a competitive edge.
They simply offer legendary customer service!
The Zappos teams respond to customer emails at lightning-fast speed and don’t argue about returns.
And they even go out of their way to shop at other stores when customers want something particular that’s not in stock.
Take a look at your competitors’ online reviews and customer feedback to learn why customers chose them.
Check out these stats:
- 43% of shoppers would pay more for greater convenience (i.e., faster shipping)
- 42% would pay more for a warm, welcoming shopping experience.
- 65% stated that a positive brand experience influences their purchase decision more than great marketing.
- 71% of consumers are prepared to pay a premium for brands that provide complete product traceability.
Work out what the competition has over you and how you can offer something better.
9. Analyze your competitors’ marketing strategy
Unfortunately, most businesses fail to review their competitors’ marketing strategies.
And many businesses are.
But understanding how your competitors market their products takes a little detective work.
What offers are they promoting?
How do they build and manage their contact lists?
How do they distribute content online?
To uncover what your competitors are up to in the marketing department, you can:
- Sign up for their newsletters
- Follow them on social media
- Subscribe to their blogs
- Purchase a product
- Abandon a product in the shopping cart
Then, look for any intriguing tactics they use to attract more customers and drive sales.
10. Leverage social media
Social media is an absolute goldmine for voice of customer (VOC) data.
Here’s how to conduct a social media competitor analysis:
- How does their customer service department respond to queries?
- Browse mentions and hashtags to assess overall conversations.
- Read the latest reviews to identify weaknesses you could improve upon.
- Use “Pages to Watch” to monitor how similar pages engage with their audiences.
- Type “pages liked by people who like [your page name]” in the search field to reveal similar brands your fans like.
- What visuals do they use? For example, Reels, Stories, or Shoppable posts?
- What is their engagement level per post? Is the engagement genuine? What’s their comments-to-like ratio?
- Do they partner with influencers?
Dangers to Avoid
Now you’ve got the skills to put together a competitive assessment.
So, let’s unpack some of the pitfalls that can throw off the insights you’ve compiled.
1. Not updating your competitive analysis
Businesses constantly evolve, and keeping an eye on your competitors is never-ending. So, you must continue to revisit and update your original insights.
If you don’t, spoiler alert: Inaccurate data and poor decisions ahead.
2. Beware of confirmation bias
As human beings, we have a tendency to jump to conclusions based on our assumptions.
This is also known as confirmation bias.
Be aware of your initial assumptions and put them to the test rather than resting on what you think is true about your competitors.
Allow the data to inform your decisions rather than letting assumptions lead the way.
3. Not acting on the data
You’re putting in all this hard work to conduct a competitive analysis.
So act on the findings.
Don’t just enter them into your competitor matrix and allow them to gather virtual dust.
Instead, create a strategic plan, then execute it based on the unique angles and marketing tactics you’ve uncovered.
4. Not using available tools
You don’t need to reinvent the wheel and do things the hard way.
You’ll find plenty of free resources to help you, such as Google Analytics.
5. Not setting clear goals
The job at hand will be infinitely more complicated if you don’t have a clear objective.
So, before you dive in, outline your goal and what you hope to learn about your competition.
6. Focusing on the “now”
Of course, it’s a great idea to understand what your competitors are doing at this very minute.
But you also need to study how your competitors' tactics have changed over time and how they have evolved.
Find Your Competitive Edge
We admire your passion.
But slow down, do your competitor research, and don't enter this challenging journey blind.
Undertaking a competitive analysis will reveal areas that you can run with to help your brand slay.
It will help you break into new markets, successfully launch new products, and keep tabs on your competitors’ customers.
All of which go a long way to keeping your business agile and one step ahead of the competition.