A competitive analysis is an important part of your marketing plan. It helps you find how you’re going to achieve a competitive advantage when it comes to your target market. Taking the time to research your competition will provide you with an understanding of how your potential and existing customers look at the competition, as well as an overview of your competitions the strengths and weaknesses. This allows you to develop a plan to position your brand as the better alternative to serve your customers.
But, a competitive analysis does more than look at a few of the companies you will be competing against. It’s more than simply saying okay companies A, B, and C compete against me and they are better because of this reason, this reason and this reason. We are better because of this reason, this reason and this reason. The more in-depth you go, the more information and insight you will have to guide your business.
One competitive analysis isn’t enough. It’s a good idea to revisit competitive analysis on a regular basis because you never know when new players are entering the market. If you want to seize your market share and maintain it, watching for new competition is essential. If you’re unaware of what companies are coming in and what they are doing, you could easily lose a portion of your customer base to the new guy in town.
Here’s the step-by-step process to conducting a competitive analysis for your business.
Identify Your Competition
Begin by finding businesses in competition with yours. Your direct competition is any business that sells a product like yours, or a substitute for your product, selling in the same geographic area.
Your indirect competition is any business that offers a dissimilar, or substitute product in relation to yours, selling in the same geographic area. Butter and margarine manufacturers are indirect competition to one another. Contact lens and glasses manufacturers are indirect competition… But businesses that sell both to customers in the same area are direct competition.
Why it is important to take the time to consider indirect competition? Because they are in similar markets, it could make sense for them to move into yours at any given time, thus becoming direct competition. That’s why you want to keep an eye on them, and check from time to time to see where you stand against them. Just as they can decide to move into your market, you can decide to move into theirs.
Do you need to analyze all of your competitors? It depends on the industry you are in. Some markets, such as the automobile industry and the steel industry, have only a limited number of businesses – and thus competitors. In these cases, where you can quickly and easily name all the market players, go ahead and analyze all of them.
If you are entering a market where there are many competitors, analyzing the competition becomes a bit more difficult. It is not realistic to collect and maintain information on all of them, or even a fraction of them. Instead, use the 80/20 rule. Basically, you’re counting on the fact that 80% of the total market revenue comes from roughly 20% of the competition. You’ll focus your time effort on the 20% that brings in the revenue.
When you use this approach, stay on top of your market for any new and upcoming players. Though some may come into play, stay awhile without any real threat to your business, then fade away, it’s possible for any of the new companies to become a dominant market force.
Begin with a list of about 10 of your competitors. If you’re struggling to see who they are, rely on search engines to do the job for you. Search the type of product o service you offer – and pay attention to the results.
Organize the information in a format that works best for you – an excel spreadsheet with a worksheet for each company is a good place to start.
Analyze the Content
After you’ve located your competition, it’s time to start researching. You should aim to answer these questions.
- Who are my top three competitors? Focus most of your effort on these, but don’t neglect others.
- How long has the company been in business? Longevity matters to customers, but it doesn’t necessarily mean you can’t compete. Older businesses don’t always do their best to keep up with changing customer demands.
- How am I able to compete? Think about the differences between your company and the competition, and how these can set you up to compete with them.
- How can I distinguish my company from my competitors? Again, think about the ways you’re different and how you can position yourself as the better option.
- Do they have a competitive advantage; if so, what is it? How can you overcome it? Do you have a competitive advantage of your own?
- What products and services do they offer? How are they similar to yours? Different? Do you need to expand your offerings?
- Are they focused on similar target markets? Are they going after the same consumers? If not, they probably aren’t direct competition.
- Are they profitable? If they’re not making a profit – why? Are you making a profit?
- Are they expanding? Scaling down? Is the business doing well enough to be growing? If they’re shrinking, is it because they grew too fast, or the market is not doing well?
- What do customers see about them that’s positive? Whatever these things may be – think about what you can do to make them see you that way, too.
- What do customers see about them that’s negative? Whatever these things may be – think about what you can do to ensure they don’t see that about you, too.
- How do our customers see us compared to the competition? Make a list of things you’ll need to work to change.
- What does their marketing strategy look like? Provide as many details as you can, so you can use it to help shape your own.
- What does their promotional strategy look like? Include as many details as you can, so you can use it to adjust your own.
- What does their pricing structure look like? How does it compare to yours? You don’t have to undercut the competition – just make sure you’re proving value.
- Are they operating in the same geographic area? If not, they may not be direct competition.
- Have they ever changed their target market segments?If so, was it a response to a change in the market, or in an effort to better position themselves?
- How big is the company? What are their revenues?This lets you know what you’re dealing with in terms of size and budget.
- What is their percentage of market share? This lets you know how much of a competitor they are. How much of the market share do you have in comparison?
- What is their total sales volume? How does it compare to yours?
- What is their growth rate? How fast is their company growing? How does the growth compare to you?
Look at the kind of content they’re publishing, because this can help you find opportunities to out perform them. Look at the types of content they focus on, and what you can do better. Compare the content to yours, and you’ll soon determine what kind of effort you need to put into being able to compete with them.
Common types of content are:
- Blog posts
- White Papers
- Case studies
- Buyer guides
- Press releases
If your competition is blogging three times a week, and you’re lucky to publish twice a month – there’s somewhere to focus your efforts. Each blog post has the potential to drive more traffic to you, and thus away from the competition.
Look at Their SEO Structure
Okay, so what do you do if you find the competition has the same kind of content you do, and updates with the same frequency as you do? It could be how they’ve structured their SEO. Look at how they’re using keywords – and what keywords they’re using. Are they the same or similar as yours?
Key places they should be used are:
- Page title
- Heading tags
- Within the content
- In internal link anchors
- Image alt text
When aiming to rank for certain keywords, look for keywords with lower search volumes – less competition and long-tail options mean they’re more specific (targeted to your audience). You should use your competitors’ keywords as a basis for additional keywords you should be targeting.
Look at Their Social Media
Social media plays a role in marketing success for a number of reasons. First, search engines do pay attention to the social signals from those websites – though simply having a profile isn’t enough. Second, these platforms give you a way to engage directly with your customers and prospects. You can share your content, of course, but it’s about more than self-promotion.
Look at each one of your competitors’ social media profiles. How are they using them? How are the platforms integrated into their overall marketing strategy?
Are they using their profiles effectively? If not, that gives you an edge.
What types of things are they posting? Are they posting at all? Are people following them? Are their profiles filled out completely, with cover photos and profile photos? Simply having a profile doesn’t mean they’re updating the pages with new content, so pay attention to the last time they posted.
If they are rocking social media – don’t get discouraged. Instead of leaving the page quickly, take time to learn from what they’re doing, and come up with some ideas that can help you establish your own presence.
Find Areas for Improvement
Whew, that’s a lot of work, right? But at this stage, your competitive analysis is complete. Now, it’s time to get to work on using what you’ve learned about the competition to make your own brand better.
Take all the information you collected about each one of your competitors and look for areas of improvement. I bet you’ll find at least one, if not several things you could stand to improve. If you don’t – you’re fooling yourself. There’s always something that can be done better, whether it’s your content, your SEO, your social media, or something else entirely.
Setting Yourself Up for Success
A competitive analysis will require a relatively significant time investment. It may even reach the point where you’re frustrated with the amount of tine you’ve spent collecting and analyzing the data, but the more groundwork you lie in the beginning, the better off you’ll be in the end.
How has competitive analysis helped your business? Share your stories with me below.