What is a competitor analysis?
All businesses have competitors and don't operate in complete isolation. Keeping up to date with your competitors is essential to make sure that you're providing expected basline value to your customers, but also how to continue to differentiate yourself.
With that said, what is competitor analysis and why is it important to conduct one?
Competitor analysis allows you to identify and compare your company's strength and weaknesses against others within your industry regarding a specific business-function (e.g. marketing, product, pricing, sales, etc.).
A competitor analysis can be conducted as detailed or as high-level as you need based on your goals. We'll be focusing on how to conduct higher-level competitor analyses in this article.
Why do a competitor analysis?
Competitor analysis help you:
- Identify your business’s strengths and weaknesses
- Keep up-to-date and notice industry trends and how it's evolving
- Set company goals based on competitor's movements
- Maintain a baseline set of expected features for customers
How to conduct a competitor analysis?
Competitor analysis ideally should be conducted every four months for your key competitors. Conducting them frequently ensures that you stay up-to-date on key milestones, industry movement, and maintain a competitive advantage.
Below are six steps to get you conduct a high-level analysis.
1. Identify your key competitors
You should always begin with a list of your top competitors. You'll have a general idea of who the main ones are in your industry, otherwise known as direct competitors, but there's another two kinds you should be aware of.
Direct competitors sell a similar product or service to a similar target audience. Examples of these competitors include Nike vs Adidas, Android vs iOS, Bing vs Google, etc.
Indirect competitors sell a different product in the same category but target an audience similar to yours. Examples of these competitors include McDonald's v Pizza Pizza. They both sell food but target different audiences (i.e. grab-and-go fast food for individuals vs feeding large social gatherings in an economical way).
Replacement competitors exist outside your product category, but they satisfy a similar customer need. For example an indirect competitor to McDonald's might be Tims Hortons because they both accomplish a similar customer need of saving the consumer time preparing and consuming food.
Start by creating a list of at-most 10 competitors with a mix of direct and indrect competitors. Creating a combination of direct and indirect companies will allow you to understand your industry more holisticly.
To start creating a list a simple Google Search should suffice. Companies that provide similar alternatives to your product will show up in the results based on what you search. Start by searching for "alternative to product X" or "your product name vs ...". You can also talk to customers and determine how they solve similar problems to your product and search their solutions.
2. Create a competitor matrix
Once you've created a list of all your competitors, you'll want to create a competitor matrix. A competitor matrix will help you compare and contrast key features and offerings between competitors.
You'll want to create a column with a list of each of your competitor's name, and a row across the top of your sheet with the key data points or information you'd like to collect and compare.
3. Gather background and target customer information
Once you have a list of competitors to research, you'll want to start populating the matrix. Start by looking for basic company information, things you'd expect like:
- Company name
- Company location/main HQ
- Company size
- Social media accounts
- Mission and vision
- Founded year
- Business website URL
- Funding amount, rounds, or recent aquisitions
- Recent announcements and financial reports
A company's "About" page should have some of this information.
Once you've gathered a company's basic information you'll want to determine which customers they're targetting. Getting this information is a bit more involved but can still be found. You'll want to look at things such as:
- Messaging tone and copy
- Marketing site brand
- Social media posts and how customers respond
- Case studies and investor relations information
- Product release notes and videos (if you can play around with their product, it's even better)
4. Marketing Strategy
Once you've determined the target customer, you'll want to look into each competitor's marketing strategy. Specifically, you'll want to look at 4 P's, some questions you may ask yourself when looking are:
- What is the product being sold
- What are the product's features
- Customer testimonials and reviews
- Pros/cons of the product
- What are the different pricing tiers for the product/service
- Does the product go on promotion frequently
- How does the competitor reach their target customer
- How does the company market their products to customers
- What is their unique value proposition
- Where are the products sold (e.g. in-person, online, etc.)
- Are the products sold directly to consumers
There will likely be lots of information available, but you'll want to make your findings (inclduing quantative data) concise.
5. Analyze strengths and weaknesses
Now that you've collected your competitor's information and added it into the matrix, you can begin analyzing them and determine their strengths and weaknesses, and your own. Some questions that may help you here are:
- Why do customers prefer one competitor over another
- What unique value proposition attracts customers to choose one competitor over another
- What are the business goals for each competitor and how do they align/differ from yours
- What are you company's weaknesses/strenths vs each competitor, and where can you differentiate and improve
- How does your target customer differ from your competitor's
- What is the perception of each brand vs yours
With the information you've gathered, you'll also be able to conduct a SWOT analysis (strengths, weaknesses, opportunities, and threats) which is a type of competitor analysis. SWOT analysis allow you to determine your company's competitive advantage.
Congrats, now that you've got a high-level overview of each competitor in your industry and analyzed them, you can use the results in your planning discussions.
You'll also be able to share the matrix with other teams such as Product and Marketing to enable them to accomplish their goals more effectively.
You'll want to conduct your competitor analysis approximately once every four-months to stay up-to-date with evolving competitors and the industry