“Stop worrying about what others think and do. Focus on yourself instead.”
-Everyone’s Mom
It’s a lesson we’ve heard since we were kids. Focus on yourself—not on others. While this may be helpful advice for personal growth, when it comes to running a business, you have to care about what others are doing. It’s the only way to remain competitive.
And that’s where a competitor analysis comes in.
A competitor analysis involves researching your top competitors to gain insight into their products, sales, and marketing tactics. Why bother? Well, you’ll be able to:
- Identify gaps in the market
- Identify your unique value proposition
- Develop new products and services
- Uncover market trends
- Market and sell more effectively
Let’s be honest—we’re all guilty of late-night snooping on our competitors. With this step-by-step guide, I’m here to show you how to conduct a competitor analysis intentionally and make it count. So channel your inner detective, and let’s get started.
1. Determine who your competitors are
The first step of your competitor analysis is identifying who your competitors are.
There are two types of competitors: direct and indirect.
Direct competitors are businesses that offer a product or service that could serve as a substitute for yours. Indirect competitors provide products that aren’t the same as yours but could satisfy the same customer need or solve the same problem.
Source: ManyChat
Let’s say you own a local ice cream shop. A direct competitor would be the other local ice cream shop down the street. An indirect competitor would be a donut shop. While donuts are a different product, it also serves to satisfy one’s sweet tooth.
When performing a competitor analysis, your focus should be on direct competitors. With that said, conduct these analyses regularly and keep your indirect competitors on your radar—they could release a product that’ll turn them into a direct competitor. (Donut ice cream sandwiches?! How do I compete with that?)
2. Research their products or services
At the core of any business is the product or service they offer. Sure, they may sell ice cream, but you need to dig a bit deeper to make this competitor analysis count.
Take the time to research their entire product line with these questions in mind:
- What’s their sales model? Do they rely on volume sales or one-off purchases?
- What’s their market share? In other words, what percentage of the total revenue or sales in a market is their company responsible for?
- Are they low-cost or high-cost providers? Are they known for offering the best price or highest quality?
- Who are their target customers?
- Do they have both brick-and-mortar and e-commerce stories?
- How do they distribute their products and services?
- How do they differentiate themselves from other companies?
With these questions answered, your competitor will become so much more than an ice cream shop. Meet Innovative Ice Cream: an artisan ice cream shop that offers small-batch unique flavors. Compared to the industry average, their prices are actually quite reasonable. Their target customers are millennials who believe the weirder the flavor is, the better. They operate a brick-and-mortar store year-round and a truck in the summer months. And being the only other ice cream business in town, the battle for market share is on.
3. Study their sales tactics and results
It’s important to know your competitors’ products. It’s just as important to understand how they sell them.
- What does their sales process look like?
- What channels do they sell through?
- Do they have multiple locations? Are they expanding?
- Do they offer discounts regularly? Perks?
- What does the customer service experience look like?
- What are their yearly revenues?
A few of these answers will be hard to track down. For example, it’ll be tricky to see their annual reports unless they’re a publicly-traded company.
However, your customers and prospects are an excellent resource for uncovering some of this information. If they’re considering a competitor, ask them why: Did a specific product or feature catch their eye? Was it the price? The customer service experience? While this isn’t a glimpse into your competitors’ financial records, it does provide valuable qualitative data on their sales tactics.
And don’t hesitate to do some sleuthing yourself—particularly around their pricing, sales, and shipping costs. It helps gauge industry standards and ensures your pricing model is competitive and enticing.
So if your competitors offer a free week trial, consider a month for free. If their shipping costs are free after spending $100, offer free shipping over $50. It’s not always about reducing your prices, though. Let’s say their ice cream pints are cheaper than yours. Instead of lowering your price, offer a discount when they buy pints in bulk. Your customers will be pumped on the discount—and you’ll make a bigger sale!
3. Consider their marketing and promotional strategy
Selling and marketing are two very different things. A product may be amazing (*ahem* donut ice cream sandwiches), and the checkout experience could be absolutely frictionless. But if your marketing falls short, the product won’t sell. So it’s essential to identify what works in your industry—and what doesn’t.
I understand that marketing is typically a creative process, and you might be hesitant to borrow what others are doing. Your mother’s voice might be creeping into your head right about now. (Stop worrying about what others…) Press pause on those thoughts and hear me out.
Here are three quick reasons why you should consider your competitors’ marketing strategy.
- You’ll have a better grasp of which channels your audience and competitors are on, and subsequently, the best areas of opportunity for advertising and brand-building tactics.
- It’ll inform your brand style and tone. To increase brand recognition, you need to find ways to set your brand apart from others—style and tone are a big part of that.
- You could save money and reduce risk with your advertising. You’re targeting a similar audience as your competitor. Instead of spending the bulk of your budget on testing, you can lean into their legwork.
Maybe you saw a killer ad or social media post that’s driving a ton of engagement. Why reinvent the wheel? Recreate it with your brand style and tone and see if it’ll work for you too.
For more tips on analyzing your competitors’ marketing strategy, take a few minutes to watch this video from SEMrush:
4. Read into their content strategy
A company’s content strategy says a lot about them. Not only are you looking for the types of content they create (blogs, webinars and videos, FAQ pages, case studies, customer stories, podcasts), but also:
- How much content they have
- How frequently they push out new content
- Where they publish it
- The quality of the content
- If it’s SEO-optimized
- Levels of audience engagement
Now, this may sound like a lot, so here’s how you can scope down the work.
- Choose a small handful of samples to review instead of tackling every single piece. Choose samples that were published recently, as they’ll best reflect the current content strategy.
- Choose a variety of content pieces that span different topics, so you can have a relatively complete picture of what your competitor is sharing with their audience.
- Evaluate the accuracy of the information, quality of work, and value of each piece. Focus on the little details as well—what are their calls to action? Are they using cheesy stock photos or eye-catching designs made in-house?
- Take a peek at their audience engagement. Are people liking and sharing their content? Linking to it? If so, ask yourself, “why?” (Do they just like Innovative Ice Cream, or are they sharing that post because Justin Bieber is in it? Food for thought…)
5. Conduct a SWOT analysis
You’ve done a lot of digging on your competitors. Now it’s time to use that information to conduct a SWOT analysis. Many businesses will do one for their own company. Today, we’ll be discussing it in terms of your competitors.
If you’re unfamiliar, SWOT stands for strengths, weaknesses, opportunities, and threats. This exercise is used to evaluate a company’s competitive position and to develop strategic planning. It assesses internal and external factors, as well as current and future potential.
Source: WordStream
Let’s flip the discussion around on your competition. To get started with a SWOT analysis of your competitors, ask yourself these questions:
Strengths
- What does your competition do really well?
- What are they known for? What attracts customers to them?
- Why do customers ultimately end up purchasing from your competitors?
Is it the wacky flavors? The Justin Bieber endorsement?
Weaknesses
- What do your competitors’ customers complain about?
- What products or services should they offer but don’t?
“Stop being so innovative. Sometimes people just want vanilla.” -Yelp Reviewer
Opportunities
- Where are they not marketing or selling their product?
- In what areas do you have an edge on them?
- Based on their offerings, is there a gap you can fill?
They operate a truck in the summer months, you say? Have you considered operating a truck year-round?
Threats
- Have they lowered their prices recently?
- Are they offering new products or services?
- Are they moving to a new location closer to you?
Plot twist: They start offering donuts—and donut ice cream sandwiches.
You’re a Step Ahead of the Competition
When you perform a competitor analysis, you learn a lot about your competitors. At the same time, you learn a lot about your own business—and areas of opportunity.
Perhaps the big gap you can fill is product-related. Maybe you identified a social channel that’s untouched by your competitors. Or, it could be as simple as offering more discounts and sales.
If you uncover an opportunity to build out your paid media or SEO strategy, that’s definitely something we could help you with. So give us a shout—our teams are happy to help!
