How to Do a Competitor Analysis: A Guide for Businesses

Competing in the business world can be challenging. To succeed, you need to conduct research prior to entering the market, be it on a global scale, or the one in Pakistan. 

And for that, you have to understand your own, as well as your competitors’ strengths and weaknesses. This guide will walk you through the essentials of competitor analysis, helping your company’s competitive advantage in the industry.

What Is a Competitor Analysis

The competitor analysis framework, or also just competitive analysis, is the systematic process of evaluating your business rivals to gather information about their strategies, strengths, and weaknesses.

In its essence, competitive analysis involves gathering information about your competitors’ products, services, marketing tactics, and market positioning. This data helps you make informed decisions to enhance your business strategies.

Why Competitor Analysis is Important

Your competitors’ strategies rely on knowing other competitors’ businesses from top to bottom. Battling such competitive pressure is difficult, but it is one of the keys to thriving in today’s dynamic market. 

Here’s why it’s crucial:

• Gaining a competitive edge: Performing a competition analysis on your competition allows you to find out what your competitors are doing well and where they fall short, so that you can position your own business to outperform theirs.

• Uncovering market opportunities: By performing primary market research, you can identify gaps in the market. Similarly, a thorough competitive analysis allows you to discover areas where your competitors are not fully meeting customer needs. This information can guide your business in offering innovative solutions and capturing untapped market segments.

• Informed decision-making: Competitor insights enable data-driven decision-making. Whether it’s pricing adjustments, marketing strategies, or product development, knowing what your competitors are doing allows you to make informed choices that align with your business goals.

• Customer-centric approach: Understanding your competitors’ products and services, as well as the interactions revolving around them helps you tailor your offerings to meet customer expectations better. This customer-centric approach can lead to improved customer loyalty and satisfaction.

• Adaptation in a dynamic market: The business landscape constantly evolves, and new competitors can emerge at any time. Regularly conducting a competitor analysis through and through may be too costly, but doing a ‘lean’ one, focusing only on the most important aspects, can at least keep you informed about changes in your industry and can adapt your strategies accordingly.

Another important factor is risk mitigation. By identifying potential threats and challenges posed by your competitors, you can proactively address them, reducing the risks to your business.

How To Identify Your Competitors

To effectively analyze your competitors, you need analytics systems in place. First, you must identify your direct and indirect competitors to begin your competitor analysis. Your direct or primary competitors offer similar products or services to the same target audience.

Indirect competitors, on the other hand, might serve a different need but still compete for your target customer’s attention on the same market. Additionally, be vigilant about potential competitors whose entry into your market could disrupt your business, such as substitute or replacement competitors who offer an alternative solution in the same category of products or services you’re active in.

Start by examining competitors’ websites. customer and even employee reviews, as well as your competitors’ pricing. Test your competitors’ customer service. Assess the user experience and design to gain insight into their digital marketing strategy.

Also, you need to conduct market research, so you can gather data on your competitors’ market share, customer demographics, and growth trends. This information will help you understand their market positioning and potential vulnerabilities. Use market research and analysis services to stay up-to-date with industry trends.

In order to do that, engage with your sales team, as it can provide invaluable insights into competitor strengths and weaknesses based on customer interactions.  Encourage them to share feedback regularly, as their frontline perspective can be a goldmine of information.

Understanding Your Competitors’ Strategies

Once you know who you’re up against, it’s time to dive deeper into your competitors’ pricing strategies, products, and services.

This in-depth analysis will help you identify opportunities and threats in your market.

Product and Service Analysis

Conduct a service or product analysis in order to see exactly what your competitors are doing. This way, you can identify what unique capabilities they provide, and how they compare to yours.

See how below:

• Features and functionality: Examine the features and functionality of their offerings. What unique capabilities do they provide, and how do they compare to yours?

• Quality and performance: Assess the quality and performance of their products or services. Do they excel in certain aspects, and are there areas where they fall short?

• Uniqueness: Identify competitors’ offerings, and pin-point what sets them apart. What makes their products or services stand out, and how do they communicate this to customers?

It could be that your main competitors rely on a sort of intellectual property to differentiate themselves from other sites. Or it could be that they simply have outstanding sales tactics even if their offering is mediocre. Whatever it is, you have to assess each aspect, including the pricing and UVP. 

Pricing Strategies

Understanding your direct competitors’ pricing is essential for positioning your pricing strategy effectively.

Learn how below:

• Pricing models: Determine each pricing model your competitors use. Are they adopting premium pricing, budget-friendly pricing, or a value-based approach?

• Price points: Identify the specific price points at which your competitors offer their products or services. Are they pricing higher or lower than you, and why?

• Discounts and promotions: Monitor any deals, promotions, or special offers your competitors run. Assess how much revenue they get and the impact of these pricing tactics on their customer acquisition and retention.

Although you share a similar target audience, sometimes your direct competition may have a very different pricing strategy that you can identify when you do an exhaustive financial analysis. 

Is it because they have a much better grasp over their budget, in addition to their services and products’ weaknesses relative to their strengths, and can market them better? Once you have examined the sales process in detail, you may be able to find out.

Unique Value Proposition (UVP)

A critical aspect of any full competitive analysis is evaluating your competitors’ unique value propositions (UVPs). Your competitors’ UVPs are the core messages they use to communicate their distinct advantages to customers.

In order to find them, use the following:

• Messaging analysis: Analyze the messaging on their websites, including their mission statement, marketing materials, and advertising campaigns. What key messages do they emphasize to differentiate themselves from the competition?

• Customer appeal: Assess the effectiveness of their UVPs in attracting and retaining customers. Are their UVPs resonating with their target markets, and how are they measuring their success?

• Alignment with offerings: Consider how well their UVPs align with their products or services. Are they delivering on the promises they make in their UVPs?

Everything mentioned until now is wrapped in the business’ unique value proposition. When you look at other players in the same industry, if you can see each element of their approach that makes customers choose their offerings and not yours, then you can take action to adjust your own business strategy to better fit the market needs.

Analyzing Your Competitors’ Marketing and Advertising Strategies

Effective competitor analysis involves dissecting your rivals’ strategies to reach their audience, build brand awareness, and drive growth.

In the next lines, we will see how you can analyze your competitors’ strategies, so you can get a competitive advantage.

Content Marketing

Content marketing is a cornerstone of modern business strategies. Analyze the type and quality of content your competitors produce. Examine blog posts, videos, infographics, and any other content they create. Look for consistency, relevance, and engagement.

Assess whether their content aligns with their target customers’ interests and needs.

Social Media Strategy

Social media is today’s social listening tool you can utilize for brand promotion and engagement. Investigate your competitors’ social media presence.

Identify the social media channels they are active on, the frequency of their posts and the quality of their content. Pay attention to their engagement metrics, such as likes, shares, comments, and follower growth, to gain insights into their social performance.

Advertising Channels

Examine the advertising and marketing channels your competitors use to reach their audience. Identify where they allocate their advertising budgets, such as Google Ads, Facebook Ads, or traditional media like TV and radio. But also don’t forget to look at offline advertising campaigns that they may be running as well.

Evaluate the effectiveness of their campaigns by assessing factors like click-through rates, conversion rates, and return on investment. Determine if there are opportunities for your business to explore new advertising channels or refine existing ones.

Examining Your Competitors’ Online Presence

Many of your competitors’ marketing and engagement efforts occur online. In performing such a company overview, you go through several stages where you analyze competitors’ market positioning.

This can be done in a number of ways, like performing regular website analysis and social media presence of your competitors.

Website Analysis

Start by evaluating your competitors’ websites. A well-designed and user-friendly website can significantly impact a business’s success.

You need to pay attention to the following:

• Design and user experience: Assess their website’s visual appeal and usability. Is it easy to navigate, and does it provide a seamless experience for visitors?

• Content quality: Examine the content on their site. Is it informative, engaging, and up-to-date? Are there blog posts, case studies, or whitepapers that showcase their expertise?

Also, don’t forget to look for call-to-action buttons, lead generation forms, and other conversion-focused features. Analyze how effectively their website converts visitors into leads or customers.

Social Media Presence

Social media is a dynamic channel for brand promotion and customer engagement. In order to analyze the social media presence of your competitors, you need to determine which social media platforms they use and why. Also, consider the suitability of these platforms for their target audience.

Another important step of the process is to analyze how often they post on social media and whether they maintain consistency in their posting schedule. Evaluate engagement metrics such as likes, shares, comments, and follower growth. In addition to that, identify posts or campaigns that generate the most engagement and learn from their strategies.

SEO Performance

Search engine optimization (SEO) plays an important role in online visibility. Use tools like SEMrush or Ahrefs to assess your competitors’ SEO performance.

You need to identify the keywords they rank for and their positions in search engine results pages (SERPs). Also, analyze the quality and quantity of backlinks pointing to their website, because strong backlink profiles can contribute to higher search rankings.

Conducting a Comparison SWOT Analysis

A SWOT analysis is a structured framework that allows you to assess your business, but it can also be used as a competitive analysis template.

Thus, it involves the evaluation of your own company’s technology stack, represented by strengths and weaknesses, opportunities and threats, followed by the same, but on the competitors’ side.

Strengths

Strengths represent your business’s internal advantages and assets. Identify areas where your firm excels and outperforms competitors.

These company’s strengths could include:

• Unique products or services;
• Strong brand reputation;
• Robust customer loyalty;
• Talented and motivated team;
• Efficient internal processes.

Understanding your strengths allows you to leverage them for a competitive advantage. For example, if your customer service is a strength, improve it further to set your business apart. 

Weaknesses

Weaknesses are internal vulnerabilities that put your business at a disadvantage compared to competitors.

These might include:

• Limited resources or budget constraints;
• Outdated technology;
• Inefficient workflows;
• Lack of brand recognition;
• Skills gaps within your team.

Identifying weaknesses is the first step toward addressing them. Develop strategies to mitigate weaknesses and turn them into strengths over time. 

For instance, if you are struggling with managing all the tasks, either prioritize them based on importance and urgency, but if you have the budget, you can also check how many employees you could hire to cover all responsibilities, including those in specific brick-and-mortar locations.

Opportunities

Opportunities are external factors and trends that can benefit your business.

These may include:

• Emerging markets or customer segments;
• Technological advancements;
• Changes in consumer behavior;
• Industry trends and shifts;
• Partnerships, joint ventures, or collaborations.

You can align your business strategy by recognizing opportunities to capitalize on them. For example, perhaps consider developing and marketing sustainable offerings if you do a demand analysis and see that eco-friendly products are being highly sought after.

Threats

Threats are external factors that can harm your business.

These could be:

• Intense competition;
• Economic downturns;
• Regulatory changes;
• Negative industry trends;
• Supplier or vendor issues.

Awareness of threats enables you to prepare for and mitigate potential challenges proactively. For example, if a new business enters the same market, focus on enhancing customer relationships to maintain loyalty.

The SWOT analysis template is used so much because it is perhaps the best competitive analysis example you can do for publicly traded companies that have to post their data in the availability of the public domain. In case you prefer to aggregate that data in an visually appealing manner, relying on a competitive analysis spreadsheet is one possible option.

If you are interested in additional methods for analysis, consider VRIO for internal environment analysis, Porter’s five forces for an analysis on the competitive forces of your industry, PEST analysis, aka PESTEL analysis, for understanding the business environment of a firm, and the 4 P’s analysis, aka marketing mix, to neatly organize the main elements of a business strategy.

How to Gather and Analyze Competitors’ Data

All competitive analyses require a manual examination of your rivals to be accurate, but it’s not only that. Leveraging competitor analysis report functionalities within marketing and sentiment analysis tools can significantly enhance your insights. 

Here are some exemplary tools and resources to consider:

• Google Alerts: Google Alerts is a free tool that provides real-time updates on your competitors and industry-related keywords. Set up alerts for your competitors’ names, products, or relevant industry terms. You’ll receive notifications when new information appears online, informing you about your competitors’ activities.

• SEMrush: SEMrush is a powerful competitive analysis report tool that offers a comprehensive view of every competitor’s marketing efforts. With it, you can Identify the keywords that key competitors rank for and explore opportunities in your target market. You can also discover content market gaps by comparing the topics and keywords your competitors are covering but you aren’t.

• Similarweb: Similarweb is another valuable tool for competitor research and analysis, focusing on website traffic and audience insights. You can easily grasp your competitors’ strategy through audience demographics, interests, and geographic distribution. This information can help you tailor your own strategy to break through the same market.

With these tools, you may compare your website’s performance to your competitors to identify areas for improvement and optimization. This information can help you tailor your marketing strategies to reach similar target audiences.

Creating an Action Plan to Follow

Competitor analysis is only valuable if you translate the insights gained into actionable strategies. One of the primary goals of competitor analysis is to identify areas where your business can stand out.

Due to this, you need to carefully analyze the information that you already have and create a solid action plan to follow.

Differentiation Strategy

A differentiation strategy involves finding unique selling points that differentiate your business from competitors.

Consider the following:

• What special features or benefits can you offer that competitors do not?
• How can you enhance your brand’s image to make it more appealing to your target audience?
• Are there niche markets or underserved customer segments you can target?

By pinpointing your differentiators, you can effectively position your business in the market and attract a loyal customer base.

Pricing Changes

Pricing is a critical aspect of competition, so you need to pay attention to this part of your action plan. Based on your competitor analysis, consider adjusting your pricing and promotion strategies. 

This way, you can evaluate whether your prices are competitive and align with your value proposition. To attract and retain customers, experiment with promotional tactics, such as discounts, bundles, or loyalty programs.

Last but not least, monitor your competitors’ pricing changes and respond strategically to stay competitive.

Products and Services Enhancement

Competitor data analysis often reveals gaps or areas where competitors need to catch up. Below, we will list actionable insights to drive product or service improvements.

Let’s see them in detail:

• Continuously improve the quality and features of your offerings to outperform competitors.

• Listen to customer feedback and adapt your products or services based on their needs and preferences.

While performing the above recommendations, don’t forget to always innovate by introducing new products or services that address unmet customer needs or emerging market trends.

Marketing Tactics

Competitor insights should inform your marketing tactics.

You may consider the following:

• Craft compelling messages highlighting your unique selling points and resonating with your target audience.

• Align your advertising and content strategies with customer preferences and competitor strategies.

Last but not least, stay ahead of competitors by adopting emerging marketing trends and technologies.

Ongoing Tracking and Monitoring

Competitor analysis is not a one-time task but an ongoing process. You can maintain your competitive edge by continuously monitoring your competitors’ activities, industry trends, and performance metrics.

Key components of these include:

• News and updates: Stay informed about changes in your competitors’ leadership, products, or strategies by following industry news and press releases.

• Market trends: Monitor industry trends, consumer preferences, and emerging technologies that may impact your competitors.

• Performance metrics: Track your competitors’ performance metrics, such as market share, revenue, and customer satisfaction scores.

Based on the insights gathered from continuous monitoring, be prepared to adapt and evolve your strategies.

Consider the following:

• Agile decision-making: Develop a culture of agility within your organization to respond quickly to changes in the competitive landscape.

• Scenario planning: Anticipate potential changes in the market and have contingency plans in place to mitigate risks.

• Competitor response: If your competitors make strategic moves, assess their impact and adapt your strategies accordingly.

Another important step of the process is to implement innovations, as they are the lifeblood of long-term success. Continuously seek opportunities to innovate and lead the market.

This can be done with the following:

• Research and development: Invest in R&D to develop new products, services, or technologies that set you apart.

• Customer-centric innovation: Listen to customer feedback and use it to drive innovation that directly addresses their needs.

• Market expansion: Consider entering new markets or customer segments where your competitors are less established.

Innovation ensures that you’re not just keeping up with competitors but setting the pace in your industry.

Navigating the Competitive Seas

What makes competitive analysis important in gaining a solid market share percentage is keeping a certain mindset. One, where you continuously seek ways to improve your online store and attain further business growth by using what your competitors are doing or not doing as building blocks.

Whether you’re a small business owner, an e-commerce business, or an aspiring entrepreneur with a groundbreaking business idea, the competitive analysis framework can be your compass for future growth and prosperity.

Leverage the tools and strategies outlined in this guide and you will be able to navigate through the market landscape more effectively. After all, the journey to success isn’t just about beating your competitors, but about building your own brand and pursuing excellence in ever-changing market dynamics. 
In this pursuit, competitive market analysis becomes your trusted ally, and data-driven decisions – your secret weapon. Keep analyzing, strive to innovate, and watch your business soar to new heights.