- A competitor analysis can help you differentiate your business and identify new marketing opportunities
- Perform a SWOT analysis to get a broad overview of the competitive landscape in your market, from direct to indirect competitors
- Dive deeper into different aspects of your competitors’ businesses by analyzing specific products or services, marketing tactics, or branding strategies
In the digital age, when customers can buy from any company around the world, small business owners face fierce competition. In fact, 90% of companies say their industry has become more competitive in the last three years.
Competing with successful brands is never easy. However, when you have strong data and insights about other companies in your market, you can make smarter decisions about how you promote your business and sell your products or services.
Learn how a competitor analysis can give you the competitive intelligence you need to improve your business strategies.
What is a competitor analysis?
A competitor analysis is the process of identifying competitors and comparing their sales, marketing strategies, and products or services with yours. Also known as competitive analysis, this assessment can give business owners insight into their competitors’ strengths and weaknesses, as well as their standing in their market.
How do businesses use competitor analyses?
Whether you own a startup or a well-known brand, a competitive analysis can help you identify what sets you apart from other brands and stay on top of what’s happening within your market. Below are four key benefits of a competitive analysis.
1. Show how you’re different than the rest
If you don’t know much about what your competitors offer, it’s hard to make the case that your brand is truly unique. Competitor analysis can help you spot your brand’s differentiators, which are the characteristics that separate your company from others. This knowledge will help you write a value proposition—a statement that identifies the core benefits that potential customers get from your brand—to shape your marketing messages.
2. Get proactive about new opportunities
Once you know what your competitors have to offer, you can also identify what they lack. Use this information to find gaps in the market—for example, products or services that meet the needs of underserved customers. As a result, you will be able to pursue new markets before other brands and find your niche, the sweet spot in your industry that distinguishes you to potential customers over your competitors.
3. Spot industry trends
Competitive analysis can reveal similarities between brands following trends in your industry. This knowledge is helpful when deciding whether to jump on board or take a different direction to make your brand stand out. Just because something is popular now doesn’t mean it’s a sustainable business model.
4. Set smart benchmarks for your growth
Competitor analysis helps you identify the metrics you need to grow at the same rate as your competition. For example, if you know how your market share or social media engagement is lower than similar brands, you can set realistic goals for surpassing your competitors.
How to identify your competitors
Before diving into a competitive analysis, determine which brands you want to evaluate. Start by identifying your direct competitors—the companies that sell similar products or services to the same target market. For instance, if you own a yoga studio, your direct competition may include other yoga studios in your service area, as well as online yoga classes.
These brands should be your priority for a competitive analysis. However, you should also include indirect competitors—brands that don’t sell the same products or services, but still meet your target audience’s needs. An indirect competitor for a yoga studio might include Pilates studios, gyms, and Tai Chi classes.
Although you likely have more options, limit your list of competitors to 10 or fewer brands. This way, you can perform thorough research and gain more actionable insights.
4 competitive analysis strategies
A competitor analysis can take several forms: It can capture the bigger picture of a competitive landscape or focus on a specific aspect of business strategy. Use these four strategies when conducting your competitor analysis.
1. SWOT analysis
The most common type of competitive analysis is SWOT analysis, which stands for strengths, weaknesses, opportunities, and threats. Conducting a SWOT analysis for each of your competitors will help you identify:
- Strengths—what they do best and what attracts clients to their brand
- Weaknesses—the problems their clients experience and the product features or services they lack
- Opportunities—the strategic choices your competitors make that may open up an opportunity for your business, such as discontinued products or shortened business hours
- Threats—the strategic moves your competitors make that negatively affect your success, such as lowered prices or business expansion
A SWOT analysis is a strong starting point for small businesses that want to compare competitors. It provides a broad look at what other brands have to offer and where your business fits into the market.
2. Product or service comparison
A product or service comparison can help you understand the value your brand provides in comparison to your competitors. To perform this type of competitive analysis, list the following information:
- Your competitors’ product features or services
- Your competitors’ pricing for each good or service, as well as add-ons
- Discounts or sales your competitors regularly offer
- Demographics, such as age or gender, of your competitors’ customer base
A product or service comparison is a good choice if you are introducing new products or services or updating your pricing strategies. This analysis can help you identify pricing for new products and determine whether you should raise prices on existing ones.
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3. Social media analysis
Social media is one of the most important marketing channels for both digital brands and brick-and-mortar businesses. To make your social media presence stand out, identify:
- Social media platforms your competitors use, such as LinkedIn, Facebook, and Twitter
- When and how often your competitors post on social media
- Their share of voice, or how often social media users mention their brand and what they’re saying
- The topics your competitors post about and which posts perform best
Use a social media analysis when you’re launching a new account or deciding whether to invest more in social media content creation.
4. SEO analysis
Search engine optimization (SEO) is a way to enhance your business website so search engines display it to potential customers. While many businesses use keywords—terms that customers are searching for—to improve their ranking, no two brands follow the same SEO or keyword strategy. Follow these steps to evaluate your competitors’ websites:
- Use Moz’s domain authority checker to learn how a website performs on search engines based on its quality of content
- Use a free keyword research tool to find your competitors’ most successful keywords, as well as keywords with less competition
- Use Ahrefs’ backlink checker to find out how many websites link to your competitor’s website (backlinks are another factor that can improve a website’s SEO)
- Visit your competitor’s website to see which keywords they include in content marketing
An SEO analysis is a good fit for businesses looking to expand their digital presence or identify more keywords to target in SEO strategy.
Gain the competitive advantage
Staying a step ahead of your competition is the best way to guarantee long-term success. However, your company can’t generate strong sales and marketing strategies based on assumptions alone.
By performing a competitor analysis—whether it’s a SWOT analysis or assessments of specific products, services, or marketing channels—you gain crucial insights to differentiate your business and entice customers.
Once you’ve identified new opportunities from your competitive analysis, learn how to do market research on a small business budget.
The information above is provided for educational and informational purposes only. It is not intended to be a substitute for professional advice and may not be suitable for your circumstances. Unless stated otherwise, references to third-party links, services, or products do not constitute endorsement by Yelp.