- Get to know your competitors’ customers, products, and services to make smarter choices about your own pricing and marketing strategies
- Indirect competitors, as well as direct competitors, can hinder your success by drawing potential customers away from your brand
- Learn how to do a SWOT analysis to expand your business or respond to potential threats before they affect you
No matter what industry you’re in, your business will likely have competition, other companies vying for the same demographic of customers—and potentially selling products or services just like yours.
Competition isn’t a bad thing. It’s a natural part of the business landscape, and it indicates the potential for brands like yours to succeed. While it can be challenging to stand out from the pack, you can gain competitive advantage by thoroughly examining the brands you’re up against.
With a competitor analysis, you’ll unveil where other brands excel and where your company can take the lead. Here’s what you need to know about how to perform a competitor analysis as a small business owner.
How to do a competitor analysis
A competitor analysis (sometimes referred to as a competitive analysis) can be useful at any stage of business. Whether you’re starting a business, launching new products or services, or figuring out the next steps for scaling your brand, your competitor analysis can help refine your business plan and marketing strategies.
The following five steps will help you get familiar with the competitive landscape and draw actionable insights for your business.
1. Create a list of competitors
Competitive research must be focused to be effective. Choose up to 10 companies to research. Even if your market is saturated with competitors, investigating too many other brands can lead to undetailed, unhelpful findings.
When developing your list of competitors, keep an eye on both direct and indirect competitors (rather than only focusing on brands exactly like yours). This will yield the most comprehensive competitive intelligence possible.
When you think of the competition, you probably think of direct competitors first. These are the businesses that sell similar products or services to similar target markets—think Apple and Microsoft, Burger King and McDonald’s, or Target and Walmart. If you own a car detailing business, your direct competitors are other car detailers in your area.
Researching the direct competition can help startups gauge the difficulty of entering a select market or help existing businesses evaluate their current market share.
Indirect competitors are businesses that offer different products or services but still meet the target customers’ needs. For example, Taco Bell can draw consumers away from Burger King despite selling completely different food genres. Similarly, while an automatic car wash may not offer detailing services, it can still help clients achieve a cleaner car.
When you know your indirect competitors, you can get the full picture of your competition. Plus, you can stay one step ahead of potential replacement competitors—those that can fully disrupt your industry, like Airbnb did to hotels.
2. Evaluate their products and services
To find out why shoppers choose your competitors’ product or service, you’ll need to understand what your competitors offer. Take a look at your competitors’ websites, Yelp Business Pages, and other channels to do a deep dive on:
- Service or product features
- Available add-ons
- Guarantees, warranties, and return policies
- How they price their products or services
- What customers love about your competitors’ products or services
- Conversely, what makes customers hesitant about your competitors
For e-commerce brands, comparing shipping options is also key to making competitive decisions. Since shipping costs are the top reason for abandoned shopping carts in the U.S., keep your fees on par or less than other brands to win sales.
Using your findings, you can brainstorm smarter pricing strategies, identify industry trends, and figure out where your brand excels compared to your competitors. Plus, you can better develop a value proposition, which is the core reason why people should choose your products or services.
3. Identify their sales tactics
Direct competitors often have different sales processes. When you know how other brands get leads and achieve sales, you can brainstorm ways to improve your own business’ sales efforts and your customer experience.
To start, identify all of the places competitors sell their products or services. These can include physical business locations, online marketplaces like Etsy and Amazon, social media shops, and e-commerce sites. Take note of any planned expansions on their website or social media so you know if your competitors are growing or aiming to reach new markets.
Then, research the sales tactics your competitors use to draw leads toward a purchase, including sales promotions and product demos. Peruse their websites, attend industry conferences, sign up for their newsletters, and read their social media comments and Yelp Page reviews to gain customer insights.
4. Analyze their marketing efforts
Before businesses can sell to their target customers, they need to reach them first. Do a thorough analysis of your competitors’ marketing strategies to determine channels and tactics to focus on—which ones you should start using and which ones you shouldn’t waste your time on at all. Using their trial-and-error, you can optimize your marketing plan and make the most of your time and resources.
To start, identify the marketing channels your competitors are using, such as Yelp, Twitter, LinkedIn, and search engines. Then take note of any clear strategies. For instance, you can identify keywords they’re targeting to enhance their search engine optimization (SEO) and determine the types of content marketing they’re producing (like blog posts, YouTube videos, or podcasts). Pay attention to how often your competitors run marketing campaigns, post to social media, and respond to comments and reviews on social media and review platforms.
Once you know how your competitors market their brand, evaluate how their marketing campaigns are actually performing. For example, you can use tools like Semrush or Similarweb to pull metrics about your competitors’ website traffic.
You can also look at competitors’ mentions on social media sites and review platforms. For instance, search their brand name on Facebook and read their customer reviews on Yelp to gauge their online reputation.
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5. Perform a SWOT analysis
To complete your competitor analysis, tie all of your findings together with a SWOT analysis (strengths, weaknesses, opportunities, and threats). This is a competitive analysis framework that implements your insights gathered from the previous steps to gauge:
- Strengths—where other brands excel. Your competitors’ strengths can include loyal clients, high-profile partnerships, and successful referral programs.
- Weaknesses—where other brands have room to improve. Weak points can include limited product features, inconsistent digital marketing messages, or lack of funding.
- Opportunities—where their choices present an opportunity for you. For instance, if a competitor decides to stop selling a service you offer, you can swoop in and gain new customers who still have a need for it.
- Threats—where their choices can stunt your growth. For instance, if a brand lowers its prices or invests in new product development to give shoppers more options, your current and future clients may flock in that direction.
Once you complete a SWOT analysis for each brand you’ve studied, use your insights to improve your business plan. You can focus on the opportunities you’ve identified and work on alleviating any threats.
Stay ahead with a competitive analysis
When you know how to perform a competitor analysis, you can build valuable insights on other brands within your market. With this information, you can make more strategic decisions about how to run your business, advertise, and sell your products to your target audience.
Figure out who your competitors are, then start evaluating their official offerings, sales tactics, and marketing strategies to uncover where your opportunities lie.
Doing a competitive analysis isn’t the only way to improve your business results. Learn how to perform market research to further improve your decision-making.
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.