Every business has competition. Yours will have too! That is why, for building a successful business, you’ll have to stay ahead of your competitors.
Not sure how to do it? Well, the simple answer is – to perform competitive analysis.
In this post, you are going to learn about competitive analysis and how to perform it for your startup.
But first, let’s see what competitive analysis is.
- What is competitive analysis?
- Why should you perform the competitive analysis?
- Understanding your industry
- Guide on how to do a competitors analysis
- List of competitor analysis tools
What is competitive analysis?
Well, competitive analysis is the process of understanding and analyzing your direct or indirect business competitors.
It provides information about a competitor’s products, services, marketing strategy, sales tactics, pricing, customer base, and everything you need to compete. In simple words finding a competitor’s weaknesses and strengths.
Additionally, you can use the gathered data to develop effective competitive strategies for your business.
Why should you perform the competitive analysis?
Competitive analysis is important for several reasons:
1. Identify your competitors
Now, you might be thinking that identifying competitors is an extremely easy job. All you have to do is search on Google and boom! You’ll be presented with a long result full of potential competitors of your business.
However, it is not as easy as you think. Identifying competitors is a complex job that on the very first step requires understanding your own business, and then performing thorough research and identifying and picking your actual competitors. Moreover, the competitors can be categorized into direct and indirect competitors.
A competitive analysis makes your process easier, helping you find both your direct and indirect competitors, including all the pieces of information about them.
2. Identify opportunities
After successfully identifying your competitors, you can pick each competitor separately and perform research to understand their strategies and identify gaps they use to target customers.
You will also get information about your competitors’ current market position, the trends they follow, and so on.
This will enable you to generate new opportunities out of your competitors.
3. Identify threats
If you want to survive in a competitive business world, you must always be aware of the threats you may face from your competitors.
Wondering how you can identify potential threats? Well, competitive analysis will help you with it.
When you perform competitive analysis, you get information on when and how your business can face potential threats from competitors. The threats can be anything such as changes in competitors’ pricing, new entrants in the market, introduction of new products, etc.
This overall helps you stay informed of the threats and be one step ahead of your competitors.
4. Develop effective strategies
Coming up with the best business strategies is not child’s play. But what if I told you that you could easily come up with effective strategies, that too with the help of your competitors? Yes, you can.
So when you do competitive research, you get all kinds of information about your competitors, from their marketing strategies and sales tactics to their product development and customer service strategies. This helps your business take learnings from their strategies and make it its own.
Additionally, by analyzing how customers interact with your competitors, you also get an idea of what they like and dislike.
All of this helps you shape your business in a positive way and affects your path to success
5. Understand your customers
By performing competitive analysis you get insights into your competitors and their relations with their customers.
This will help you identify the potential gaps and the unmet customer needs in the market, to gain an advantage over them.
You can also take the strengths and weaknesses of your competitors and compare them with your own to understand the areas where your business lacks and improve them, to provide better customer service.
Understanding your industry
Before going for competitive analysis, you should have a good understanding of your industry and how things work in it.
Not sure why understanding your industry is important? Here are some reasons why:
- Firstly, every industry works differently. So you cannot always apply one industry’s tactics to another.
- The customers of your industry and another industry are not the same. Every industry customers have different preferences.
- To follow the rules and regulations of your industry.
- Some industries are more advanced due to the rise of technology while others are yet to advance. In such cases, you cannot apply one industry’s technology to another.
- Helps in understanding who your competitors are in the industry.
How to understand your industry
Understanding the industry is crucial for every entrepreneur before conducting competitive analysis, as it helps them take effective actions accordingly. Here is how you can go about understanding your industry:
1. Identify your industry
Now you all probably know that you cannot run a business if you don’t know which industry it works in. That is why the first step towards understanding your industry is to identify it. Here’s how you can do it:
- Start by analyzing your product or service and understand what exactly they are.
- Next, ask yourself some questions like “What is the core purpose of my business?”, “What problem does it solve?”, and “To whom does my business serve?”, and answer them carefully.
- Next, research and try to find some businesses that offer products or services similar to yours and consider the industry they fall under.
2. Research industry reports
Ok, so you have successfully identified your industry. That’s great! And what else? Well, now it’s time to gather and analyze Industry reports.
What are industry reports? To explain in simple words, an industry report is like an overview of an industry. They provide information about the industry’s performance, forecasts, growth rates, etc.
Not sure how to do it? Well, it’s simple.
Head over to Google and type “[your industry name] industry report”, and you’ll be surprised with a list of web pages that provide exactly what you need.
3. Look for trends
Now that you have gathered industry reports, it’s time to analyze and get study of the Industry. You can learn about new innovations and trends in the industry to stay updated.
Here is a list of some of the best tools to do this:
- Google Trends
- Google Alerts
- LinkedIn Indsutry Insights
4. Learn the rules of the industry
Tell me one thing, do you want your business kicked out of the game for doing something you didn’t know you were doing wrong? Of course, not. That’s why it’s important to know all the rules and regulations of your industry.
5. Know your customers
We all know that customers are the center point of running a business. This means your business cannot survive if you don’t know who your customers are.
You can do this by learning about the age, gender, location, interests, needs, and so on, of your customers.
There are several ways to gather information about your customers:
- Conduct surveys to learn about their preferences
- Monitor your own and your competitors’ social media channels
- Make a search on Google
- Analyze your existing customers’ data
- Engage and interact with your customers
6. Network with industry experts
You must always take the step and try to network with as many industry experts as possible. These experts will teach you about your industry and how you must thrive in it, which can be extremely helpful.
The best way to network with industry experts is by following them on various social media channels like Facebook, LinkedIn, Twitter, etc. You can follow them on these channels and reach out to them to form a connection.
Guide on how to do a competitors analysis
Now let us learn how to do a competitive analysis for startups and any other kinds of businesses.
1. Identify your competitors
The first step in any competitive analysis is to identify the competitors. In this step, you analyze your own product or service to understand what you are selling and which businesses are selling the same.
When talking about competitors then there are generally three kinds of competition your business can face:
- Direct competitors – These are the kinds of competitors that offer products or services similar to what your business sells. Direct competitors are a direct challenge to your business, that target the same target audience in the same geographic area.
- Indirect competitors – These are the kinds of competitors that offer different products or services from what your business sells and target different customers. However, they fall under the same category as your business and serve similar needs.
Let us take One Plus as an example company here. In such cases, the direct competitors of One Plus would be brands like Samsung, Apple, Oppo, and Vivo, that offer similar products. Next, the indirect competitors would be brands like Dell, Microsoft, and HP, that offer different products but fall under the same category (electronic).
2. Research your competitors and gather information
Ok, so now that you know who your direct, indirect, and substitute competitors are, it’s time for you to gather information about them.
In this step, you’ll be collecting information about your competitors’ pricing, marketing strategies, sales tactics, market cap, target audience, and every other information needed.
There are numerous ways to collect this information. Here are some:
By visiting their online sites – If anyone asks me what’s the best way to gather information about a company, I would say visit their website. A website provides information about a company more than an actual person could. Therefore, you can visit their website and social media platforms to learn about them.
By conducting surveys – Well, I have myself taken part in a lot of surveys previously. Some companies conduct surveys to ask questions about their competitors to the audience. You can do the same by conducting surveys on popular survey platforms like Survey Monkey or Typeform.
By reviewing industry reports and publications – If not directly from the company or their audience, then you can gather information from third parties. You can research the reports or check out popular publications like Forbes and Bloomberg Businessweek. Furthermore, you can also visit websites like Crunchbase and Glassdoor, that provide basic information about a company.
3. Analyzing your competitors
Hmm… So you have successfully identified your competitors and gathered some information about them. Good. Now I suggest you take that information and use it to analyze your competitors’ strengths and weaknesses.
Here’s how you can do it:
To start, you can assess all of your competitors’ strengths. You can do this by analyzing all of your competitors’ strongest areas. Wondering what could be your competitors’ strengths? A good example of this is when your competition has tons of social media followers. In such cases, your competitors are stronger in their content marketing efforts. Through this, you will understand how to improve your own content.
Once you’ve finished analyzing your competitors’ strengths, it’s time to study their weaknesses. Good examples of such weaknesses could be bad customer service, poor brand image, etc. This will give you an idea of where you can beat your competition.
For example, let us take Shopify as the main company for this step and Bigcommerce as one of its competitors.
In such cases, the strengths of the competitors would come up to be something like “Bigcommerce is easier to set up and manage store”. This will tell Shopify to focus on their platform’s user-friendliness. Next, the weakness of the competitors would be something like “Bigcommerce is too expensive”. This will give Shopify an idea of how it can use competitor’s weaknesses to its advantage.
Ok, so you are done with analyzing the strengths and weaknesses of your competitors. Now what? Well, now I suggest you to take those strengths and weaknesses and compare them with your own.
See, you cannot improve your business just by analyzing the strengths and weaknesses of your competitors. For that, you need to compare them with your own and understand how to improve.
First, take your competitors’ strengths and compare them to your own locations. For example, if your competition has strong content marketing, compare their content with your own. By doing this, you can understand how to improve your own content.
Next, take the weaknesses of your competitors and compare them with your own. If your competitors have poor customer service, learn and understand how you can take advantage of that to attract customers.
5. Develop a strategy and monitor your competitors
Congratulations! You have completed almost all steps of competitive analysis. Then comes the final and most important step in this process: creating your schedule.
The process isn’t that hard once you’ve completed your competitive analysis. All you have to do is analyze the results of your research and make a decision. That’s it!
If your research says most of your competitors have a better sales strategy than you do, improve your sales strategy. If it says your business has better customer service than your competition, focus on how to take advantage of it. Nice.
Once you have completed a strategy, your final task will be to manage your competition. You see, your competitors may introduce new changes to their business every month. That’s why it’s important to keep an eye on them and keep developing new strategies.
Here are some of the best tools to monitor your competitors:
List of competitor analysis tools
Now let us discuss some of the best competitor analysis tools that can help you gain insights into your competitors’ strengths and weaknesses and identify opportunities.
Are you looking for a comprehensive competitive analysis tool? Look no further than Semrush; a digital marketing and SEO toolkit that allows companies to stay ahead of their competition.
Semrush offers 50+ marketing tools that help you monitor your competitors and learn how they are driving traffic to their websites. If you can track SEO rankings, social media growth, and backlinks, you can identify areas for improvement. Additionally, Semrush offers analytics and reporting features that help you track your results and compare them to your competitors’ performance.
Read the complete Semrush review here to know what it can do for your business.
Similarweb is another top-rated competitive analysis tool that provides numerous features to gather information about your rivals. You can analyze website traffic, engagement metrics, referral sources, highest traffic generating websites for your competitors and the keywords they use to rank higher on Google.
Furthermore, Similarweb also gives audience demographics such as age group, gender or location enabling users to identify specific audiences targeted by their competition.
SpyFu is a user-friendly competitive analysis tool that allows users to analyze their competitors’ online advertising strategies with ease.
With SpyFu’s most profitable keyword feature businesses can identify the most profitable keywords which would have been otherwise overlooked.
This helps improve advertising efforts resulting in better outcomes. Additionally, SpyFu provides valuable insight into marketing efforts compared with the competition, allowing you to take effective decisions.
If you’re looking to gain an advantage over your competition, you need to know what they’re doing. Well, Buzzsumo is the right tool for it.
Buzzsumo is a popular tool that tells you what is performing well in your industry and who is sharing it. You can also see which social media platform is giving the best results and how you can use them.
Wondering how else can you keep an eye on your competitors? Well, here’s my favorite tool: Ahrefs. Ahrefs is a game changer competitive analysis tool that can be used to gain valuable insights into competitor strategies.
Moreover, Ahrefs’ site explorer section provides insights into the backlink profiles of your rivals so that you can gather information about their link-building tactics. With Ahrefs at your disposal, gaining a competitive edge over your competitors has never been easier!
Why is having competition good for startups?
There are several reasons why having competition is good for startups:
1. They provide you with a roadmap if you are new to the industry
2. They push you to be innovative
3. They teach you new business lessons
4. You can easily learn from their strategies
What is the purpose of competitive analysis?
The purpose of a competitive analysis is to analyze your competitors and your own strengths and weaknesses to take a step ahead of your competitors.
What is SWOT analysis?
SWOT analysis is the process of gathering information and analyzing your own or your competitors’ strengths, weaknesses, opportunities, and threats.
So, there you have it folks! The complete guide to conducting a competitive analysis for startups. Now that you know how to conduct one, it’s your turn to take action.
Just remember all the steps included in this post, and you’ll be ready to take off with your competitive analysis.