How to conduct a competitive analysis

Table of contents

• What is competitive analysis?
• What is competitive market research?
• The benefits of competitive analysis
• How to do your competitive analysis
• Start your competitive analysis now
• FAQs

Key takeaways

• Competitive analysis helps you assess competitors’ strengths, weaknesses, and market position to refine your strategy.
• Market research and SWOT analysis reveal opportunities to improve products, marketing, and sales tactics.
• Tracking competitors and industry trends helps you stay ahead, differentiate your brand, and uncover new opportunities.
• Applying insights from your analysis strengthens your unique value proposition, boosts customer retention, and prepares you for emerging competitors.

A competitive analysis helps you build a strategy to strengthen your business and triumph over your competitors. Here’s how competitive analysis can help you, and how to do it.

What is a competitive analysis?

A competitive analysis is a process to identify and evaluate your competitors’ strengths, weaknesses, strategies, and market position compared to your own. This analysis helps you identify opportunities and anticipate threats to gain a competitive edge in your market.

Competitive market analysis is also about your business. Findings from the analysis can help you improve your own products or services and make smarter decisions across your business.

What is competitive market research?

Competitive market research is all about better understanding your market by gathering and analyzing data relating to your competitors, industry, and customers.

It’s one of the foundations of competitive analysis because it reveals competitor strategies that you can use to capitalize on fresh opportunities.

Here’s more on conducting market research

How competitive analysis helps your business

Done right,a competitive analysis gives you a roadmap for growth. It’s about leveraging insights from your competitors so you can outperform the rest of your industry.

In a way, competitors make the perfect mentors. So, learn from them! Studying your competitors reveals:

• Areas they’re better, and where you need to improve
• Successful marketing strategies to adopt
• Mistakes to avoid
• Your unique strengths to highlight

Analyze their decisions – both the good and the bad – for insights to guide your own strategy.

Competitive analysis strengthens different areas of your business

Competitive analysis gives you practical information you can use to refine your strategies in marketing, sales, and product development.

• Marketing: analyze your competitors’ winning campaigns, then uncover why they work so well.
• Sales: study your competitors’ tactics and counter them by emphasizing your key selling points, addressing their weaknesses, and resolving objections.
• Product development: identify gaps in your competitors’ products to enhance features in yours and solve customer pain points.

How to do your competitive analysis

For good competitive analysis, you need to know who your competitors are; their strengths and weaknesses, and the opportunities and threats they present; and the questions that form a thorough competitive analysis.

1. Identify your competitors

Competing businesses target the same customers as you. They generally fall into three categories:

• Direct competitors: businesses that offer identical products or services and target your audience. Customers will compare you directly when deciding who to buy from. For example, Netflix competes directly with other on-demand streaming services like Disney+ and Hulu.
• Indirect competitors: companies that compete for your customers by providing an alternative (or substitute) product or service. For example, Netflix and local movie theaters both provide entertainment but in different formats. Customers may choose between them based on budget or convenience – or what they feel like that night.
• Potential competitors: businesses that could be your rivals in the future, either as a new startup or an existing company expanding into your industry. For example, a successful gaming platform might compete with established streaming services by expanding into movies and TV shows tied to its gaming franchise.

2. Conduct a competitive SWOT analysis

A SWOT analysis – assessing your competitors’ their strengths, weaknesses, opportunities, and threats – is a powerful way to pinpoint your place in the market and where you stand against competitors – great insights for your strategic decisions.

Here’s a list of the things you'd consider in a SWOT analysis when comparing your business to competitor.

Strengths might include:

• Extensive distribution networks – their products are widely available everywhere
• Strong brand recognition – they have an established reputation that customers trust
• Established iIndustry connections – they’ve built strong relationships with key buyers and partners
• Competitive pricing – their pricing is too low for others to compete directly on price

Weaknesses might include:

• Stale brand image – their brand fails to excite customers or emotionally connect with them.
• Low-quality packaging – it doesn’t meet customer expectations for quality or aesthetics.
• Negative reviews – their customers often criticize their product quality or experience.
• Poor customer service – consumers feel undervalued and unsupported.

Opportunities might include:

• Underserved niches – competitors overlook specific market segments that you could target
• Emerging trends – they are slow to adopt new technologies or adapt to industry trends
• Partnership potential – your competition’s networks might be weak, allowing you to work with key industry players
• Sustainability gaps – they lack eco-friendly or socially responsible initiatives that are becoming important to consumers

Threats might include:

• New competitors – startups or emerging businesses entering the market with innovative ideas
• Economic pressures – inflation or shifting consumer spending habits impacting overall demand
• Technological advancements – competitors adopt or pioneer new tools and processes faster than you
• Regulatory changes – new laws or policies that could favor competitors or create challenges for your business

For more about SWOT analysis, read the EDA’s advice.

3. Answer key questions about your competition and the market

Successful competitive market analysis digs deep to clarify why customers choose your competitors and how they position themselves. It aims to show you how you can set yourself apart and outperform them.

Here are the categories you should structure your analysis with, and the key questions within each that you need to answer.

Your market

• Who are the major players in the space?
• How is the market divided – who holds the largest share, and where are the opportunities for growth?

Brand perception

• How do customers perceive each competitor – are they seen as industry leaders, budget-friendly options, or are they known for exceptional quality?
• Which demographics do they appeal to – such as younger customers, bargain hunters, or eco-conscious buyers?

Products or services

• What features or benefits make them stand out?
• What gaps or weaknesses in their offerings could you improve on?

Customer experience

• How do customers interact with their brands – through websites, social media, apps, or physical stores?
• What support, guarantees, and loyalty programs do they offer?

Pricing and delivery

• What pricing strategies do competitors use – discounts, bundles, tiered, or premium pricing? Which approaches work best?
• How do they handle delivery and fulfilment – for example, do they focus on speed, flexibility, or reliability?

Putting your analysis into practice

It’s time to apply the insights from your analysis to reveal your unique advantages and to highlight the opportunities and challenges within your market.

Identify your competitive advantages

Your competitive analysis should help you pinpoint your own distinct advantages – factors setting your business apart that your rivals can’t easily replicate.

Product advantages

• Patents – are you the only business legally allowed to produce a certain product?
• Unique features – do you have innovative features and design elements that set you apart?
• Exclusive supply arrangements – can you access products or materials your competitors struggle to find?

Operational advantages

• Special processes – do you have more efficient methods or workflows than your rivals?
• Faster production – can you capitalize on trends by bringing products to market quicker than your competitors can?
• Lower costs – can you produce goods or services more cheaply than competitors?

Market advantages

• Strong brand reputation – does your brand’s credibility influence your customers’ decisions to buy as much as, or more than, price?
• Loyal customer base – do your customers stick with you, reducing the need for costly acquisitions?
• Niche market expertise – do you have specialized knowledge or experience that gives your business an edge?

Technological advantages

• Proprietary technology – Can you access specialist software, tools, or platforms that enhance your business?
• Digital automation and AI – Can AI and automation reduce your costs and improve efficiency?
• Data-driven insights – Can you use exclusive market data or predictive analytics to gain a strategic lead?

Once you’re aware of your strengths, you can integrate them into your marketing to stand out from the crowd.

• Highlight exclusive features in advertisements and product descriptions
• Emphasize key benefits in your messaging
• Leverage brand loyalty by encouraging customers to write testimonials and leave five-star reviews
• Demonstrate your innovative features or service offerings to position yourself as a market leader

Boost your business to beat the competition

No business is completely safe – so turn the insights you’ve gained from your competitive analysis into ways to protect your market position and stay ahead of the pack:

• Strengthen your unique value proposition (UVP) – offer something distinctive or uniquely appealing to your customers
• Build customer loyalty – give your customers exceptional service and rewards so they’ll never think to look elsewhere
• Diversify your offerings – expand your products or services so you don’t rely on a single revenue stream
• Keep innovating – evolve so your competitors are always playing catch-up
• Monitor the market – Watch market trends to stay ahead of changing preferences and new competitors

Take another look at your business plan to help you find ways to do these.

Above all, never get too comfortable! Success today feels great, but tomorrow will probably bring new challenges. So always protect your market position, just in case.

Prepare for new competitors

Keep an eye on the future. If you’re in a fast-growing industry or you start doing really well, you might find lots of new entrants in your market.

Your first step is to identify the barriers to entry in your market. Ask yourself:

• How hard would it be for someone to come in, copy my idea, and take my customers?
• How easy is it for an established business to tweak its offerings to take away my competitive advantages?

FAQs on competitive anazysis

1. How do I decide which competitors to analyze?

Focus on your closest direct competitors – businesses with similar products, price points, and target audiences. Look first at those with a larger market share or those your customers compare you to. Do this often – tracking competitor performance helps put you ahead of shifts in the market so you can adapt quickly.

2. Which metrics should I track when doing my competitive analysis?

Key metrics like market share, customer reviews, marketing strategies, product features, social media activity, brand engagement, and sentiment are all great for your analysis. If you use competitive benchmarking, compare these metrics against industry leaders to find gaps in your performance and areas you can improve.

3. How can I identify gaps in my competitors' offerings?

Take a good look at customer reviews, social media feedback, and forum posts for recurring complaints about prices, quality, or product features. These should highlight opportunities for you to do a better job than your rivals.

4. What’s the best way to track competitors over time?

You can track competitors’ moves by watching their websites and social media for price changes, customer feedback, and any major updates. Use free services like Google Alerts as a competitive analysis tool to update you on big announcements.

5. How do I use competitive analysis to find new market opportunities?

Study competitors’ products, pricing, and customer feedback to find gaps. Look for unmet needs in reviews, forums, and social media. Use this information to develop new features or services.

6. Should I use customer feedback in my competitive analysis?

Definitely. Customer feedback flags pain points, unmet needs, and common frustrations. Analyzing it helps you improve your offerings and position your business to meet those needs.

7. Can I do competitive analysis without expensive tools?

You sure can! Review competitor websites, social media, and customer reviews is free. Make the most of free services like Google Alerts, too, for notifications when your competitors are in the news.

8. What are some common mistakes to avoid in competitive analysis?

A common mistake is to focus only on direct competitors while ignoring indirect or emerging ones. Broaden your research to consider alternative solutions a customer might turn to – inside and outside your industry.

Another is copying a competitor’s strategies rather than improving on them to give yourself a competitive edge. Instead, analyze what works, gaps they’ve missed, and try to create a stronger selling point for your offerings.

9. How can competitive analysis help me keep my existing customers?

The better you understand your competitors’ strengths and weaknesses, the more information you have to improve your products or services – which will naturally boost retention. And if you’re thinking about starting a loyalty program, you can use insights from your competitors’ programs to refine yours.

10. How do I prioritize insights from competitive analysis?

Prioritize insights that align with your business’s goals. For example, if you’re focused on growth, analyze marketing strategies. Or if profitability is key, concentrate on pricing and cost savings.

For more info about growing a business, check out this guide.