By Oran Yehiel

Whether you're a brand-new startup ready to bring change to the business world or a football player striving for victory on the field, you share a commonality: knowing your competition is vital for achieving success. Just as athletes meticulously analyze their opponents' strengths and weaknesses, entrepreneurs have to adopt a similar mindset to succeed in a fiercely competitive market.

In this article, we will explore the essential steps of conducting a competitive analysis, a powerful marketing strategy to boost your startup's success. We'll provide practical tips, techniques, and tools to conduct a thorough analysis, enabling you to create a strategic business plan that sets your startup apart.

What is competitive analysis?

Competitive analysis involves identifying and evaluating the strengths and weaknesses of competing companies within the same industry or market. The goal is to understand how your business measures up against its rivals. A competitive analysis should be a crucial component of your company's overall business strategy and will help your organization make informed decisions to improve your position in the market.

By conducting a comprehensive competitive analysis, you will gain a better understanding of the factors that drive your industry and identify opportunities for growth and improvement. This will allow you to assess market demand for your products or services, explore potential threats from competitors, and uncover new market trends that may impact your business—it's like doing detective work to uncover your strengths and weaknesses. Let's break it down.

First, you have your direct competitors:

• They offer the same or similar products or services.
• They operate in the same market and geographical location.
• Their offerings are considered direct substitutes for your products or services.
• They target the same customer base.
• They often have similar pricing structures and business models.

Direct competitors are your main competition, so pay close attention to what they are doing.

Then, you have indirect competitors:

• They offer different products or services that satisfy the same or similar needs.
• They might operate in different markets or geographical locations.
• Their offerings are not direct substitutes, but still compete for the same consumer spending.
• They may appeal to your customer base for different reasons or during different occasions.

While indirect competitors may not be your primary competition, it's still important to keep an eye on what they're up to.

Once you've identified who your competitors are, it's time to gather some intel. Dig into their strategies, marketing tactics, and customer engagement methods. This information will give you insights into how you measure up in the market and where you can find your competitive advantage.

What to include in a competitive analysis

A competitive analysis starts by understanding your target market and who you're up against. You'll dive into the nitty-gritty details of your product or service and compare it to what your competitors are offering. Think pricing, market share, sales, and revenues. You'll even delve into marketing and social media strategies to see how they're winning over customers.

There are several key areas to consider:

1. Clearly define your target market and identify your specific niche. Understand the needs and preferences of your target audience to pinpoint competitors who are also catering to the same customer segment.

2. Assess and articulate your unique value proposition compared to your competitors. As reported by Nielsen, nearly two-thirds of shoppers prefer to buy new products from brands familiar to them. Thus, highlighting the aspects of your product or service that set you apart can offer a compelling reason for customers to choose you over others.

3. Identify and analyze your direct and indirect competitors. Businesses that are aware of their competitors' moves are more likely to succeed. Evaluate your competitors' products or services, pricing models, marketing strategies, target audience, and any unique features or offerings they provide.

4. Determine how you differentiate from competitors. According to a Salesforce study, 61% of customers say most companies treat them as a number. Therefore, focus on areas where you can offer a unique customer experience, innovative solutions, or superior quality.

5. Evaluate the marketing and customer acquisition strategies of your competitors. The biggest challenge for marketers today is generating traffic and leads. Thus, examining your competitors' online presence, social media engagement, content marketing, advertising campaigns, and lead generation tactics can provide valuable insights.

6. Pay attention to customer feedback and reviews for your competitors. According to a BrightLocal survey, 76% of consumers always or regularly read online reviews for local businesses. Understanding your competitors' strengths, weaknesses, and areas where they may be falling short in meeting customer expectations can offer critical insights to drive your business growth.

Including these six components in your competitive analysis will help you gain valuable insights into your startup's market positioning, identify opportunities for differentiation, and develop strategies to outshine your competition. Remember, the goal is to leverage your strengths and capitalize on market trends to propel your startup towards success.

Guide to conducting a competitive analysis

Follow these six simple steps to give you a comprehensive view of your position in the market:

Step 1: Get to know your competitors

Begin by selecting around five to 10 competitors that closely align with your company. Look for companies which offer similar products or services and have a comparable business model.

It's important to choose a mix of direct competitors who operate in the same space and indirect competitors who may target different markets but still pose a challenge to your business. Also, including both established players and startups will help give you a broader perspective.

Tools to use: Utilize tools like SEMrush or SimilarWeb to identify competitors in your industry. These tools provide insights into the online presence, traffic, and marketing strategies of your competitors. Additionally, industry-specific directories or trade publications can be valuable resources for discovering competitors within your niche. If you're in a niche market or just starting out, you may need to dig a bit deeper to find direct competitors that closely match your offering.

Step 2: Conduct market research

©Rawpixel.com - Adobe Stock

Once you have identified the competitors you will want to analyze and conduct market research for each one. This involves a mix of primary and secondary research to gather valuable insights.

Primary research:

• Gather data from target customers or industry professionals to understand preferences and perceptions.
• Conduct discussions with customers, experts, or employees of competitors for deeper insights.
• Organize group sessions to gather qualitative data and explore customer opinions.
• Assess the customer experience and pricing strategies of competitors through mystery shopping activities.

Secondary research:

• Analyze research reports and industry publications for market size, trends, and competitor performance.
• Scrutinize financial statements, annual reports, press releases, and website content of competitors.
• Track competitors' social media channels for marketing strategies and customer engagement.
• Examine customer feedback and online reviews to understand satisfaction and pain points.

Tools to use: SEMrush provides comprehensive analysis of organic and paid search strategies, keyword performance, and ad campaigns. Moz offers robust SEO capabilities, enabling you to explore competitors' websites and gain valuable insights. Utilizing these tools allows you to understand your competitors' online presence, identify SEO opportunities, and refine your own strategies for improved performance in the digital landscape.

Step 3: Comparison of product features

Now it's time to dive into the exciting phase of your analysis where you will compare your startup's product to your competitors' offerings. This comparison is all about breaking down the features of each product and understanding how they stack up against each other. This knowledge will help you identify areas of strength, areas for improvement, and opportunities for differentiation.

While every product has its own set of unique features, there are several key aspects that you should consider during this process:

• Price. Compare the pricing of your product with that of your competitors. Is your pricing competitive, higher, or lower? Understanding how your pricing aligns with the market can help you determine your positioning and potential pricing strategies.

• Service offered. Assess the range of services that your product provides compared to your competitors. Do you offer additional services or value-added features that set you apart? Consider how these services can enhance the customer experience.

• Age of audience served. Determine the target audience that your product caters to in terms of age. Analyze whether your competitors have a similar target demographic or if they serve a different age group and team.

• Number of features. Evaluate the number and range of features offered by your product and how they compare to your competitors. Are there any unique features or functionalities that give you an advantage or set you apart?

• Style and design. Consider the aesthetic appeal and design of your product in relation to your competitors. Does your product have a distinct style or design that appeals to your target audience?

• Ease of use. Assess the user-friendliness of your product and compare it with your competitors. How intuitive and easy is it for customers to use your product? Is there room for improvement in terms of usability?

• Types and number of warranties. Analyze the type and extent of warranties offered by your product and how they compare to your competitors. Are you offering better warranty terms or coverage?

• Customer support offered. Evaluate the level of customer support and after-sales service provided by your startup. How does it compare to what your competitors offer? Strong customer support can be a key differentiator in the market.

• Product quality. Assess the quality and durability of your product compared to your competitors. Is your product of equal or higher quality? Consider how product quality impacts customer satisfaction and perception.

Tools to use: When analyzing a lengthy features table, prioritize key aspects that hold significance. Utilize tools like spreadsheet software, product management software, survey and feedback tools, user testing platforms, and online review/social listening tools. Focus on cost, unique benefits, and ease of use.

Step 4: Comparison of product market

Now, you will shift your focus from product features to the marketing efforts of your competitors. Here you will dive deeper into each company's marketing plan to gain a comprehensive understanding. There are several areas you'll want to analyze:

• Social media. Examine the company's social media presence and engagement. How do they utilize platforms like Facebook, Instagram, LinkedIn, or Twitter to connect with their audience? What type of content do they share, and how do they engage with their followers?

• Website copy. Explore the company's website and pay attention to their messaging. What story are they trying to tell? How do they convey their value proposition and unique selling points? Analyze the website copy to understand their brand messaging and positioning.

• Paid ads. Investigate any paid advertising campaigns. Are they running Google Ads, Facebook Ads, or other online advertising campaigns? What keywords or targeting strategies do they use? Assess their ad creatives and messaging to uncover their approach to paid marketing.

• Press releases. Look for press releases or media coverage related to your competitors. What news is being shared? How does the company position itself in the market through these press releases? Identify any notable PR efforts and their impact.

• Product copy. Analyze how the company describes their products or services. What specific features or benefits do they highlight? Pay attention to product descriptions and see how they differentiate themselves from competitors.

As you analyze each area, it's important to ask thought-provoking questions to dig deeper into their marketing strategies. These questions will vary depending on your industry, but consider asking:

• What story are they trying to tell through their marketing efforts?
• What value do they bring to their customers, and how do they communicate it?
• What is their company mission or core purpose?
• How do they define their brand voice and personality?

By asking these questions and closely examining their marketing efforts, you'll gain insights into how your competitors position themselves, tell their story, and engage with their target audience. This knowledge will guide you in developing your own effective marketing strategies and standing out in the competitive startup landscape.

Tools to use: To gather insights on your competitors' target demographic, utilize social media analytics platforms (e.g., Facebook Insights, Instagram Insights, Twitter Analytics), customer feedback and review websites (e.g., Yelp, Trustpilot, Google Reviews). These tools provide valuable data to refine your marketing strategies and effectively reach your target audience.

Step 5: Utilize SWOT analysis

Competitive intelligence plays a crucial role in your competitor analysis framework, but it's equally important to shift the focus back to your own startup business plan. This is where a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis comes into play. It helps you identify your company's strengths and weaknesses while transforming weaknesses into opportunities and assessing the threats you face from your competition. This insight will guide you in leveraging your strengths, addressing weaknesses, exploring new ways, and navigating potential threats.

© Warakorn - Adobe Stock

During a SWOT analysis, take a moment to reflect and ask yourself key questions:

• What do we excel at? Identify your unique strengths and areas where your startup stands out from the competition. These are the factors that set you apart and give you a competitive edge.

• What areas could we improve upon? Acknowledge your weaknesses and areas where there is room for growth. By recognizing these aspects, you can develop strategies to overcome them and enhance your startup's performance.

• Are there any market gaps in our services? Look for untapped opportunities or areas where your startup can fill gaps in the market. This allows you to offer something unique and meet the needs of customers that may not be addressed by your competitors.

• What new market trends are emerging? Stay ahead of the game by identifying upcoming market trends. By being aware of these trends, you can adapt your strategies, products, or services to meet changing customer demands and stay relevant in the industry.

Tools to use: To create a visually impactful SWOT matrix, you can leverage tools like Microsoft PowerPoint, Canva, or Lucidchart. These tools offer customizable templates and intuitive interfaces to help you visually showcase your startup's strengths, weaknesses, opportunities, and threats, enabling you to make informed strategic decisions.

Step 6: Understand your position in the market

In the last step of your competitive analysis, it's time to assess your startup's position in the market landscape. To do this, we'll create a graph with two axes that represent the most important factors for success in your specific industry.

Let's consider an example template where the X-axis represents product quality and the Y-axis represents brand reputation. You'll plot each competitor on the graph based on their respective scores on these factors. This will give you a visual representation of where each competitor stands in terms of product quality and brand reputation.

You'll also plot your own startup on the graph. By doing so, you'll gain insights into how your product quality and brand reputation compare to those of your competitors. This will help you understand your position in the market and identify areas where you may need to improve or differentiate yourself.

Courtesy: Startup Geek

In this scenario, three companies outperform your startup in market presence and customer satisfaction, while two companies show similar market presence but higher customer satisfaction. This data serves as a starting point to identify threats and areas for improvement. Analyzing the graph helps pinpoint industry leaders, guiding effective strategies to address weaknesses and enhance competitive position.

Tools to use: To create the graph and analyze your startup's position compared to competitors, utilize spreadsheet software like Excel or Google Sheets. For advanced data visualization, consider tools like Tableau or Power BI.

An example of a competitive analysis

Let's imagine you're running a tech startup in the e-commerce industry, specializing in personalized fashion recommendations. To conduct a competitive analysis for your business, follow these steps:

Begin by researching and identifying your direct and indirect competitors in the personalized fashion recommendations market.

• Step 1: Explore the websites and platforms of your competitors, utilizing tools like SimilarWeb or SEMrush to delve into their offerings, user experience, and marketing strategies.

• Step 2, 3 & 4: Analyze their strengths and weaknesses, assessing factors such as product features, user engagement, customer satisfaction, and brand reputation.

• Step 5: Shift the focus back to your own startup and conduct a SWOT analysis to evaluate your unique strengths, weaknesses, opportunities, and threats.

• Step 6: Visualize the competitive landscape by creating a graph that compares competitors based on factors like user adoption and customer satisfaction, gaining insights into where your startup stands in relation to the competition.

As you compile and analyze information, you may discover that certain competitors excel in areas like user engagement or brand recognition. This understanding can inspire you to develop a differentiation strategy. For instance, you might consider focusing on a niche market segment or implementing innovative features to stand out.

Remember, the purpose of a competitive analysis is to gain a comprehensive understanding of your market, identify areas for improvement, and identify unique opportunities. This analysis will guide you in making informed decisions, allowing you to refine your offerings, enhance your marketing efforts, and ultimately position your startup for success in the competitive startup ecosystem.

Problems you might encounter while doing a competitive analysis

Before diving into your competitive analysis report, it's essential to be aware of some minor drawbacks:

Not taking action on the information. Remember, the purpose of conducting a competitive analysis is not just to gather information but to take action based on that information. The data you collect will provide insights into where you stand in the market landscape. To maximize the benefits of competitive analysis, use it as a tool for problem-solving and to refine your company's strategic plan.

Confirmation bias. Confirmation bias occurs when you interpret information based on preexisting beliefs, which can lead to holding onto false assumptions. To avoid this bias, rely on all available data to support your decision-making process.

For instance, if you believe your startup is the best in the SEO dental market for social media, ensure you gather comprehensive information that objectively assesses your competitors' social media performance. Embracing all available data helps eliminate biases and ensures a more accurate analysis results.

Not regularly updating your analysis. While constantly updating your report may seem tedious, it will allow you to stay up-to-date with evolving market trends and ensure you have accurate and timely insights into your competitors. By regularly refreshing your analysis, you can adapt your strategies and stay ahead of the curve.

Translate your analysis into action

Understanding your competitors' strengths and weaknesses is crucial for becoming a more effective marketer. By conducting competitive analysis, you gain valuable insights that can enhance your marketing strategy and enable you to better target your desired audience.

However, it is essential to translate your analysis into action by using the findings to establish clear business goals and develop a robust business plan. Only by taking proactive steps based on your competitive analysis can you position yourself to outperform your competitors and capture your target audience more efficiently.

Competitive analysis FAQs

About the Author

Post by: Oran Yehiel

Oran Yehiel is the founder of Startup Geek. As a digital marketing professional, Oran writes about venture capital, marketing, entrepreneurship, and more, bringing a wealth of experience to businesses seeking growth and success. Oran has an MBA specializing in financial management and is a certified public accountant.

Company: Startup Geek
Website: www.startupgeek
Connect with me on LinkedIn.