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How to create a competitive analysis (with examples)
Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own. In this guide, we’ll outline how to do a competitive analysis and explain how you can use this marketing strategy to improve your business.
Whether you’re running a business or playing in a football game, understanding your competition is crucial for success. While you may not be scoring touchdowns in the office, your goal is to score business deals with clients or win customers with your products. The method of preparation for athletes and business owners is similar—once you understand your strengths and weaknesses versus your competitors’, you can level up.
What is a competitive analysis?
Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own.
Direct competitors market the same product to the same audience as you, while indirect competitors market the same product to a different audience. After identifying your competitors, you can use the information you gather to see where you stand in the market landscape.
What to include in a competitive analysis
The purpose of this type of analysis is to get a competitive advantage in the market and improve your business strategy. Without a competitive analysis, it’s difficult to know what others are doing to win clients or customers in your target market. A competitive analysis report may include:
A description of your company’s target market
Details about your product or service versus the competitors’
Current and projected market share, sales, and revenues
Marketing and social media strategy analysis
Differences in customer ratings
You’ll compare each detail of your product or service versus the competition to assess strategy efficacy. By comparing success metrics across companies, you can make data-driven decisions.
How to do a competitive analysis
Follow these five steps to create your competitive analysis report and get a broad view of where you fit in the market. This process can help you analyze a handful of competitors at one time and better approach your target customers.
1. Create a competitor overview
In step one, select between five and 10 competitors to compare against your company. The competitors you choose should have similar product or service offerings and a similar business model to you. You should also choose a mix of both direct and indirect competitors so you can see how new markets might affect your company. Choosing both startup and seasoned competitors will further diversify your analysis.
Tip: To find competitors in your industry, use Google or Amazon to search for your product or service. The top results that emerge are likely your competitors. If you’re a startup or you serve a niche market, you may need to dive deeper into the rankings to find your direct competitors.
2. Conduct market research
Once you know the competitors you want to analyze, you’ll begin in-depth market research. This will be a mixture of primary and secondary research. Primary research comes directly from customers or the product itself, while secondary research is information that’s already compiled. Then, keep track of the data you collect in a user research template .
Primary market research may include:
Purchasing competitors’ products or services
Conducting online surveys of customers
Holding in-person focus groups
Secondary market research may include:
Examining competitors’ websites
Assessing the current economic situation
Identifying technological developments
Reading company records
Tip: Search engine analysis tools like Ahrefs and SEMrush can help you examine competitors’ websites and obtain crucial SEO information such as the keywords they’re targeting, the number of backlinks they have, and the overall health of their website.
3. Compare product features
The next step in your analysis involves a comparison of your product to your competitors’ products. This comparison should break down the products feature by feature. While every product has its own unique features, most products will likely include:
Age of audience served
Number of features
Style and design
Ease of use
Type and number of warranties
Customer support offered
Tip: If your features table gets too long, abbreviate this step by listing the features you believe are of most importance to your analysis. Important features may include cost, product benefits, and ease of use.
4. Compare product marketing
The next step in your analysis will look similar to the one before, except you’ll compare the marketing efforts of your competitors instead of the product features. Unlike the product features matrix you created, you’ll need to go deeper to unveil each company’s marketing plan .
Areas you’ll want to analyze include:
As you analyze the above, ask questions to dig deeper into each company’s marketing strategies. The questions you should ask will vary by industry, but may include:
What story are they trying to tell?
What value do they bring to their customers?
What’s their company mission?
What’s their brand voice?
Tip: You can identify your competitors’ target demographic in this step by referencing their customer base, either from their website or from testimonials. This information can help you build customer personas. When you can picture who your competitor actively targets, you can better understand their marketing tactics.
5. Use a SWOT analysis
Competitive intelligence will make up a significant part of your competitor analysis framework, but once you’ve gathered your information, you can turn the focus back to your company. A SWOT analysis helps you identify your company’s strengths and weaknesses. It also helps turn weaknesses into opportunities and assess threats you face based on your competition.
During a SWOT analysis, ask yourself:
What do we do well?
What could we improve?
Are there market gaps in our services?
What new market trends are on the horizon?
Tip: Your research from the previous steps in the competitive analysis will help you answer these questions and fill in your SWOT analysis. You can visually present your findings in a SWOT matrix, which is a four-box chart divided by category.
6. Identify your place in the market landscape
The last step in your competitive analysis is to understand where you stand in the market landscape. To do this, you’ll create a graph with an X and Y axis. The two axes should represent the most important factors for being competitive in your market.
For example, the X-axis may represent customer satisfaction, while the Y-axis may represent presence in the market. You’ll then plot each competitor on the graph according to their (x,y) coordinates. You’ll also plot your company on this chart, which will give you an idea of where you stand in relation to your competitors.
This graph is included for informational purposes and does not represent Asana’s market landscape or any specific industry’s market landscape.
Tip: In this example, you’ll see three companies that have a greater market presence and greater customer satisfaction than yours, while two companies have a similar market presence but higher customer satisfaction. This data should jumpstart the problem-solving process because you now know which competitors are the biggest threats and you can see where you fall short.
Competitive analysis example
Imagine you work at a marketing startup that provides SEO for dentists, which is a niche industry and only has a few competitors. You decide to conduct a market analysis for your business. To do so, you would:
Step 1: Use Google to compile a list of your competitors.
Steps 2, 3, and 4: Use your competitors’ websites, as well as SEO analysis tools like Ahrefs, to deep-dive into the service offerings and marketing strategies of each company.
Step 5: Focusing back on your own company, you conduct a SWOT analysis to assess your own strategic goals and get a visual of your strengths and weaknesses.
Step 6: Finally, you create a graph of the market landscape and conclude that there are two companies beating your company in customer satisfaction and market presence.
After compiling this information into a table like the one below, you consider a unique strategy. To beat out your competitors, you can use localization. Instead of marketing to dentists nationwide like your competitors are doing, you decide to focus your marketing strategy on one region, state, or city. Once you’ve become the known SEO company for dentists in that city, you’ll branch out.
You won’t know what conclusions you can draw from your competitive analysis until you do the work and see the results. Whether you decide on a new pricing strategy, a way to level up your marketing, or a revamp of your product, understanding your competition can provide significant insight.
Drawbacks of competitive analysis
There are some drawbacks to competitive analysis you should consider before moving forward with your report. While these drawbacks are minor, understanding them can make you an even better manager or business owner.
Don’t forget to take action
You don’t just want to gather the information from your competitive analysis—you also want to take action on that information. The data itself will only show you where you fit into the market landscape. The key to competitive analysis is using it to problem solve and improve your company’s strategic plan .
Be wary of confirmation bias
Confirmation bias means interpreting information based on the beliefs you already hold. This is bad because it can cause you to hold on to false beliefs. To avoid bias, you should rely on all the data available to back up your decisions. In the example above, the business owner may believe they’re the best in the SEO dental market at social media. Because of this belief, when they do market research for social media, they may only collect enough information to confirm their own bias—even if their competitors are statistically better at social media. However, if they were to rely on all the data available, they could eliminate this bias.
Update your analysis regularly
A competitive analysis report represents a snapshot of the market landscape as it currently stands. This report can help you gain enough information to make changes to your company, but you shouldn’t refer to the document again unless you update the information regularly. Market trends are always changing, and although it’s tedious to update your report, doing so will ensure you get accurate insight into your competitors at all times.
Boost your marketing strategy with competitive analysis
Learning your competitors’ strengths and weaknesses will make you a better marketer. If you don’t know the competition you’re up against, you can’t beat them. Using competitive analysis can boost your marketing strategy and allow you to capture your target audience faster.
Competitive analysis must lead to action, which means following up on your findings with clear business goals and a strong business plan. Once you do your competitive analysis, you can use the templates below to put your plan into action.
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How to Write the Competitive Analysis of a Business Plan
Written by Dave Lavinsky
If you are writing a business plan, hopefully by this point you’ve conducted thorough market research to identify industry trends and identified the target market for your business. Now it’s time to conduct a competitor analysis. This section is included in virtually every simple business plan template , and the information you include will depend on several factors such as how many competitors there are, what they offer, and how large they are in comparison to your company.
Download our Ultimate Business Plan Template here
What is a Competitive Analysis?
A competitive analysis is a type of market research that identifies your competitors, their strengths and weaknesses, the strategies they are using to compete with you, and what makes your business unique. Before writing this section it’s important to have all the information you collected during your market research phase. This may include market data such as revenue figures, cost trends, and the size of the industry.
Why Do You Need the Competitive Analysis?
If you are planning to raise capital, the investor will require a business plan that includes the competitive analysis section. This section will also come in handy while writing a business plan template , if your company is considering increasing prices or adding new products and services. You can use the information you find to determine how well-positioned your business is to perform in the competitive landscape.
3 Steps to Writing a Competitive Analysis
The steps to developing the competitive analysis section of your business plan include:
- Identify your competition.
- Select the appropriate competitors to analyze.
- Determine your competitive advantage.
1. Identify Your Competition
To start, you must align your definition of competition with that of investors. Investors define competition as to any service or product that a customer can use to fulfill the same need(s) as the company fulfills. This includes companies that offer similar products, substitute products, and other customer options (such as performing the service or building the product themselves). Under this broad definition, any business plan that claims there are no competitors greatly undermines the credibility of the management team.
When identifying competitors, companies often find themselves in a difficult position. On one hand, you may want to show that the business is unique (even under the investors’ broad definition) and list few or no competitors. However, this has a negative connotation. If no or few companies are in a market space, it implies that there may not be a large enough base of potential customers to support the company’s products and/or services.
2. Select the Appropriate Competitors to Analyze
Once your competition has been identified, you want to consider selecting the most appropriate competitors to analyze. Investors will expect that not all competitors are “apples-to-apples” (i.e., they do not offer identical products or services) and therefore will understand if you chose only companies that are closest in nature. So, you must detail both direct and, when applicable, indirect competitors.
Direct competitors are those that serve the same potential customers with similar products and services. If you sell your products or services online, your direct competitors would also include companies whose website ranks in the top 5 positions for your same target keyword on Google Search.
For example, if you are a home-based candle-making company , you would consider direct competitors to be other candle makers that offer similar products at similar prices. Online competitors would also include companies who rank for the following keywords: “homemade candles”, “handmade candles”, or “custom candles.”
Indirect competitors are those that serve the same target market with different products and services or a different target market with similar products and services.
In some cases, you can identify indirect competitors by looking at alternative channels of distribution. For example, a small business selling a product online may compete with a big-box retailer that sells similar products at a lower price.
After selecting the appropriate competitors, you must describe them. In doing so, you must also objectively analyze each of their strengths and weaknesses and the key drivers of competitive differentiation in the same market.
For each competitor, perform a SWOT Analysis and include the following information:
- Competitor’s Name
- Overview of Competitor (where are they located; how long have they been operating)
- Competitor’s Product or Service
- Competitor’s Pricing
- Estimated Market Share
- Potential Customers (Geographies & Segments)
- Competitor’s Strengths
- Competitor’s Weaknesses
By understanding what your competitors offer and how customers perceive them, you can determine your company’s competitive advantage against each competitor.
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3. Determine Your Competitive Advantage
Perhaps most importantly, you must describe your company’s competitive advantages over the other companies in the space, and ideally how the company’s business model creates barriers to entry. “Barriers to entry” are reasons why it would be difficult for new companies to enter into or compete in the same market.
For instance, you may have a patent that provides value to your customers and makes them less likely to switch suppliers, which protects your business from potential competitors. Or, you may have more resources than the competition and thus be able to provide superior customer service.
Below is a list of areas in which you might have a competitive advantage:
- Size of the Company – Large companies have more resources and can usually offer lower prices than smaller businesses. This is a significant barrier to entry, as starting a small business and competing with a larger company may be difficult.
- Product or Service Differentiation – If your product or service is unique in some way, this will make it less likely that customers will switch to a competitor.
- Experience & Expertise – Experience and knowledge are valuable attributes that can help differentiate you from the competition.
- Location – If you are located in an area where there is high demand for your product or service, this can be a barrier to entry because competitors will not want to open new locations.
- Patents & Copyrights – Protecting intellectual property can prevent others from entering the same market and competing with your company.
- Brand Recognition – Customers are loyal to brands they have come to trust, which protects the company from new competitors.
- Customer Service – Providing excellent customer service can help you retain customers and prevent them from switching suppliers.
- Lowest Cost Offerings – If you can offer a lower price than your competitors, this makes it more difficult for them to compete with you.
- Technology – New technology that enables you to provide a better product or service than your competitors can be an advantage.
- Strategic Partnerships & Alliances – Collaborating with a company that your customers want to work with can help keep them from switching.
- Human Resources – If you have a highly skilled and talented workforce, it can be difficult for competitors to find and employ the same skills.
- Operational Systems – Strong operational systems that lead to greater efficiencies can protect your business from the competition.
- Marketing Strategy – Investing in strong marketing campaigns can make your business difficult to compete with.
For instance, you could say that your [enter any of the bullets from above] is better than your competitors because [insert reason].
The competitive landscape is one of the most important considerations in developing a business plan since it sets the stage by providing information on past and current competitors and their respective strengths and weaknesses. A strong understanding of the competitive landscape is needed before you can develop a strategy for differentiating your company from the competition. Follow the above competitive analysis example and you will be well-prepared to create a winning competitor analysis section of your business plan.
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How to Write the Market Analysis Section of a Business Plan
The Management Team Section of Your Business Plan
Financial Assumptions and Your Business Plan
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How to Write the Competitor Analysis Section of the Business Plan
Writing The Business Plan: Section 4
Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.
The competitor analysis section can be the most difficult section to compile when writing a business plan because before you can analyze your competitors, you have to investigate them. Here's how to write the competitor analysis section of the business plan.
First, Find Out Who Your Competitors Are
If you're planning to start a small business that's going to operate locally, chances are you already know which businesses you're going to be competing with. But if not, you can easily find out by doing an internet search for local businesses, looking in the online or printed local phone book, or even driving around the target market area.
Your local business may also have non-local competitors that you need to be aware of.
If you're selling office supplies, for instance, you may also have to compete with big-box retailers within a driving distance of several hours and companies that offer office supplies online. You want to make sure that you identify all your possible competitors at this stage.
Then Find Out About Them
You need to know:
- what markets or market segments your competitors serve;
- what benefits your competitors offer;
- why customers buy from them;
- as much as possible about their products and/or services, pricing, and promotion.
Gathering Information for Your Competitor Analysis
A visit is still the most obvious starting point - either to the brick and mortar store or to the company's website. Go there, once or several times, and look around. Watch how customers are treated. Check out the prices.
You can also learn a fair bit about your competitors from talking to their customers and/or clients - if you know who they are. Other good "live" sources of information about competitors include a company's vendors or suppliers and a company's employees. They may or may not be willing to talk to you, but it's worth seeking them out and asking.
And watch for trade shows that your competitors may be attending. Businesses are there to disseminate information about and sell their products or services; attending and visiting their booths can be an excellent way to find out about your competition.
You'll also want to search for the publicly available information about your competitors. Online publications, newspapers, and magazines may all have information about the company you're investigating for your competitive analysis. Press releases may be particularly useful.
Once you've compiled the information about your competitors, you're ready to analyze it.
Analyzing the Competition
Just listing a bunch of information about your competition in the competitor analysis section of the business plan misses the point. It's the analysis of the information that's important.
Study the information you've gathered about each of your competitors and ask yourself this question: How are you going to compete with that company?
For many small businesses, the key to competing successfully is to identify a market niche where they can capture a specific target market whose needs are not being met.
- Is there a particular segment of the market that your competition has overlooked?
- Is there a service that customers or clients want that your competitor does not supply?
The goal of your competitor analysis is to identify and expand upon your competitive advantage - the benefits that your proposed business can offer the customer or client that your competition can't or won't supply.
Writing the Competitor Analysis Section
When you're writing the business plan, you'll write the competitor analysis section in the form of several paragraphs.
The first paragraph will outline the competitive environment, telling your readers who your proposed business's competitors are, how much of the market they control and any other relevant details about the competition.
The second and following paragraphs will detail your competitive advantage, explaining why and how your company will be able to compete with these competitors and establish yourself as a successful business.
Remember; you don't have to go into exhaustive detail here, but you do need to persuade the reader of your business plan that you are knowledgeable about the competition and that you have a clear, definitive plan that will enable your new business to successfully compete.
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What Is Competitor Analysis? Definition + Step-by-Step Guide
Discover what goes into competitor analysis, how it benefits your business, and the steps to conducting a competitor analysis.
What is a competitor analysis?
A competitor analysis, also called competitive analysis and competition analysis, is the process of examining similar brands in your industry to gain insight into their offerings, branding, sales, and marketing approaches. Knowing your competitors in business analysis is important if you’re a business owner, marketer, start-up founder, or product developer.
Benefits of conducting competitor analysis
A competitor analysis offers several benefits, including:
Understanding industry standards so that you can meet and exceed them
Discovering untapped niche markets
Differentiating products and services
Fulfilling customers’ desires and solving their problems better than competitors
Distinguishing your brand
Standing out in your marketing
Measuring your growth
How to do a competitor analysis
The sections below provide a competitor analysis framework for evaluating your industry’s competitive landscape. Return to this framework regularly and apply the insights to develop your business.
1. Find out who your competitors are.
Start by reviewing your own business values, goals, branding, products, and services. That way, you can easily identify existing brands that target customers might choose over yours.
Next, turn to Google. Type in your product name or category. What brands and companies come up when you search "hydrating lipstick", for example? What comes up when you search social media channels for relevant hashtags or keywords?
Using the information you gathered, make a list of up to 10 brands whose offerings most resemble yours and present your target customers with comparable alternatives. Identify potential direct competitors (those who sell a similar product to a similar audience) and indirect competitors (those who sell a different product to a similar audience).
2. Analyze your competitors and their business structures.
By examining how competitors structure their businesses, you can gauge how equipped they are to grow, gain market share, and earn customer loyalty in your target market. Review each competitor’s website and social media profile to gather the following information:
How large is the company, in terms of the number of leaders and employees?
How many years has the company been in operation?
What job openings do these companies list on Glassdoor, Indeed, or LinkedIn? What are their areas of expansion?
For publicly traded companies, you may be able to review their annual reports and gain insight into how much revenue they’re generating, their debt and liability, and other performance metrics.
3. Evaluate your competitors and their value propositions.
A value proposition is a short statement that summarizes the benefits of a product and why a customer would choose it over competing products . A value proposition often looks something like the following: We help [target customer] do [outcome, benefit, experience] by doing / offering [product or service].
In this section, you will understand competitors’ value propositions in order to ensure your product or service stands out in the marketplace. Review major competitors’ site copy, particularly on the "About" or What We Do" pages, as well as analyzing any blogs and stories on their website. Answer these questions for each competitor:
What problems and pain points do competitors’ products solve?
What desires do the products fulfill?
What benefits or outcomes does the product deliver for customers?
What data do they cite to support their claims about products’ benefits?
What pricing structure do competitors use?
4. Evaluate your competitors’ marketing efforts.
Evaluate how competitors position themselves in the marketplace. This will allow you to create a marketing strategy that gets your brand in front of your target audience.
For each competitor, answer these questions:
What social media influencers does this company partner with to leverage their authority, authentic content, and personal connections to target customers?
What affiliate marketing or brand ambassador programs does this company offer to leverage the recommendations of satisfied customers?
What kind of digital or traditional paid advertising presence does this company have?
On what marketing channels do competitors publish organic content, including websites, landing pages, social media platforms, and email?
What type of content do you see, including articles, videos, ebooks, reports, commercials, and digital ads?
Read more: Marketing Strategy: What It Is and How to Create One
5. Audit your competitors’ brand identities.
Get to know your competitors by auditing their brand identities and getting a sense of why customers might feel connected (and loyal) to that brand.
For each competitor, answers these questions:
If this company were a person, how would you describe its personality?
What words, phrases, tone, and style does this company use in its messaging?
What values do competitors communicate through their messaging?
How would you describe the visual elements of this company’s branding? And how do those elements correspond to the brand’s values, voice, and personality?
What emotions do the brand elements evoke in customers?
Read more: What Is a Brand Strategy? And How to Create One
6. Follow each competitor’s customer journey.
Study the customer journeys that your competitors have set up to nurture and convert customers. Your goal is to gauge how seamless, integrated, and logical it is to go from the first touchpoint to making a purchase and beyond.
Start by following your competitors on social media, subscribing to them via email, and purchasing products and services to experience each customer journey for yourself.
As you experience the customer journey for each competitor, gather information on the following:
What are the different touchpoints along this company’s customer journey?
What elements make it easy to keep moving along the customer journey?
What calls to action and instructions are there to make it clear how to proceed?
What kinds of content educate and entertain you at each touchpoint?
What elements create friction or make it difficult to advance to the next step?
What do you experience after subscribing or making a purchase? Do you find customer support, upsells, and access to a community?
7. Examine audience engagement.
In this step, you will scour competitors’ customer reviews, reactions, and comments on their social media posts, social media mentions, media appearances, and even employee reviews on job sites to understand the perception of competitors in the marketplace. With this information, you can strategize how to garner a positive reputation for your brand, learn from competitors’ mistakes and challenges, and work to avoid any pitfalls yourself.
For each competitor, explore the following:
How do followers and subscribers interact with this company’s public content?
What is the general public sentiment regarding this company, based on mentions, product reviews, and social media likes and comments? Include praise as well as complaints.
What experiences do employees have, based on reviews on job sites like Glassdoor and Indeed?
Share of voice measures how much of the market your brand owns compared to competitors. By determining the share of voice, you can gauge how visible, authoritative, and popular your brand is in the marketplace.
8. Conduct a SWOT analysis of your competition.
A SWOT analysis is a classic exercise for identifying the Strengths, Weaknesses, Opportunities, and Threats that exist within the competitive landscape. Conduct a SWOT analysis of your competitors to consolidate everything you’ve learned into a succinct story.
What strengths do you see in competitors’ branding, marketing, customer journeys, and products?
What weaknesses do you see in competitors’ branding, marketing, customer journeys, and products?
What opportunities do you see for your business to capitalize on?
What is your competition doing that might pose a threat to your business?
You can also list the strengths and weaknesses of your business as it currently stands and compare them side-by-side with those of competitors.
For more on SWOT analysis, watch this video from the Business Strategy Specialization:
How to use competitor analysis
Once you’ve conducted a competitor analysis, your next step is to apply the insights to your business. Use the following prompts to differentiate your brand, products, and services from competitors and gain market share:
What product features can you add that differentiate your product from competitors?
What pricing strategy can you use to attract new customers to your offerings?
What design features can you add to your brand to make it stand out?
How can you compose a value proposition that stands out from competitors? We help [target customer] do [outcome, benefit, experience] by doing / offering [product or service].
How can you design a more seamless, frictionless customer journey that leads consumers to make a purchase and become loyal brand ambassadors?
How can you create content that improves on that of your competitors, including covering new topics, addressing ignored pain points, recommending new solutions, and offering more exciting experiences?
How can you improve your social media strategy to reach new potential customers?
What approaches can you take on marketing channels where your competitors have a presence to distinguish your messaging and present your offerings as the best choice?
On which marketing channels do your competitors not (yet) have a presence? What steps can you take to establish and grow a presence on those channels?
Competitor analysis key takeaways
Remember that conducting a competitor analysis is a crucial step in developing your business. It can help you differentiate your brand and present your products and services as the best on the market. Return to your competitor analysis efforts regularly, such as every quarter, six months, or year, to account for shifts in competitors’ tactics and new competitors that arrive on the scene. Always look for ways to give your brand and products a competitive edge.
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This content has been made available for informational purposes only. Learners are advised to conduct additional research to ensure that courses and other credentials pursued meet their personal, professional, and financial goals.
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What is a competitive analysis?
How to conduct a competitive analysis, how to write your competitive analysis, why competition is a good thing, what if there is no competition, do a competitive analysis, but don’t let it derail your planning, how to write a competitive analysis for your business plan.
10 min. read
Updated October 27, 2023
Do you know who your competitors are? If you do, have you taken the time to conduct a thorough competitor analysis?
Knowing your competitors, how they operate, and the necessary benchmarks you need to hit are crucial to positioning your business for success. Investors will also want to see an analysis of the competition in your business plan.
In this guide, we’ll explore the significance of competitive analysis and guide you through the essential steps to conduct and write your own.
You’ll learn how to identify and evaluate competitors to better understand the opportunities and threats to your business. And you’ll be given a four-step process to describe and visualize how your business fits within the competitive landscape.
A competitive analysis is the process of gathering information about your competitors and using it to identify their strengths and weaknesses. This information can then be used to develop strategies to improve your own business and gain a competitive advantage.
Before you start writing about the competition, you need to conduct your analysis. Here are the steps you need to take:
1. Identify your competitors
The first step in conducting a comprehensive competitive analysis is to identify your competitors.
Start by creating a list of both direct and indirect competitors within your industry or market segment. Direct competitors offer similar products or services, while indirect competitors solve the same problems your company does, but with different products or services.
Keep in mind that this list may change over time. It’s crucial to revisit it regularly to keep track of any new entrants or changes to your current competitors. For instance, a new competitor may enter the market, or an existing competitor may change their product offerings.
2. Analyze the market
Once you’ve identified your competitors, you need to study the overall market.
This includes the market size , growth rate, trends, and customer preferences. Be sure that you understand the key drivers of demand, demographic and psychographic profiles of your target audience , and any potential market gaps or opportunities.
Conducting a market analysis can require a significant amount of research and data collection. Luckily, if you’re writing a business plan you’ll follow this process to complete the market analysis section . So, doing this research has value for multiple parts of your plan.
3. Create a competitive framework
You’ll need to establish criteria for comparing your business with competitors. You want the metrics and information you choose to provide answers to specific questions. (“Do we have the same customers?” “What features are offered?” “How many customers are being served?”)
Here are some common factors to consider including:
- Market share
- Product/service offerings or features
- Distribution channels
- Target markets
- Marketing strategies
- Customer service
4. Research your competitors
You can now begin gathering information about your competitors. Because you spent the time to explore the market and set up a comparison framework—your research will be far more focused and easier to complete.
There’s no perfect research process, so start by exploring sources such as competitor websites, social media, customer reviews, industry reports, press releases, and public financial statements. You may also want to conduct primary research by interviewing customers, suppliers, or industry experts.
You can check out our full guide on conducting market research for more specific steps.
5. Assess their strengths and weaknesses
Evaluate each competitor based on the criteria you’ve established in the competitive framework. Identify their key strengths (competitive advantages) and weaknesses (areas where they underperform).
6. Identify opportunities and threats
Based on the strengths and weaknesses of your competitors, identify opportunities (areas where you can outperform them) and threats (areas where they may outperform you) for your business.
You can check out our full guide to conducting a SWOT analysis for more specific questions that you should ask as part of each step.
Once you’ve done your research, it’s time to present your findings in your business plan. Here are the steps you need to take:
1. Determine who your audience is
Who you are writing a business plan for (investors, partners, employees, etc.) may require you to format your competitive analysis differently.
For an internal business plan you’ll use with your team, the competition section should help them better understand the competition. You and your team will use it to look at comparative strengths and weaknesses to help you develop strategies to gain a competitive advantage.
For fundraising, your plan will be shared with potential investors or as part of a bank loan. In this case, you’re describing the competition to reassure your target reader. You are showing awareness and a firm understanding of the competition, and are positioned to take advantage of opportunities while avoiding the pitfalls.
2. Describe your competitive position
You need to know how your business stacks up, based on the values it offers to your chosen target market. To run this comparison, you’ll be using the same criteria from the competitive framework you completed earlier. You need to identify your competitive advantages and weaknesses, and any areas where you can improve.
The goal is positioning (setting your business up against the background of other offerings), and making that position clear to the target market. Here are a few questions to ask yourself in order to define your competitive position:
- How are you going to take advantage of your distinctive differences, in your customers’ eyes?
- What are you doing better?
- How do you work toward strengths and away from weaknesses?
- What do you want the world to think and say about you and how you compare to others?
3. Visualize your competitive position
There are a few different ways to present your competitive framework in your business plan. The first is a “positioning map” and the second is a “competitive matrix”. Depending on your needs, you can use one or both of these to communicate the information that you gathered during your competitive analysis:
The positioning map plots two product or business benefits across a horizontal and vertical axis. The furthest points of each represent opposite extremes (Hot and cold for example) that intersect in the middle. With this simple chart, you can drop your own business and the competition into the zone that best represents the combination of both factors.
I often refer to marketing expert Philip Kohler’s simple strategic positioning map of breakfast, shown here. You can easily draw your own map with any two factors of competition to see how a market stacks up.
It’s quite common to see the price on one axis and some important qualitative factor on the other, with the assumption that there should be a rough relationship between price and quality.
It’s pretty common for most business plans to also include a competitive matrix. It shows how different competitors stack up according to the factors identified in your competitive framework.
How do you stack up against the others? Here’s what a typical competitive matrix looks like:
For the record, I’ve seen dozens of competitive matrices in plans and pitches. I’ve never seen a single one that didn’t show that this company does more of what the market wants than all others. So maybe that tells you something about credibility and how to increase it. Still, the ones I see are all in the context of seeking investment, so maybe that’s the nature of the game.
4. Explain your strategies for gaining a competitive edge
Your business plan should also explain the strategies your business will use to capitalize on the opportunities you’ve identified while mitigating any threats from competition. This may involve improving your product/service offerings, targeting underserved market segments, offering more attractive price points, focusing on better customer service, or developing innovative marketing strategies.
While you should cover these strategies in the competition section, this information should be expanded on further in other areas of your business plan.
For example, based on your competitive analysis you show that most competitors have the same feature set. As part of your strategy, you see a few obvious ways to better serve your target market with additional product features. This information should be referenced within your products and services section to back up your problem and solution statement.
Business owners often wish that they had no competition. They think that with no competition, the entire market for their product or service will be theirs. That is simply not the case—especially for new startups that have truly innovative products and services. Here’s why:
Competition validates your idea
You know you have a good idea when other people are coming up with similar products or services. Competition validates the market and the fact that there are most likely customers for your new product. This also means that the costs of marketing and educating your market go down (see my next point).
Competition helps educate your target market
Being first-to-market can be a huge advantage. It also means that you will have to spend way more than the next player to educate customers about your new widget, your new solution to a problem, and your new approach to services.
This is especially true for businesses that are extremely innovative. These first-to-market businesses will be facing customers that didn’t know that there was a solution to their problem . These potential customers might not even know that they have a problem that can be solved in a better way.
If you’re a first-to-market company, you will have an uphill battle to educate consumers—an often expensive and time-consuming process. The 2nd-to-market will enjoy all the benefits of an educated marketplace without the large marketing expense.
Competition pushes you
Businesses that have little or no competition become stagnant. Customers have few alternatives to choose from, so there is no incentive to innovate. Constant competition ensures that your marketplace continues to evolve and that your product offering continues to evolve with it.
Competition forces focus & differentiation
Without competition, it’s easy to lose focus on your core business and your core customers and start expanding into areas that don’t serve your best customers. Competition forces you and your business to figure out how to be different than your competition while focusing on your customers. In the long term, competition will help you build a better business.
One mistake many new businesses make is thinking that just because nobody else is doing exactly what they’re doing, their business is a sure thing. If you’re struggling to find competitors, ask yourself these questions.
Is there a good reason why no one else is doing it?
The smart thing to do is ask yourself, “Why isn’t anyone else doing it?”
It’s possible that nobody’s selling cod-liver frozen yogurt in your area because there’s simply no market for it. Ask around, talk to people, and do your market research. If you determine that you’ve got customers out there, you’re in good shape.
But that still doesn’t mean there’s no competition.
How are customers getting their needs met?
There may not be another cod-liver frozen yogurt shop within 500 miles. But maybe an online distributor sells cod-liver oil to do-it-yourselfers who make their own fro-yo at home. Or maybe your potential customers are eating frozen salmon pops right now.
Are there any businesses that are indirect competitors?
Don’t think of competition as only other businesses that do exactly what you do. Think about what currently exists on the market that your product would displace.
It’s the difference between direct competition and indirect competition. When Henry Ford started successfully mass-producing automobiles in the U.S., he didn’t have other automakers to compete with. His competition was horse-and-buggy makers, bicycles, and railroads.
While it’s important that you know the competition, don’t get too caught up in the research.
If all you do is track your competition and do endless competitive analyses, you won’t be able to come up with original ideas. You will end up looking and acting just like your competition. Instead, make a habit of NOT visiting your competition’s website, NOT going into their store, and NOT calling their sales office.
Focus instead on how you can provide the best service possible and spend your time talking to your customers. Figure out how you can better serve the next person that walks in the door so that they become a lifetime customer, a reference, or a referral source.
If you focus too much on the competition, you will become a copycat. When that happens, it won’t matter to a customer if they walk into your store or the competition’s because you will both be the same.
Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.
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What is a Competitive Analysis — and How Do You Conduct One?
Published: November 10, 2022
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When was the last time you ran a competitive analysis for your brand? And most importantly, do you know how to do one efficiently?
If you‘re unsure or if the last "analysis" you ran was a quick perusal of a competitor’s website, you're likely missing out on important intelligence that could help your brand grow.
In this detailed guide, you'll learn how to conduct a competitive analysis to give your business an advantage.
Table of Contents
What is a competitive analysis?
- Understanding Competitive Market Research
Competitive Analysis in Marketing
How to do a competitive analysis, competitive product analysis, competitive analysis example, competitive analysis templates, competitive analysis: faqs, what is a competitive market analysis.
A competitive analysis is a strategy that involves researching major competitors to gain insight into their products, sales, and marketing tactics. Implementing stronger business strategies, warding off competitors, and capturing market share are just a few benefits of conducting a competitive market analysis.
A competitive analysis can help you learn the ins and outs of how your competition works and identify potential opportunities where you can outperform them. It also enables you to stay atop of industry trends and ensure your product is consistently meeting — and exceeding — industry standards.
Let's dive into a few more benefits of conducting competitive analyses:
- Helps you identify your product's unique value proposition and what makes your product different from your competitors, which can inform future marketing efforts.
- Enables you to identify what your competitor is doing right. This information is critical for staying relevant and ensuring your product and marketing campaigns outperform industry standards.
- Tells you where your competitors are falling short — which helps you identify areas of opportunities in the marketplace and test out new, unique marketing strategies they haven't taken advantage of.
- Learn through customer reviews what‘s missing in a competitor’s product, and consider how you might add features to your own product to meet those needs.
- Provides you with a benchmark against which you can measure your growth.
Competitive analysis is a meticulous strategy that dives deep into the operations of your prime competitors.
It's not just about knowing what they offer. You need to understand their sales strategies, marketing tactics, and the ethos driving their brand.
You're all set!
Click this link to access this resource at any time.
10 Competitive Analysis Templates
Fill out the form to access the templates., why is a competitive analysis important.
The ripple effects of a well-executed competitive analysis are manifold:
- Strategic business decisions. Anchoring your business strategies on solid, data-driven insights ensures you stay ahead in the game.
- Fortifying defenses. By knowing what your competitors are up to, you can better defend your market share and even capture new territories.
- Unearth golden opportunities. Delving into the intricacies of your competition’s operations can spotlight areas where you can shine brighter.
Beyond Just the Basics
While it's essential to understand how your competition operates, the real magic happens when you can:
- Spot your unique value. What sets you apart? How can you amplify that difference in your marketing efforts?
- Learn from their triumphs. Your competitors might just be doing something genius. Identifying their strengths ensures you're always at par, if not ahead.
- Discover their shortcomings. Every brand has its Achilles' heel. Find it. This knowledge can carve out opportunities and new strategies for your business.
- Tap into customer sentiments. Dive into customer reviews. What’s lacking in their product? Can you incorporate those missing features into your offerings?
- Benchmark your progress. Your journey is unique. However, setting a benchmark based on your competitors can offer valuable growth metrics.
What is competitive market research?
Competitive market research is a vital exercise that goes beyond merely comparing products or services.
It involves an in-depth analysis of the market metrics that distinguish your offerings from those of your competitors.
A thorough market research doesn't just highlight these differences but leverages them, laying a solid foundation for a sales and marketing strategy that truly differentiates your business in a bustling market.
In the next section, we’ll explore the nuts and bolts of conducting a detailed competitive analysis tailored to your brand.
Every brand can benefit from regular competitor analysis. By performing a competitor analysis, you'll be able to:
- Identify gaps in the market.
- Develop new products and services.
- Uncover market trends.
- Market and sell more effectively.
As you can see, learning any of these four components will lead your brand down the path of achievement.
Next, let's dive into some steps you can take to conduct a comprehensive competitive analysis.
- Determine who your competitors are.
- Determine what products your competitors offer.
- Research your competitors' sales tactics and results.
- Take a look at your competitors' pricing, as well as any perks they offer.
- Ensure you're meeting competitive shipping costs.
- Analyze how your competitors market their products.
- Take note of your competition's content strategy.
- Learn what technology stack your competitors use.
- Analyze the level of engagement on your competitors' content.
- Observe how they promote marketing content.
- Look at their social media presence, strategies, and go-to platforms.
- Perform a SWOT Analysis to learn their strengths, weaknesses, opportunities, and threats.
Don't forget to share this post!
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How to Identify and Research Your Competition Emphasizing your competitive advantage is an essential part of any business plan.
By Entrepreneur Staff • Oct 27, 2023
- Why competitive analysis matters
Questions to ask about your industry
How to find similar companies.
Successful entrepreneurs are renowned for intuitively feeling a market's pulse, project trends before anyone else detects them, and identifying needs that even customers are unaware of. After you are famous, perhaps you can claim a similar psychic connection to the market. But for now, you'll need to reinforce your claims to market insight by presenting solid research in your plan.
Market research aims to understand the reasons consumers will buy your product. It studies consumer behavior, specifically how cultural, societal, and personal factors influence that behavior. For instance, market research aiming to understand consumers who buy in-line skates might study the cultural importance of fitness, the societal acceptability of marketing directed toward children and teens, and the effect of personal influences such as age, occupation, and lifestyle in directing a skate purchase.
Market research is often split into two varieties: primary and secondary. Primary research studies customers directly, whereas secondary research studies information others have gathered about customers. Primary research might be telephone interviews or online polls with randomly selected target group members. You can also study your own sales records to gather primary research. Secondary research might come from reports on other organizations' websites or blogs about the industry.
Conducting market research provides answers to those unknown elements. It will greatly reduce risk as you start your business. It will help you understand your competitive position and the strengths and weaknesses of your competitors. And it will improve your marketing and sales process."
To start preparing your industry analysis and outlook, dig up the following facts about your field:
- What is your total industry-wide sales volume? In dollars? In units?
- What are the trends in sales volume within your industry?
- Who are the major players and your key competitors? What are they like?
- What does it take to compete? What are the barriers to entry?
- What technological trends affect your industry?
- What are the main modes of marketing?
- How does government regulation affect the industry?
- In what ways are changing consumer tastes affecting your industry?
- What are recent demographic trends affecting the industry?
- How sensitive is the industry to seasons and economic cycles?
- What are key financial measures in your industry (average profit margins, sales commissions, etc.)?
When looking at comparable businesses (and their data), find a close match. For comparative purposes, consider:
- Companies of relative size.
- Companies serving the same geographic area could be global if you plan to be a web-based business.
- Companies with a similar ownership structure. If you are two partners, look for businesses run by a couple of partners rather than an advisory board of twelve.
- Relatively new companies. While you can learn from long-standing businesses, they may be successful today because of their twenty-five-year business history and reputation.
You will want to use the data you have gathered not only to determine how much business you could do but also to figure out how you will fit into and adapt to the marketplace.
How to do original research
One limitation of in-house market information is that it may not include exactly what you're looking for. For instance, if you'd like to consider offering consumers financing for their purchases, it's hard to tell how they'd like it since you don't already offer it.
You can get around this limitation by conducting original research—interviewing customers who enter your store, for example, or counting cars that pass the intersection where you plan to open a new location—and combining it with existing data. Follow these steps to spending your market research dollars wisely:
Determine what you need to know about your market. The more focused the research, the more valuable it will be.
- Prioritize the results of the first step. You can't research everything, so concentrate on the information that will give you the best (or quickest) payback.
- Review less expensive research alternatives. Small Business Development Centers and the Small Business Administration can help you develop customer surveys. Your trade association will have good secondary research. Be creative.
- Estimate the cost of performing the research yourself. Keep in mind that with the internet you should not have to spend a ton of money. If you're considering hiring a consultant or a researcher, remember this is your dream, these are your goals, and this is your business.
- Don't pay for what you don't need.
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How to Create a Competitor Analysis Report (Templates Included)
By Midori Nediger , May 08, 2020
Your business will always have competition.
And if you don’t know what that competition is up to, you could be missing out on huge opportunities.
That’s why a competitive analysis is so crucial to your success as a business. It gives you the tools to quickly adapt to any changes in the competitive landscape and potentially capitalize on industry trends that your competitors haven’t even noticed.
So let’s get some basics out of the way…
What is a competitive analysis report?
A competitive analysis report outlines the strengths and weaknesses of your competitors compared to those of your own business.
Typically, a competitive analysis report will contain:
- A description of your business’s target market
- Details about the features of your product compared to your competitors’ products
- A breakdown of current and projected market share, sales, and revenues
- Comparisons of pricing models
- An analysis of marketing strategy and social media strategy
- A description of customer ratings of the features of each competitor
GET THIS COMPETITOR ANALYSIS TEMPLATE
Whether you’re a startup trying to break into the marketplace , a consultant trying to get results for your client, or an established company looking to cement your foothold against the competition, a well-researched competitive analysis gives you the tools you need to make strategic decisions.
Your competitive analysis should inform your marketing plan , your business plan , your consultant report and every part of your high-level business strategy.
But how do you actually create a competitive analysis report?
How to create a competitive analysis report (jump ahead to each section):
- Start with a competitor overview
- Conduct market research to uncover customer personas and industry trends
- Compare product features in a feature comparison matrix
- Summarize your strengths and weaknesses with a SWOT analysis
- Show where you fit in the competitive landscape
- Use a competitor analysis template for a professional look and feel
The level of detail you include in each section of your competitive analysis report will vary depending on the stage of your business growth and your goals. For example, a startup might create a report that focuses on market research, while an established business might dive into detail on an emerging competitor.
But let’s talk about the parts of a competitive analysis that every report should include.
1. Start with a competitor overview
A strong report shows exactly what a company must out-compete to be successful.
Meaning you must audit any product or service that currently solves the problem your business is trying to solve for customers and write a quick profile for each competitor.
Like the template below, each competitor profile might include:
- The company’s revenue and market share
- The company’s size and information about their management team
- A broad description of the company’s strengths and weaknesses
- An overview of how the company is perceived by customers
GET THIS REPORT TEMPLATE
This overview will help your readers get a big-picture view of the market landscape.
2. Conduct market research to uncover customer personas and industry trends
You can’t create a competitive analysis report without doing extensive market research , which is all about gathering information to understand your customers, identify opportunities to grow, and recognize trends in the industry.
This research can help you put together the customer personas that will guide business and marketing decisions down the line, and allow you to plan for any shifts that might disrupt the marketplace.
You can conduct primary market research, with:
- Customer interviews
- Online surveys or questionnaires
- In-person focus groups
- Purchasing a competitor product to study packaging and delivery experience
Or secondary market research, by:
- Reading company records
- Examining the current economic conditions
- Researching relevant technological developments
When assembling your market research you may just want provide a high-level summary of the industry trends, like this competitor analysis example shows:
CREATE THIS REPORT TEMPLATE
Or you may want to dive into detail on the demographics of a particular consumer segment, like this:
But if you’re a consultant or advisor struggling to get buy-in from skeptical stakeholders, the report below would be ideal. Covering everything from market forecasts to consumer profiles, it can help you get clients and decision-makers on board.
3. Compare product features in a feature comparison matrix
The feature comparison is arguably the most important part of the competitive analysis. Breaking down your product and your competitors’ products feature-by-feature will allow you to see what really sets everyone apart.
In addition to specific product features, here are some attributes that you might include in a feature comparison matrix:
- Product quality
- Number of features
- Ease of use
- Customer support
The most common format for a features analysis is a simple matrix with you and your competitors along one side and all of the relevant features along the other. You can check off or rate how you perform in each area:
CREATE THIS PRESENTATION TEMPLATE
But these tables can get pretty long. Another approach is to focus on the things that provide the most value to the user, like in this competitor analysis example from Mint. It only includes ease of use, costs, and benefits:
If you want to visualize your comparisons in an engaging way, you could use a comparison infographic .
Great resources for this section of your competitive analysis report are product rating sites like Capterra and G2Crowd . They’ll give you an unbiased view of your company and your competitors.
And as with any market research, it’s critical that you speak with real people who use your product and your competitors’ products. That’s the only way to get an accurate picture of how your target customers rate the competition .
4. Summarize your strengths and weaknesses in a SWOT analysis
When you’re conducting research for your competitive analysis, it’s going to be messy. You’ll have a lot of data and it’ll be hard for an outsider to understand.
That’s what makes the SWOT analysis so essential.
A SWOT analysis is a framework for evaluating your competitive position by listing your key strengths, weaknesses, opportunities, and threats.
It can act like a short summary of the rest of your competitive analysis report for anyone who doesn’t have time to dig into the details.
GET THIS SWOT ANALYSIS TEMPLATE
Click the template above to enter our online SWOT analysis maker tool. Customize the template to your liking–no design no-how required.
Here are some questions to kickstart your SWOT analysis:
- Strengths: What are we doing really well (in terms of marketing, products, sales, branding, technology, etc.)?
- Weaknesses: What are we struggling with? What’s holding us back?
- Opportunities: What’s the weakest area for our biggest competitor? Are there any gaps in the market that aren’t current being addressed? What has recently changed in our business or the market?
- Threats: What is our biggest competitor doing much better than us? What new products/features are they working on? What problems aren’t we currently addressing?
In your report, you could arrange your SWOT analysis in a simple list, but it can be helpful to use color-coded quadrants, like the competitor analysis example below. Note how each quadrant is paired with an icon:
CREATE THIS PROPOSAL TEMPLATE
5. Show where you fit in the competitive landscape
After summarizing your strengths, weaknesses, opportunities, and threats, it’s time to look at the bigger picture. It’s time to figure out where every major competitor currently fits into the competitive landscape.
The most popular way of doing this is to identify the two dimensions that are most important for being competitive in your industry and plot them on a matrix, like this one from the Boston Consulting Group:
And this one from G2 Crowd (which looks at market presence and customer satisfaction):
You may want to focus on where you fit in the market landscape based on your own biggest strengths and weaknesses, or the biggest threats and opportunities you identified in the SWOT analysis.
Or, it may be enough just to summarize in words the features and benefits that set your apart from your competitors (which is a great way to end your report on a high note).
3 tips to improve your competitive analysis report design
How you design your competitive analysis report can have a significant impact on your business success. The right report design can inspire stakeholders to take action based on your findings, while a mediocre design may reflect poorly on your hard work.
Here are a few report design best practices to keep in mind when designing your competitive analysis report:
- Start with a competitive analysis report template
- Keep core design elements like colors and fonts consistent
- Use visuals to summarize important information and keep your audience engaged
1. Start with a competitor analysis template
The quickest way to lose the confidence of your stakeholders is to present a messy, amateur report design. Besides distracting from the content of the report, it might even put your credibility at risk.
Starting with a pre-designed competitor analysis template, like the one below, takes almost all of the design work out of the mix so you can focus on the content (while still impressing your stakeholders).
And if you’re a consultant competing for a project, a pre-designed template may just give you the edge you need to land that client.
Click on any of our templates; you’ll enter our online drag and drop report maker tool. No design know-how required.
2. Keep core design elements like colors and fonts consistent
If you take a look at the competitor analysis template below, you might notice that the designer has switched up the layout from page to page, but many of the other design elements are kept consistent.
That consistency helps the report design feel cohesive while making it easier for readers to quickly skim for key pieces of information.
Here are a few quick guidelines for keeping important design elements consistent:
- Use the same color scheme throughout your report (with one highlight color to draw attention to key takeaways and important numbers)
- Use the same font styles for your headers, subheaders, and body text (with no more than 2-3 font styles per report)
- Use the same style of visuals throughout your report (like flat icons or illustrated icons… but not both)
3. Use visuals to summarize important information and keep your audience engaged
The challenge with a competitive analysis report is that you collect heaps of background research, and you have to condense it into a brief report that your client will actually read.
And written summaries will only get you so far.
Visuals like charts and tables are a much better way to communicate a lot of research quickly and concisely, as seen in the market research summary below.
Even lists can be made more engaging and informative by spacing out list items and giving more emphasis to headers:
The more you can replace descriptive paragraphs and long lists with thoughtful visuals, the more your readers will thank you.
A competitive analysis will allow you to think up effective strategies to battle your competition and establish yourself in your target market.
And a report that communicates the findings of your competitive analysis will ensure stakeholders are on board and in the know.
Now that you know how to design a competitive analysis report, you’re ready to get started:
CREATE A COMPETITIVE ANALYSIS REPORT
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How to Write a Market Analysis for a Business Plan
After giving the reader a good idea of the important trends and paradigm shifts in the industry, you will need to specifically point out your major competitors This means factoring in on not just your direct competition, but the indirect competition as well.
One very important aspect of business that every business owner must deal with is competition. It is a fact every business has competition regardless of how small or large it is. The way you decide to handle competition in your business can make the difference between profit and loss; and between you staying in the race or you getting kicked out.
This is why it is very necessary for every entrepreneur to have plans on how to deal with competition and competitors when starting a business.
It is for this reason that business plans have sections for competitor and competitive analysis. This section of your business plan is devoted to analyzing your competition, and not just your current competition, but also potential competitors who would enter your market at one point or the other.
What is Competitor Analysis?
A competitor analysis is an assessment of the strengths and weaknesses of your businesses’ competitors. Carrying out competitor and competitive analysis would help you identify your competitors and see how they would influence your revenue.
A comprehensive analysis of your competitors will also allow you to track how your business compares with that of your competitors in terms of financial resources, staff, products or services, market share, pricing, customers, financial data, brand recognition, location, marketing tactics, logistics etc.
Including a competitor analysis in your business plan tells investors that you know what you are getting into, that you understand your marketplace and that you have plans in place to compete at the same level as established competitors. This can actually up your chances of getting startup capital.
Why Should You Include a Competitive and Competitor Analysis in your Business Plan?
- It can help you understand the competitive advantages and disadvantages in your industry
- It would help you gain insight into your competitors’ business strategies
- It would help you develop strategies to achieve in the future
- It can assist your management with developing well-tailored
- It can help you identify opportunities in the market that are under-served
- It can help you take advantage of competitors’ weaknesses to grow your market share
- It can help you in forecasting future investments
4 Types of Competitors your Business Would Be Up Against
Every business has different types of competitors that it should be wary of and they typically include;
a. Direct Competitors: These are competitors that provide exactly the same products or service that you are providing. No matter what business line you are into, direct competitors are usually your main competitors. For instance, if you want to establish a business that retails cosmetics, other cosmetic shops around your vicinity are your direct competitors.
b. Indirect competitors : these are businesses that offer products and services that are close substitutes, and as well target the same group of customers with the goal of satisfying the same need. For instance, a cosmetic shop competes indirectly with a hair salon or spa.
c. Occasional Competitors: these are competitors that provide services or products which differ slightly to yours or they are situated in a different location.
d. Future competitors: these are existing companies that are not yet in the market-space that you intend to occupy but could move there at any time. For instance, a spa is not in direct competition with a cosmetic shop, but it has every tendency of offering its clients cosmetics in the near future.
9 Steps to Conducting Competitive and Competitor Analysis
Conducting an effective and efficient competitor analysis takes procedures that may include;
Identify your Competitors
The first step in conducting a competitor analysis is to identify your competitors. You can start this by considering the range of competition in your market-space because not all competition are the same, and there are different types of competitors your business will face. Your main competitors are companies that customers can easily buy from instead of from you and they represent your most intense competition.
When conducting a competitor or competitive analysis, your first port of call is to identify each of your competitors; in fact, you need to profile them. If you plan on opening an antique store, your competitors would be any store that sells antiques, crafts, jewelry etc within your location.
Online stores should also be included if you plan to take your wares online. You may also want to include information on companies that may be entering your market in the coming year or subsequently. You equally have to look at their aims and objectives, the market share they occupy and what they aim to achieve in the now and the near future.
Identify their strengths and weaknesses
Once you have identified your competitors, you then have to find out that makes them tick. This can be identified as their strengths. For a business, their strengths can be their price range, service or product, convenience, extensive inventory etc.
These areas are what can help them to edge you out of the market, so you really have to take note of them when writing your competitor analysis. Another thing of importance to note here is their weaknesses; what makes them not to sell as much as they should.
These are areas you should aim to capitalize on to grow your business and gain market share. This maybe their poor publicity strategies, limited products range, etc. To obtain most of this information, you can go through their websites and marketing materials.
Most of the information you need about products, services, prices, and company objectives should be readily available there. If that information is not available, then you may have identified a weakness. In addition to visiting their website, you have to as well visit their offline locations to see things for yourself.
This is a section where you zero in on your competitors target market. First of all, a businesses’ primary target market is the group of customers that they service the most. Identify who your target market is and then do some research on your competitors to see who their target market is. A good place to start would be their website and marketing communications.
Market share can be defined as the percentage of the market you account for. You have already identified your target market, now it is time to calculate your market share based on your competitors. You have to make a complete analysis of your market share to know which sections you have to devote most of your time, energy and finances to.
In this section of the template, you have to fill in your marketing strategies and predict those of your competitors. If you are not familiar with what they are doing, do some research and observe what strategies they are using. A good place to start looking is their advertising campaigns and promotional materials. The goal here is to try and predict what they might have planned for the future and how that will affect you.
How a company advertises creates a great opportunity to uncover the objectives and strategies of that business. Advertising should help you quickly determine how a company positions itself, who it markets to, and what strategies it employs to reach potential customers.
Carry out Product/Service Profiling
Your product and/or service offering include your range of products and services. This section of the competitor analysis template involves comparing your offerings to those of your competitor. It is important here to take a look at your product range, product quality and brand credibility.
Here, you need to evaluate your products and services for strengths and weaknesses; in fact you can conduct a full SWOT analysis on your products or services, and if you like, put them in a scale from 1 to 10.
It is much easier to find information on public companies than private companies, but it’s always a good idea to do as much background research as possible. When discussing each of your competitors, you will want to use the SWOT Analysis. Here’s what it stands for:
- S – Strengths : What do they have going for them? Is it their technology, brand, people, or lean value chain ?
- W – Weakness : What are they missing out on? Do they lack experienced management, reliable customer service, or customer retention tactics ?
- O – Opportunities : What are they positioned to take advantage of? Are their environmental, technological, or other trends or changes they are likely to benefit from ?
- T – Threat : What gives them sleepless nights? What are they always worried about ?
Do the same for your competitors’ products or services and you would get to see the difference. This would help you know which product or service is likely to get more market share and why. This section gives you the opportunity to identify new viable markets that can be exploited with a new product, or make product or service variations to fill a gap in an existing market.
Pricing and Costs
Pricing can tell a lot about your competitors. Here you want to be looking at what pricing strategies you and your competitors are implementing. You have to find out if they are low-cost or high-cost providers, what are their mark-ups, does their business require volume sales or once off purchases?
These and other questions would help you determine the price range of your competitors and use it to compare your own. Again, pricing is an observable source so you should be able to get most of the answers by looking at your competitors offerings.
Here, you need to ask yourself a few questions. What is the market for your company’s product like? Is it growing? If so, then you may not have issues with your competitors as regards customers. If on the other hand the market is flat, then the competition for customers is likely going to be fierce.
Your company may find itself scrambling to win market share. By the time you have done most of your research, you will have enough information to determine what the outlook really is.
Next, find out what makes each of your outlined competitors unique. Their competitive advantage is what would help them outperform you and other businesses offering the same kind of product or service. You need to determine what they offer that the other businesses on the list don’t, and why some customers pick them over you or your other competitors. This is a very important aspect of your competitor analysis so you have to take your time on it.
Next, you will discuss what makes your offer distinct from others in the marketplace. These variables are your “ unique selling points, ” “ value propositions ,” or “ competitive strategy. ” The following questions will help you craft this part perfectly:
- Can you scale your operations in order to offer lower prices than majority of the players in an effort to maximize profits?
- Does your business offer something distinct from those of the current cost leaders in your industry?
- What is your niche or specific target market ?
Finally, it is important you bear in mind that your product or service will have a competitive advantage if it meets the following conditions:
- Satisfies a previously undiscovered need, or comes as a first-of-its-kind solution to an existing need
- Solves problems faster than other offers available
- Spots a better design that stands out from others
- Comes at a lower price than other offers
- Helps customers save money
- Helps customers reduce risk
- Taps into a previously under served or never served market
- Offers greater ease of use than other offers
In conclusion ,
As an entrepreneur, your competitor should not be seen as a threat but as a source of inspiration and a reference point that will enable you establish a stronger product or service base. Analyzing of your competitors can help you keep your finger on the pulse of what is happening in the industry, thus preventing you from taking any unnecessary risks.
A quick and easy way to compare your product or service with similar ones on the market is to make a competition grid. Get a piece of paper and write out the names of four or five products or services that compete with yours. To help you generate this list, think of what your customers would buy if they didn’t buy your product or utilize your service.
Across the top of the paper, list the main features and characteristics of each product or service. Include such things as target market, price, size, method of distribution, and extent of customer service. For a service, list prospective buyers, where the service is available, price, website, toll-free phone number, and other features that are relevant.
A glance at the competition grid will help you see where your product fits in the overall market. Bear in mind that you don’t need to be perfect, offer the lowest prices or provide an extremely efficient service. The most important thing is just to be slightly better than your competitors.
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Write the Competition Section: Business Plan Writing
11 Min Read
What is the Competition Section?
Your business plan includes a lot of operational sections. Every section holds different importance. In that case, competition is one of the most fundamental aspects of your business. And so, it needs to be added to your business plan. The section that explains your competition is your competition section.
While deciding where to add the competition section, pay attention to the flow of your business plan. Moreover, it also depends on the priority. So, it must come next to your objective, problem statement , product/services, and target audience.
Why do You Need a Competition Section in Your Business Plan?
The why of your business plan depends on your purpose-
If your purpose is to direct your business growth:
Your competition status can play as your reference point. Here, the competition section serves as a medium for understanding your competition. So, you can develop strategic positioning.
If your purpose is to create a business plan to seek investment:
You must add it to inform your investors about your competition, market position, and brand promise.
You need to describe the competition to reassure probable investors that you know and understand your competition. And that you are ready to take advantage of opportunities and avoid the pitfalls.
How to write a competition section in your business plan?
Regardless of your purpose mentioned above, you have to include all the steps mentioned below. Wherever there is the need for that ‘minor’ change, we will include it under the same step.
While following this step, we suggest you take action side by side. So, it becomes easier to implement. Moreover, before putting up your competition section, be ready with your competition data.
Also, make sure that you have conducted a competitive analysis and processed data of at least 5 competition companies. Once you have everything you need, you can go through the following steps-
1. Determining and Documenting Your Business Position
Regardless of your purpose, you will have to follow this step. And there isn’t any major difference here. You need to know your business position in the market and document it properly. However, we will first talk about the determining part. And then, document it for the competition part of your business plan.
How to determine your market position?
Gather crucial details for your company and your competitors’ company. When you have all the data, you compare them. And put it up on the competition graph.
The details you will need include:
- Sales Figures
- Profit margins
You can also add the marketing column if you find the need. Here, your goal is to make clear positions with respect to your target markets.
Position Mapping Graph
You can do this for 5 main aspects of your business-
- For product characters
- The quality of products/services
- The number of products/services
- For user/customer friendliness
You can either put all the points in the same graph or use a separate graph for each.
How to do this?
- Get graph paper and divide it into 4 quadrants
- Add your parameter(s)
- Start plotting your and your competition’s point
A competitive matrix is a method that helps you determine your competitive advantages. Usually, you put together this tool to note your market credibility. It is an industry analysis tool that compares the characteristics of you and your competition.
How to do it?
- You draw out a matrix
- Position your company and competitors, at the top, the horizontal blocks
- Put all the aspects you want to compete with, in the vertical blocks
- Put the tick marks to draw the competition
How to document in the competition section for your business plan?
Once you complete the determination, the documentation is quite easy. In fact, you can put the final graphs in your draft. It will not only give color and variety but also make it easy to understand.
While you put all the graphs together, you have to explain your competition and the parameters that you have selected. Moreover, you can go ahead and explain why the companies are your competition. And also explain why you picked particular parameters.
Mention the date and time frame in your graphs. It makes it easier to have a deeper knowledge of your competition.
Basically, the documentation is journaling the process of drawing the graphs. You may not want to add every detail. As that could make the entire section a little longer than expected. But at the same time, don’t leave out the important details.
Why is this step important?
2. determine and draft your competitive advantages, determining the competitive advantage.
This process may look hard. But it is not. In fact, it just includes one step to the above one. It can be done side by side while you are drawing the comparison and putting them together in different graphs.
Drafting your competitive advantage
You have to note down your bonus points and explain them in detail. You can use those graphs too for more clarity and variety. It is better that you make this up to the point. If you are writing for the investors, they might just want the rounded points after seeing the graphs.
With this step, you became assertive about your success and future in the market.
If brought in front of your investors, they quickly get a clear idea of whether to invest in your business or not. In a way, it helps you store their faith in your business.
3. Put in the customers’ review
This step is just like putting that final nail in the coffin! Plus, regardless of the purpose of your business plan, this step and section remain the same. Even more interesting, it takes less time than the two above-mentioned steps.
Here’s how you do it-
- Find out the reviews and ratings of all the competitors, you had begun the process with.
- Be discreet. Don’t only add the good points or the bad points. Add the good, the bad, and the average rating and reviews.
- In fact, you can go ahead and make three sections named- The Good, The Bad, and The average.
- Add 10-12 reviews in total and put them in the respective sections (3 or 4 in each).
- You can find reviews from search engines, social media, websites, forums, and magazines.
- If you want even authentic reviews and have enough time and resources, you can even run surveys. Or contact agencies that run unbiased surveys.
How to draft it-
- Put them just the way they are, even if they have typos. Try not to tamper with them.
- Add them at the end of the competition section for your business plan.
Why is this step important
- To add more clarity and favor to your business.
- Gives a chunk of customer points to view.
- Restores your, your team’s, and your investor’s faith in your company.
And that’s all about the competition section in the business plan. We hope we have given you all the information that you needed. However, regardless of how you find notes, we have listed the FAQs for the competition section for a business plan. You can refer to it for questions that look similar to yours.
FAQs for your competition section
What if we think that our business does not have competition?
Ideally, every business has competition. If not directly, then indirectly. Basically, there are three types of competition- Primary, Secondary, and Tertiary.
Primary: The business that has similar products/services as you and, serves the same target audience.
Secondary: The high-end or low-end services/products as you. There may be a slight change in the target audience, depending on the spending capacity location and more.
Tertiary: They have completely different products/services but satisfy the same need of your target audience.
So, if you think that you don’t have primary competition. Look closely, you may have a secondary or tertiary competition.
What if that time my competition changes?
Do we need a separate team to draw a competition analysis and draft it in the business plan, how long should the competition section be in the business plan, where else can we showcase this analysis.
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Competitor Analysis: What It Is and How to Conduct One
Discover the benefits of a competitor analysis and learn how to conduct one for your business.
No business operates in a bubble. If you’re a small business owner, chances are you think about your competition a lot. But what should you focus on, and what should you do with that information?
That’s where a competitor analysis can help. At any stage of your business, it’s worth taking time to conduct one. You’ll identify competitors, research their marketing strategies, and assess your brand’s strengths and weaknesses.
Before any big game, a good sports team spends time studying their opponent. Coaches will do research, watch game footage, and put together a scouting report on each opposing player. A competitor analysis is like a scouting report for your business—a tool for designing a game plan that helps your company succeed.
What is a competitor analysis?
A competitor analysis, also referred to as a competitive analysis, is the process of identifying competitors in your industry and researching their different marketing strategies. You can use this information as a point of comparison to identify your company’s strengths and weaknesses relative to each competitor.
You can do a competitor analysis at a high level, or you can dive into one specific aspect of your competitors’ businesses. This article will focus on how to conduct a general competitive analysis, but you’ll want to tailor this process to match the needs and goals of your business.
Why do a competitor analysis?
More often than not, small business owners find themselves juggling many tasks at once. Even amid a busy schedule, though, it’s worth taking the time to do a competitor analysis.
- Identify your business’s strengths and weaknesses
By studying how your competitors are perceived, you can draw conclusions about your own brand’s strengths and weaknesses. Knowing your company’s strengths can inform your positioning in the market, or the image of your product or service that you want members of your target audience to have in their minds. It’s essential to clearly communicate to potential customers why your product or service is the best choice of all those available.
Being aware of your company’s weaknesses is just as important in helping your business grow. Understanding where you fall short of your customers’ expectations can help you identify areas where you may want to invest time and resources.
You might learn that customers prefer your competitors’ customer service, for example. Study your competition to find out what they’re doing right, and see what you can apply to your business.
- Understand your market
While identifying competitors, you may find companies that you didn’t know about or that you didn’t consider part of your competition before. Knowing who your competitors are is the first step to surpassing them.
Conducting a thorough assessment of what your competitors offer may also help you identify areas where your market is underserved. If you find gaps between what your competitors offer and what customers want, you can make the first move and expand your own offerings to satisfy those unmet customer needs.
- Spot industry trends
Studying the competition can also help you see which way the industry as a whole is moving. However, you should never do something just because your competitors are doing it. Copying the competition without really considering your own place in the market rarely, if ever, leads to success.
If you see your competitors doing something that you’re not, don’t rush to replicate their offering. Instead, evaluate what your customers’ needs are and how you can create value for them. It’s often better to zag when everyone else zigs .
- Set benchmarks for future growth
When doing a competitor analysis, you should include companies that are both larger and smaller than your own. Studying well-established businesses in your industry can give you a model of what success looks like and a reference point against which to compare your future growth. On the other hand, researching new entrants into your industry tells you what companies may threaten your market share in the future.
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When should you do a competitor analysis?
Conducting a thorough competitive analysis is always a good idea when starting a new business. However, a competitor analysis isn’t just for startups.
Periodically revisiting and updating your competitor analysis, or conducting one from scratch, will help you identify new trends in the market and maintain a competitive advantage over other companies in your industry.
How to do a competitor analysis
Figuring out what to focus on when conducting a competitive analysis can be tricky. Below are 6 steps to help you get started. Before you begin your competitor analysis, consider what you want to get out of it. Add any other areas of research that align with these goals.
1. Identify your competitors
To create a list of potential competitors, consider where your customers would turn if they didn’t buy from your company. An easy way to start is to search your product name or category on Google or another search engine and explore the results. You can also survey or interview existing customers to ask them what alternatives they considered before deciding on your product or service.
When you finalize your list, aim to include a diverse set of companies to get an accurate assessment of what the market is like. You should consider businesses that fall into each of the 3 categories of competitors.
Direct competitors sell a similar product or service to a similar target audience. These are likely the companies that first come to mind when you think of your competition. For example, McDonald’s likely considers other fast food burger chains like Wendy’s and Burger King to be its direct competitors.
Indirect competitors sell a different product or service in the same category but target an audience similar to yours. For example, takeout pizza restaurants like Domino’s and Papa John’s are indirect competitors of McDonald’s.
Replacement competitors exist outside your product category, but they satisfy a similar customer need. For McDonald’s, replacement competitors could be any solution that consumers turn to when they’re hungry, including products such as frozen meals. Of the 3 types of competitors, replacement competitors are the hardest to identify.
When conducting a competitor analysis, you should focus most of your attention on direct and indirect competitors. Still, it’s worth briefly taking stock of potential replacement competitors that could threaten your business prospects.
2. Create a competitor matrix
Before you dive into your competitor analysis , take a moment to get organized. A competitor matrix, also known as a competitor grid, is a table or spreadsheet you can use to compile your research. This will make it easier to compare your findings across competitors and spot larger trends.
Start by devoting one row or column to each competitor that you’ve identified. On the other axis, list data points or categories of information you’d like to find out about each competitor. Don’t worry if you’re not sure what you should be looking for at this point. You can also always add more categories as you progress through your research.
3. Gather background information
Once you have a list of competitors to research, start learning about their businesses. Look for the most basic information first, and then build your way up from there. Start by looking at company websites, social media pages, and any news articles that have been published about them. Here’s some basic information that you may want to look for.
This includes information such as founding date, funding sources, and any mergers or acquisitions they have been involved with. You can often find this information by reading the “About” section of their website or browsing past press releases from the company. Studying how your competitors got to where they are today will give you a more complete understanding of their businesses.
This will vary greatly based on your industry. If you’re in the e-commerce business, you could be competing against companies that sell their products worldwide. For traditional brick-and-mortar businesses, your competition is likely highly localized. Either way, it’s always smart to know where your competition is based and where they sell.
How many people do your competitors employ? LinkedIn and Glassdoor are helpful resources for this kind of data. You’ll also want to look into how many customers your competitors have and how much revenue they generate. This information will likely be easily accessible online for larger companies. For smaller and privately held companies, you might have to make do with rough estimates. Knowing how large your competitors are will help you better contextualize the rest of the data you collect.
4. Profile your competition’s target customers
A company is nothing without its customers. Getting an idea of who your competitors sell to will tell you a lot about their businesses. To pinpoint the target customer for any business:
- Read their mission statement .
- Look at what kind of messaging they use.
- Track who they interact with on social media.
- See if they feature any existing customers in their content.
Use this information to construct a profile of who your competitors are trying to reach with their products or services. These customer profiles will probably resemble your own target customers—these are your competitors, after all—so make note of even small differences.
5. Focus on the 4 P’s
Now that you’ve identified the target customer for each competitor, it’s time to look into how they go about reaching that segment of the market. This will require a deep dive into their marketing strategies.
The marketing mix , also known as the 4 P’s—product, price, promotion, and place—covers the must-have elements when bringing a product to market. As part of your research, ask yourself the following questions for each competitor you’ve selected.
- What are they selling?
- What features are included in their product or service?
- What is most appealing to customers about the product or service? What are some weak points of the product or service? (Pro tip: Check out customer reviews.)
- What kind of pricing model do they use? Is it a one-time purchase or a subscription?
- How much do they charge for their product or service? Do they offer sales or discounts?
- How does their pricing reflect the quality, or perceived quality, of their product or service?
- How do they get the word out about their product or service? What advertising channels (social media, email marketing , print advertisements, etc.) do they use?
- What elements of their product or service do they emphasize? What’s their unique selling proposition ?
- What’s their company story? How do they talk about their brand?
- Where do they sell their product? Do they sell online or in brick-and-mortar locations?
- Do they sell to customers directly, or do they partner with retailers or third-party marketplaces?
These questions are meant to be a starting point. Feel free to expand on them and tailor your questions to your industry and the goals of your research.
You’ll likely find a lot of information. Try to condense your findings into short bullet points that you can easily reference later. Be sure to include quantitative data where appropriate if you’re able to find it.
6. Analyze strengths and weaknesses—yours and your competitors’
Using the information you’ve collected, consider the strengths and weaknesses of each of your selected competitors. Ask yourself why consumers choose a particular company’s product or service over the other available options. Record your conclusions in your spreadsheet.
Last, consider your own company’s strengths and weaknesses. How does your business compare to the competitors you’ve researched? Knowing what sets your business apart from the competition—and where it falls short of expectations—can help you better serve your target customers.
A competitor analysis sets you up for success
Completing a competitive analysis isn’t the end of your strategic planning—it’s just the beginning. Don’t let your hard work go to waste. Use the insights you’ve collected to guide your strategic decision-making.
Not sure where to start? It can be helpful to conduct a SWOT analysis , in which you evaluate your strengths, weaknesses, opportunities, and threats. This can help you sift through the information you collected during your competitor analysis and identify actionable next steps for your business.
Using a competitive analysis as part of your strategic planning is an ongoing process. You can always refer back to your research whenever you need to make an important decision for your business. To stay ahead of the competition, you should regularly revisit and update your competitor analysis.
Whether your company is big or small, well established or just starting out, it’s essential to keep your competition in mind. Conduct a competitor analysis today to set your business up for success.
Competitor Analysis FAQ
Competitor analysis is researching one of your competitors to analyze its products, sales, and marketing. Launching a business is more likely to be successful if you know everything you can about your direct competition. Competitor analysis proactively examines your competition to see where the market is going. A competitor analysis sets your business up for success.
Why do competitor analysis?
The competitor analysis definition includes analysis. After you gather information on your competitors, look at their digital content . What is working? If you were a customer, what parts of your competitor's social media presence appeal to you? Better yet, what would appeal to customers even more?
When you analyze your competitors, you will see their strengths and weaknesses. But the real advantage is the ideas the analysis stimulates. Jot down what you are thinking, and make a list of all the actionable items that you can implement.
A competitor analysis will:
You should do competitor analysis before you launch your business and whenever you make a strategic change. Ideally, you should do a competitor analysis at least twice a year. Some experts recommend monthly or quarterly analysis of your top e-commerce competitors.
What is the meaning of competitor analysis?
Competitor analysis lets you know what products and services they are offering, but also how they are marketing and selling those products. You can use the findings to find best practices, exploit competitors' weaknesses, and gain more customers.
How do you do competition analysis?
There are many ways to do a competitive analysis, but there are 4 basic steps:
- Identify your competition including direct competitors, indirect competitors, and substitute competitors.
- Gather information on products, services, pricing, service area, reputation, and marketing tactics.
- Compare the strengths and weaknesses of each competitor.
- Build on your competition’s strengths and weaknesses to create a competitive advantage.
Is competitor analysis the same as SWOT analysis?
SWOT analysis is a type of competitor analysis that looks at your competition's strengths, weaknesses, opportunities, and threats. Competitor analysis can go beyond SWOT to create new ways to increase market share.
Why do we do competitor analysis?
We do competitor analysis to understand the strengths and weaknesses of our competitors. Competitor analysis is proactive rather than reactive so that you can step out and lead the competition instead of trying to catch up.
What are the types of competitor analysis?
Types of competitor analysis include SWOT analysis, the customer journey map, and growth-share matrix . The customer journey is the story your customer creates with your branding, digital footprint, and products. A growth-share matrix is a visual tool to determine where to focus business activities.
What are the objectives of competitor analysis?
The objectives of competitor analysis are to study the changing market environment to predict market supply and demand. Then adjust your business strategy to optimize for the new conditions.
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The Ultimate Guide to Competitive Analysis + Competitor Analysis Example Template
What is a competitive analysis?
What are the benefits of doing a competitive analysis, a step by step guide to conducting a competitor analysis, a competitive analysis template, tips and tricks for successful competitor analysis, competitive analysis - the takeaways and faqs.
Knowing your own products like the back of your hand is essential for getting your e-commerce store going. But stacking your offering up against the competition is what will keep it growing!
This is where competitor analysis comes in. It’s a handy competitive research tool that can help you effectively carve out an ever larger share of your market.
Competitor analysis can benefit you in multiple situations:
- Maybe you’re launching a new product and need to know how to present it,
- Maybe your brand is feeling stale and you need ideas (a great way to re-engage existing customers),
- Maybe you noticed your sales growth slowing, or even stopping completely,
- Or maybe you simply have some downtime in your marketing schedule and want to sharpen up your message and ads in relation to your competitors.
Whatever stage your business is at, analysing your competitors can help you find new opportunities and keep on top of industry trends.
Evaluating your competition might seem like a daunting task, but we’ve prepared a detailed guide to all things competitor analysis.
In this blog, you’ll find:
- A definition of what competitor analysis is;
- A breakdown of its main benefits ;
- A step-by-step guide to conducting a competitor analysis yourself;
- A free competitive analysis template you can use for your e-commerce store;
- And some tips and tricks for getting your competitor analysis right.
Ready to beat the competition? Then read on!
A competitive analysis - also known as a competitor analysis - is a process of evaluating what your current and potential competitors are up to . It involves looking at what the businesses you compete with are doing, and, more importantly, deciding on what you can do in response.
Competitor analysis is about understanding your competition by evaluating:
- their products,
- their marketing and sales strategies,
- their customers and audience,
- and their strengths and weaknesses.
So it’s less about just comparing prices and more about understanding the businesses operating in your niche, and what advantages you might have over them.
Analysing competitors is a crucial step in your business planning process. Ultimately, you’re going head-to-head with your competition to win the loyalty of the exact same customer base. Competitor analysis is a tool that reveals critical insights that can help you come out on top in this race.
The biggest benefit is that you will understand how to turbo-charge your business’ growth. That’s because you will know how to compete in the market. A clear competitive analysis will make any business decision you take more informed and more likely to succeed.
Here’s a breakdown of some of the main benefits of doing a competitive analysis:
Finding a competitive edge
While market research helps you find customers for your business, competitor analysis helps you make your business unique. A customer’s first question will be: Why do I need this product? But their second will be: Why do I need your version of this product? Focusing attention on your current and potential competition will help zero-in on specific product features, pricing strategies, and marketing approaches that can distinguish your brand from its competitors and persuade customers to pick you.
Learning from others
Competitive analysis helps you understand the businesses competing for your potential customers. This is key to figuring out where you can improve. By analysing your competitors, you can not only learn their best practices, but also avoid some of the mistakes that they’ve made.
Managing threats and reducing risk for your business
Even if your sales are rocketing right now, how can you be sure that this will continue? Understanding your competitive landscape well makes you better prepared to face any unpleasant surprises . Competitor analysis allows you to identify your competitive vulnerabilities and keep an eye on potential threats. Scoping out where customers may go if they don’t choose you is a good way of making sure it doesn’t happen.
You can do it too.
Capitalizing on opportunities
Is there a product or niche that is on fire right now, and could propel your store from five figure earnings to six figure? Well, there might be, but without competitive analysis there’s a good chance you’ll miss it. Competitive analysis makes it easier to spot gaps in the market and jump on these opportunities while they’re still hot.
Many businesses find themselves wrong-footed, not because they did something wrong, but because they failed to anticipate changes in the market. A competitor analysis will help you identify the strategies your competition uses to provide value to your target buyers. By looking at these strategies, you can better recognise how you can enhance your own long-term business strategy, or find alternative strategies to attract additional customers. Just imagine you’re selling DVDs online right before Netflix launched its streaming service! If you’re analysing the competition, you’d understand that your business needs to change (maybe a pivot to movie merchandise instead).
The more you can understand the businesses that directly and indirectly compete with you, the better you’re equipped for success. In essence, competitor analysis is a way to ensure you are one step ahead of your competition.
So, with no further ado, let’s see how it’s done.
It’s easy to burn hours of time on competitor analysis. To save you some time, we have set out a structured step-by-step guide that should help keep you focused on what to look for and where.
Let’s get into the how-to’s of a competitive analysis in 6 easy steps:
Step 1: Create a spreadsheet for collecting the data
The first step is the least interesting, but it’s important. You’ll need to be ultra organized when conducting your analysis, so get a spreadsheet set up. Make sure everyone working on the analysis can access it.
And in terms of the content of the spreadsheet, we’ll leave that for later in this blog, when we present your very own template for conducting a competitive analysis.
Step 2: Identify your competitors
It’s time to find the competition. Of course, good ol’ Google will be a valuable tool here. But one important point to remember is that you should always add modifiers to your search terms. These are additional words or phrases that will dramatically narrow down the number of results for a search, and help you find your direct competitors more easily.
For example, imagine you’re a US-based e-commerce business that sells monthly subscriptions of organic gourmet coffee. If you simply search for “Gourmet Coffee”, you return over 375 million results. And the first is a blog about coffee, not a competitor.
Now add the modifiers “Monthly subscription” + “US” + “organic” and you get an 87.5% reduction in search results. Plus, all the results are for e-commerce coffee stores. Bingo!
Once you have tried the most obvious modifiers, make some variations like “best”, “cheapest”, and “fastest delivery”. And don’t forget Google tries to work out the intention of a search too (eg. whether you’re trying to buy something, research something, compare something etc.) So adding “buy” or “for sale” into your search enquiry might also help with honing in on your competitors.
Step 3 - Define your competitors by type
Once you have a list of competitors, it’s time to organise them a bit. The key categorization is to divide them into direct competitors and indirect competitors.
These are e-commerce stores that are offering the same products (or very similar) to the same audience (or very similar) as you are. So, to go back to our coffee subscription example, any other e-commerce stores selling coffee as a subscription to customers in the same region and demographic would be a direct competitor.
These are e-commerce stores that are selling a similar product to you, but with some crucial differences. For example, you might be at opposite ends in terms of pricing (luxury vs low end). For our subscription gourmet coffee store, indirect competitors would either be those selling cheap, lower quality coffee, or those not selling as a subscription. You could even consider competitors selling a different product that solves a similar problem. For example, if you’re selling vitamin supplements, you may consider standard pharmaceuticals to be your competitors.
A different approach for different competitor types
It’s important to be careful when categorising your competitors into direct or indirect, because the way you respond to these types of competitors will differ.
In the case of direct competitors, you might need to change specific parts of your product or service in response to what you discover about your competitors. Furthermore, when you’re targeting the same audience you’ll need to focus on specific benefits (like free shipping) that you can offer over your direct competitors.
But with indirect competitors, you might think more about persuasion. How can I get a customer who buys low-end coffee interested in trying gourmet coffee instead? So you’re going to focus less on the specifics, and more on the general benefit you have to offer.
Step 4 - Analyse each competitor’s value proposition and positioning
Now things are starting to sound a bit “advertising agency.” But don’t worry, fancy terms like “value proposition” and “positioning” describe really simple ideas. Here’s what they mean:
- Value proposition - a summary of the main reasons to choose a product or brand.
- Positioning - where a brand fits within the overall market.
Analysing these elements are important, because they give you a lot of information about the company’s product, service, and audience. And this gives you an opportunity to stand out.
For example, take a look at this value proposition from Apple: Looks brand new. Feels like home.
Apple is emphasising an important feature to their customers - the fact that its new iPhone looks modern, but will feel familiar for Apple users.
Understanding this gives you important information about who Apple is targeting - existing Apple users looking for an iPhone upgrade. So, if you’re Samsung you can come up with a distinctive and different message. Something like this:
By creating a different value proposition - one focused on discovery - you stand out and offer something different. If you’re thinking about your own value proposition and how to make it stand out, check out this list of 9 great value proposition examples to get you inspired.
How to find your competitor’s value proposition and market positioning
While companies communicate a lot about their value proposition and market positioning, it can sometimes take a little bit of digging to find it. Here are some tips you can follow to make the process easier.
Go to the about us section of your competitor’s website then:
- Note what they say their mission is. For example, if they say their mission is to “Make gourmet accessible to more people”, this probably means they’re cheap and are targeting the low end of the market. If they say they want to “Provide lovers of coffee with unique tasting opportunities,” this means they’re highly personalised (and therefore probably expensive).
- See if your competitor compares itself directly to other products on the market. For example, Four Sigmatic spell out on their website exactly where they see themselves in the health food market.
You should also take a look at their social media activity. This can give you a good snapshot of their size and activity, and help you identify their target audience too.
Step 5 - Compile this data in one place
Add all the data you’ve gathered into your spreadsheet. You could create a scoring system to make it easier to analyse and help you pick out key trends.
Step 6 - Find your competitive advantage
Here comes the toughest part. But this is the whole point of the exercise - to find a way to present yourself that will give you an advantage over your competitors.
Start with your direct competitors. Look through your data to see if there are any gaps in the market positions. Are there loads of competitors in the low-end side of your market, but very few in the luxury segment. Or perhaps everyone is focusing on free shipping, but very little is mentioned about flexible returns policies.
Once you have looked through each competitor, you’ll need to turn the attention onto your e-commerce store. Ask yourself:
- What are our biggest strengths as a team?
- What do we do badly or find challenging?
- What do we enjoy and value most?
For example, let’s say you realise that you are highly creative but not so great at organisation. Then it would make sense for you to focus on building a brand people love by being active on social media, rather than thinking about logistics-intensive benefits like flexible returns.
Combine the two (your analysis of your direct competitors and your reflection on yourself) to find the perfect competitive advantage for you.
For example, take a look at this brilliant ad by Atoms shoes.
Here is a brand that knows exactly what its competitive advantage is:
creating comfortable, long-lasting shoes made from high quality materials.
They even spell out exactly what they’re not.
This level of clarity is what you’re aiming for with your competitive analysis.
Finally, once you have identified your competitive advantage, take a look at your secondary competitors. You might spot gaps in the market, or think of ways to convince some of their audience to try your product.
You’ve got a clear idea of the steps you’ll need to follow for your competitive analysis. Now, as promised, here’s a handy template you can use. It’s designed for general use for e-commerce stores, but of course you can adapt or tailor to your specific niche.
We’ve filled in the answers for our fictional gourmet coffee store to give you an idea of how to answer each section.
OK, just time for 5 handy tips to you should follow when you’re carrying out your competitor analysis.
- Analyse web traffic and organic performance: If organic traffic is a key component of your marketing strategy, look for organic competitors by seeing whose content performs well for specific search queries. You’ll need to look at the content they create and see how you can offer more value. You can also use tools like ahrefs or semrush to get more granular. Useful metrics to look for are number of referring domains and volume of organic search traffic .
- Check out the ads your competitors are running: If you rely mainly on ads for your marketing, look at your competitors ads to see how they engage their audience and sell their product. Here’s a step by step guide on how to find your competitor’s ads.
- Know when enough is enough: Although it’s always sensible to do competitor analysis, avoid obsessively researching every possible competitor. It’s easy to take research to the point where you get stuck in ‘analysis paralysis’ and never get round to actually taking action so your business grows. You could try limiting competition analysis to once every 3 or 6 months, and be tight on how long you give yourself for the process.
- Take everything you see from your competitors with a pinch of salt: Don’t assume that everything a competitor does actually works well. When looking at a competitor’s glossy website, it’s easy to think everything is perfect. But few businesses get everything 100% right for their customers. And many businesses do things that aren’t always ideal or profitable, but due to other pressures they never get round to changing. Even if it is right for them, it might not be right for you.
- Repeat, repeat, repeat at regular intervals: Competitive analysis isn’t a one-and-done exercise. While the frequency of analysis can differ depending on the industry, we recommend conducting a competitor analysis anytime from once a quarter to once a year. This gives you time to react to your discoveries and benchmark your progress.
Competitive analysis is an important tool in maintaining your store’s continuous growth. By keeping tabs on what the other e-commerce stores in your niche are doing, you can:
- Constantly improve and clarify your value proposition so you really stand out in the market,
- Identify opportunities in the market that can bring in big bucks,
- Manage potential risks i n the future so that your business is secure for the long term.
And to carry out a successful competitive analysis, just adapt the competitor analysis example template in this article to fit your specific area of business. Then follow these 6 steps:
- Create a competitive analysis spreadsheet based on the template in this article,
- Identify your competitors (don’t forget to use a range of modifiers when you’re searching for them on Google)
- Define your competitors by type (separate them into direct and indirect competitors)
- Analyse your competitors’ value propositions and market positioning (for analysing your competitors’ social media activity, take a look at this guide to spying on your competitors’ ads in Instagram and Facebook.)
- Compile all your data in your competitive analysis spreadsheet
- Find your competitive advantage (after all, this is the main benefit of conducting a competitive analysis).
So, you’ve got the competitive analysis template. And you’ve got the steps for completing your competitive analysis. Now all you need is schedule some time to put this strategy into action (we recommend once every 3-6 months, and annually at the very least). Then get ready to propel your business’ growth and secure its long-term future.
What is competitive analysis?
A competitive analysis - also known as a competitor analysis - is like an audit. You gather information on who your competitors are and what they’re doing. This usually includes looking at their products, their marketing and sales strategies, their customers and audience, and the strengths and weaknesses of their business.
How does it work?
There are 6 keys steps to follow when conducting your competitive analysis: create a spreadsheet (based on the template in this article), identify your competitors, categorise them into direct and indirect competitors, analyse them, compile your data, and then identify your competitive advantage.
Why is it worth doing?
There are 3 main reasons to conduct a competitive analysis. The first, and most important, is to identify your own competitive advantages. See what you can offer that your competitors can’t and use this to attract new customers. Secondly, a competitive analysis will help you identify new opportunities and gaps in the market. Thirdly, it will enable you to secure your business’ future by being ready for changes and shifts in the market.
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Business Plan - Competitive Analysis
What is the Competitive Analysis Section of the Business Plan
Written by Jason Gordon
Updated at August 4th, 2023
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What is the competitive analysis portion of my business plan?
Barriers to entry, competitors, and how you will beat them. In this section, you are trying to identify all of the aspects of the market that could keep you out. Many business plans simply identify the competitors and products that will compete with their intended products/services; however, this is only one-half of the story. If there are a certain number of competitors or competitive product/services, why is that?
There has to be some factor that keeps others producer/providers from entering the market. These are commonly known as "barriers to entry". In the market analysis, you made the determination that the market is sufficiently big that you could be successful by grabbing even a conservative percentage. So, now:
- Tell why others aren't entering the market;
- Tell why you will be able to enter the market;
- List those who are going to attempt to keep you from taking their market share or will try to take your market share;
- List how you will be successful in taking their share, making the pie bigger, or fighting off their attempts.
Back to: Entrepreneurship
If there is market potential, why are others NOT in this awesome market?
What are your barriers to entry? Assuming that you are not yet in the market, what is it going to take to get there? This will generally be the same explanation as to why others are not in the market. Remember, the chances are not good that you are the first person or business to come up with an idea for a product or service. There has to be something that is keeping others out. This may not be obvious at first, but identifying these early will allow you to make adjustments to meet these hurdles. Identify the barriers to entry and explain how they may affect your business or industry. Common barriers to entry include:
Funding or Capital Concerns
How much capital is required upfront? Will it require some level of revolving capital needs? Where are you going to get this capital?
Legal Barriers (Licensing, Regulatory approval)
Is there a required state or federal license? Does the product or service require inspection and approval by a state or federal regulatory agency? Is the business subject to some state or federal regulation that is subject to change? (ex. Labor laws, foreign embargos, etc.)
Costs of Production
Is there a cost of production that is inhibitive in starting out?(Ex.Many older companies avoid the high cost of production due to production methods established when costs were lower.)
Cost of Sales and Marketing
Suppose you have the perfect product. How are you going to let people know about it? (Remember, the Apple operating system was superior that of Microsoft in the early days of each company. Nonetheless, Microsoft dominated the market with a largelyinferior product.) Can you market and pitch sales sufficiently to create customer awareness and drive sales of your product. Often you will have to market far more than the established brands in order to convert existing customers to your product.
How are you going get your raw material or other supplies for conducting business. How are you going to deliver your goods or services to your customers? Will it involve outsourcing or international shipping? Will this require strategic presence or distribution centers in various locations? All of these go into logistical concerns. Basically, you need to brainstorm of how every aspect of the business that requires the movement of product or material from one place to another will take place. Much of this information can be gleaned from competitors or businesses with similar business models. Understanding the logistical concerns will allow you to estimate costs and budgeting. Further, you may uncover a logistical aspect that supplies a competitive advantage to another business or, potentially, your planned business.
Required Skills and Knowledge
Who are you going to need to involve in order to carry out your business? It's a common mistake for the entrepreneur to believe that he or she can carry on too many of the actual business functions. If you haven't realized, you will be preoccupied with countless tasks and will not be able to carry on many of the tasks that you now assume will be your responsibility. You need to have an understanding of what you don't know have the time or ability to do. Again, look to competitors or similar businesses to determine the skills or market knowledge necessary to carry on your planned business operations.
Employee concerns are countless and daunting. There is no way to project for the types of employee troubles that you may face in starting your business. Types of employee issues include: hiring, training, employee benefits (healthcare, retirement), union negotiations, lawsuits (discrimination or hostile environment), and firing. The employee concerns for which you can plan include hiring, training, and employee benefits. All of these issues can entail considerable costs that were not previously anticipated. Planning and buying insurance for unplanned legal events can help to minimize these issues.
How are you going to protect your process or product? Does your product or service involve or potentially infringe on the intellectual property rights of others? Generally, the only way to protect your intellectual property is through patent, trademark, copyright, or trade secret. Some businesses develop around a product or service with the idea that they can start up under the radar of competitors and then grow quickly before competitors can catch up. This is commonly referred to as, "running faster" than the competition. In general, this is a last resort strategy as outrunning a competitor with superior funding is very difficult. Start by looking at the nature of your product or service and try to determine the best way to protect or establish defendable ownership or intellectual property rights.
Every business is going to pay taxes on the identifiable profit. The question is how much tax you will have to pay. Are there any tax advantages that exist for carrying on your business? Importantly, what tax advantages are your competitors employing that allow them to carry on business in an otherwise unprofitable venture. For example, there may be economic development or energy savings associated with your business venture. Another example is the effect or choosing a particular business entity above another. If you are going to need to use Net Operating Losses from the current year to offset personal income tax then an LLC may be a better option than an S-Corporation. Again, a percentage of tax savings can make a considerable difference in the profit margin or overall profitability of your business.
How strong are the competitors? What tactics are they likely to employ to defeat your product or service or to keep you from stealing market share? A large, well-capitalized competitor may be able to engage in a price war that you cannot withstand. This will require both primary and secondary research of your actual and potential competitors. (This concept is developed further below.)
Now, address each of the above-listed competitive barriers and explain how you will deal with the current situation, the situation that will arise along your projected growth path, and any contingent changes in these factors that could affect these businesses.
Competitive Analysis - Who Will You Have to Compete within This Market Space?
Who will be your competitors? Here you should prepare an exhaustive list of the players who will compete against you in your immediately relevant and prospective markets.
- List each competitor's name, location, and give a brief profile of their product or service.
- Create sub-categories and groupings for the competitors who are your most direct competitors.
- Classify the extent to why the subcategorized competitors are the greatest threat. (You will list aspects such as location, percentage of the market held - customer base, type of product or service lines, competitive or innovative nature of the firm, etc.)
- Expand on the secondary or indirect competitors. (Give an explanation of why you believe their product or service is a competitor to yours. This could explain how their product or service is a substitute product. Explain the situation in which these secondary or indirect competitors would be the greatest threat to your projected business, e.g., if they offer an inferior good (product or service) then a downturn in the economy may drive customers away from your more economically elastic product.
- Explain how your product or service is superior (or competitively advantaged) against each competitor's product service. The most difficult part of this component is identifying all of the characteristics that customers covet in the product or service, such as: design, speed, ease of use, dependability, price, customer service, etc. It may be useful to use a table listing the attributes of the products side-by-side. This allows for quick assessment by third-parties, as well as provides a framework for you to conceptualize the market position of your product or service. You can create multiple tables comparing your product or service to each category or individual competitor. You will need to compile the lists of competitive factors for that competitor or competitor's product. Note: These individual tables may not fit within the body of the business plan. You can always append or attach them to the end of the business plan.
Developing a Competitive Analysis section requires a great deal of research and knowledge about other businesses' products or services; however, the most difficult portion is assessing your product or service strength and weaknesses. In developing this section it is important to as honest and objective as possible in analyzing your value proposition. It may be useful to enlist third parties who are unbiased or unrelated to your business to provide their opinion on your product. This will help avoid the cognitive bias that nearly all entrepreneurs have when assessing the competitive strengths of their own product or service. Remember, even if you can explain away any fears or negative perceptions that customers have about your product, the customer's input is extremely valuable. You will not be there to explain away these fears or concerns at the point in which the customer learns of the product. These will be the perception issues that you have to address in marketing your product or service.
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What is competitive analysis? Template, examples, and how-to
October 4, 2022 8 min read 2441
In this comprehensive guide, we’ll define what a competitive analysis is, describe the benefits product teams stand to gain from conducting one, and walk through the steps of how to do a competitive analysis.
Through the tutorial, we’ll refer to examples to demonstrate how each step of a competitive analysis works in practice. We’ll also provide a list of customizable, free competitive analysis templates for you to use when completing these steps on your own.
Table of contents
What is competitive analysis, why do a competitive analysis.
- Create a shortlist of your competitors
- Do a deep dive on each competitor
- Develop a holistic overview and strategy
The Five Forces model
Customer journey map.
- Competitive analysis template
- Product canvas template
- Competitive matrix template
- Battle card template
- Customer journey map template
Complete guide to competitive analysis
Picture this: you just came up with the next disruptive, game changing, AI-powered e-commerce marketplace. The objective is to connect buyers with sellers to fulfill their tailored and customized product needs.
You’re confident your product will take on Etsy and other big players in the market. You did some market and user research and have a good idea of your ideal customer and their (underserved) needs. Based on this data, you believe your marketplace can reach product-market fit quickly.
It’s now time for you to dust off your copy of Sun Tzu’s T he Art of War . Why is that, you ask?
The Art of War is an ancient Chinese military textbook that, although dated somewhere between ~500–400 B.C., is one of the most influential management books out there to this day. It provides great strategic and tactical advice. Moreover, it provides guidance to help you assess yourself and your competition to gain an advantage.
Maintaining a competitive advantage is the goal. Even if you have the best product in the world and you know there is a market for it, if you don’t understand your competition, you‘re bound to fail. That’s why you need to perform a competitive analysis.
As the band Rage Against the Machine would say, know your enemy .
Competitive analysis (sometimes called a competitor analysis or competition analysis) is exactly what it sounds like: a structured approach to identifying and analyzing your competitors. More concretely, it’s an assessment of your competition’s offerings, strategy, strengths, and weaknesses.
A competitive analysis helps you answer questions such as:
- Which other companies are providing a solution similar to ours?
- What are the ideal customer’s minimum expectations?
- What are they currently not getting from our product with regard to those expectations?
- What barriers do competitors in the market fce?
- What should we avoid introducing in our product?
- What price are customers willing to pay for our product?
- What value do we need to provide to make our product stand out in the market?
- What trends are happening and how might they change the playing field?
When conducted thoroughly and regularly, a competitive analysis provides you with tons of information that can be used to improve and optimize your product. The end result is a holistic overview of your competitor landscape.
Competitive analysis is a fundamental product management instrument. It helps PMs learn what works and what doesn’t when trying to acquire market share, identify market trends, and locate gaps in their product offering.
Competitive analysis exists to help you avoid making mistakes and empower you to beat competitors to the punch in the pursuit of product growth and success.
Knowing your competition will bring you great rewards. Conducting a competitive analysis will help you more effectively:
- Create benchmarks
- Identify opportunities to better serve customers
- Make strategic decisions
- Determine your pricing strategy
- Identify market gaps
- Determine distribution and marketing strategies
Typically, the first time you create a competitor analysis is when doing your market research. This helps you get an idea of the product-market fit , which will evolve along your journey.
As a product manager, your role is not to analyze how well your competitors are able to showcase themselves. It is your job to make the product what the customer needs it to be. Understanding your competitor’s capabilities, pricing, and product positioning helps you in this.
Keep in mind that your competitors will likely showcase themselves to appear better than they probably are. You’ll be able to acquire tons of information about them, but you should take that information with a pinch of salt.
How to do a competitive analysis
There is no a single way to do a competitive analysis. In general, a competitive analysis is made up of three fundamental components:
- A shortlist of competitors
- A competitor deep dive
- A holistic overview and strategy
To demonstrate how to do a competitor analysis, we’ll refer back to the example outlined in the introduction.
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Remember, in our example, we’re looking to disrupt the market with an AI-powered e-commerce marketplace app that helps buyers and sellers connect to fulfill highly customized orders. Let’s call our innovative new product AGORA.
1. Create a shortlist of your competitors
There are three types of competitors:
- Direct — Competitors that offer the same product and target the same ideal customer; you are battling direct competitors heads-on
- Indirect — Competitors that either offer a somewhat similar product or target the same ideal customer
- Replacement — Competitors that offer a different product but target the same ideal customer
For a competitive analysis, you need to identify at least your direct and indirect competitors. So how do you do that? By looking inward and researching obsessively .
To figure out who your direct and indirect competitors are, you need to look inward first to understand your product positioning: who are you servicing and what is the offering you are providing?
You can answer these questions by doing a self-assessment using the product canvas . Originally introduced by Roman Pichler, the product canvas has since tbeen tweaked and refined.
In its core, the product canvas covers:
- The name of the product
- Objectives and key metrics for success
- The ideal customer
- A high-level overview of what’s required to meet the customer’s needs
- Just enough product details about short-term goals
For our example product, the competitive analysis might look something like this:
A simple Google search using keywords from your self-assessment can get you pretty far. Other resources that can help you identify your competitors include tools such as Crunchbase, Similarweb, Statista, etc.
As the old saying goes, the customer knows best. If you don’t have many customers yet, review sites such G2, Capterra, Trustpilot, and Google Reviews can help you.
If you do have customers, go ask them. Most customers try and evaluate several products before deciding on the right product to buy. Nothing is stopping you from asking them which other brands they considered and why they ultimately chose yours.
Once you have established who your competitors are, you might find yourself in a market with many direct and indirect competitors. If that is the case, select about seven of the most relevant competitors to include in your competitor deep dive.
2. Do a deep dive on each competitor
From your a shortlist of competitors, choose about seven of your most important and dig up all the relevant information on each one.
The research conducted during the previous step will help you capture the most relevant information about your competitors for the following categories:
Ideal customer profile, product information, market approach, swot analysis.
Start by creating a company profile for each of your competitors to gain a better understanding of who they are. Include the following information:
- Name — What is the name of your competitor?
- Founding date — When was the company founded? How long has it been in the market?
- Company size — How many employees does the company have? Are they equipped to service the market and innovate?
- Market share — The portion of the market controlled by the competitor’s product
- Revenue — The income the competitor generates from its product
- Reputation — What do customers think of your competitor’s product on a scale from one to five?
Let’s apply this framework to our AGORA competitive analysis example:
It’s important to understand who your competitors are serving and who is buying the product. This not only to reconfirm that the competitor is indeed a direct (or indirect) competitor, but also to understand what customers like and dislike about the competitor’s product.
The information you’re looking for includes:
- Ideal customer — Who is the competitor’s target customer and what defines them?
- Motivations — What does the customer enjoy about your competitor’s product?
- Frustrations — What does the customer hate about the product?
- Primary buyer — Who is the primary buyer of the product? Is it the as the ideal customer, or is it a different persona?
Let’s see what this would look like following our AGORA example. Below is an example ideal customer profile for Etsy. First, for the buyer:
And the ideal customer profile for Etsy sellers:
Not to be captain obvious, but you want to capture more details about the product your competitor is offering and its positioning.
The information we’re looking for at this step includes:
- The product — What is the tagline your competitor is using to market its product?
- Positioning — Based on the quality and price of the product, place the product into a one of several buckets. For example, Economy (low quality, low price), Skimming (low quality, high price), Penetration (high quality, low price), and Premium (high quality, high price)
- Product features — What are the key features being marketed and promoted?
Referring to our example AGORA app, the product information associated with Etsy on a competitor analysis might look as follows:
Next, seek to understand how your competitors are bringing the product to market .
List the following information:
- Pricing — What does the product costs? If there is a tiered pricing model, what does it look like?
- Distribution channels — Through which channels is your competitor selling the product?
- Marketing channels — Through which channels is the product being promoted?
In our AGORA competitor analysis example, this section would look something like:
With all the information you’ve collected, you’ll find yourself in a good place to do a SWOT analysis . This is one of the most common and popular competitive analysis frameworks.
SWOT stands for strengths, weaknesses, opportunities, and threats:
- Strengths — What is going well for the competitor?
- Weaknesses — What is not going well? What obvious flaws are there?
- Opportunities — What could give your competitor an advantage?
- Threats — What might harm your competitor’s product?
For AGORA, our example competitive analysis might include a SWOT analysis that looks like this:
3. Develop a holistic overview and strategy
Now that you have a better view of your competitors, it’s time to determine how you want to approach them in the market: do you want to avoid your competitors or attack them?
Two extremely useful tools that can help you make this assessment are the competitive matrix and battle cards .
One way to operationalize the data you gathered during your competitive analysis is to plot out a four-quadrant competitive matrix.
Define key factors for the and x and y axes and plot yourself and your competition accordingly to see how you stack up. This approach is also known as perceptual mapping.
A competitive matrix for our example would look like this:
You can use the four-quadrant competitive matrix and competitor insights to create battle cards for each of your competitors.
Battle cards are a visual aid that help you compare your product against those of your competitors at a glance. It’s a quick and easy way to see how you stack up in key areas of performance and value. It’s also a neat way to help sales in their conversations with customers.
Here’s what you should include on each battle card:
- Company name — Name of your competitor
- Powers — What makes this competitor stand out from the rest?
- How we win — What should we do to gain a competitive advantage over this competitor?
- Why we lose — What is this competitor better at? What should we avoid so we don’t lose market share?
- Pricing — How much of a threat is the competitor’s product to our market share (low, medium, or high)?
- Strategy — Should we attack or avoid this competitor?
A battle card for our example competitive analysis might look as follows:
Alternative competitive analysis frameworks
If you‘ve followed the framework described above, you should have solid insight into your competitors, your product opportunities, and the best strategy to attack or avoid your competitors in the market.
If you want to dig deeper, you can follow up your competitive analysis by producing a Five Forces analysis and/or customer journey map .
You still might want to consider gaining more insights into the competitive structure of the market you are in — in other words, gain a better understanding of how easy it is to either enter or be replaced by a competitor in the market.
A great framework to use for this type of competitor analysis is the Five Forces model , originally conceived by Michael Porter.
According to the Five Forces model, you can assess the market you are in by looking at:
- Intensity of competitive rivalry
- Negotiation power of new buyers
- Negotiation power of suppliers
- Threat of new entrants
- Threat of substitutes
Instead of zooming out, you can also zoom in on the journey ideal customers make when interacting with the product itself, the distribution, or marketing channels.
On a journey map, your touchpoints are the customer, the activity performed, how the customer experiences the activities, and their expectations.
Free competitive analysis templates
A competitive analysis is a continuously updated document packed with information about your most important competitors to help you determine how to approach them in your target market.
The competitive analysis model described in this article consists of three steps that are designed to produce the insights you need to rule the market once and for all.
Below are free, customizable competitive analysis templates for each step of the process described in this article:
NOTE : To use and customize the competitive analysis templates above, after opening, select File > Make a copy from the main menu.
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How to Write a Market Analysis for a Business Plan
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A lot of preparation goes into starting a business before you can open your doors to the public or launch your online store. One of your first steps should be to write a business plan . A business plan will serve as your roadmap when building your business.
Within your business plan, there’s an important section you should pay careful attention to: your market analysis. Your market analysis helps you understand your target market and how you can thrive within it.
Simply put, your market analysis shows that you’ve done your research. It also contributes to your marketing strategy by defining your target customer and researching their buying habits. Overall, a market analysis will yield invaluable data if you have limited knowledge about your market, the market has fierce competition, and if you require a business loan. In this guide, we'll explore how to conduct your own market analysis.
How to conduct a market analysis: A step-by-step guide
In your market analysis, you can expect to cover the following:
Barriers to entry
Let’s dive into an in-depth look into each section:
Step 1: Define your objective
Before you begin your market analysis, it’s important to define your objective for writing a market analysis. Are you writing it for internal purposes or for external purposes?
If you were doing a market analysis for internal purposes, you might be brainstorming new products to launch or adjusting your marketing tactics. An example of an external purpose might be that you need a market analysis to get approved for a business loan .
The comprehensiveness of your market analysis will depend on your objective. If you’re preparing for a new product launch, you might focus more heavily on researching the competition. A market analysis for a loan approval would require heavy data and research into market size and growth, share potential, and pricing.
Step 2: Provide an industry outlook
An industry outlook is a general direction of where your industry is heading. Lenders want to know whether you’re targeting a growing industry or declining industry. For example, if you’re looking to sell VCRs in 2020, it’s unlikely that your business will succeed.
Starting your market analysis with an industry outlook offers a preliminary view of the market and what to expect in your market analysis. When writing this section, you'll want to include:
Are you chasing big markets or are you targeting very niche markets? If you’re targeting a niche market, are there enough customers to support your business and buy your product?
Product life cycle
If you develop a product, what will its life cycle look like? Lenders want an overview of how your product will come into fruition after it’s developed and launched. In this section, you can discuss your product’s:
Research and development
How do you see your company performing over time? Calculating your year-over-year growth will help you and lenders see how your business has grown thus far. Calculating your projected growth shows how your business will fare in future projected market conditions.
Step 3: Determine your target market
This section of your market analysis is dedicated to your potential customer. Who is your ideal target customer? How can you cater your product to serve them specifically?
Don’t make the mistake of wanting to sell your product to everybody. Your target customer should be specific. For example, if you’re selling mittens, you wouldn’t want to market to warmer climates like Hawaii. You should target customers who live in colder regions. The more nuanced your target market is, the more information you’ll have to inform your business and marketing strategy.
With that in mind, your target market section should include the following points:
This is where you leave nothing to mystery about your ideal customer. You want to know every aspect of your customer so you can best serve them. Dedicate time to researching the following demographics:
Create a customer persona
Creating a customer persona can help you better understand your customer. It can be easier to market to a person than data on paper. You can give this persona a name, background, and job. Mold this persona into your target customer.
What are your customer’s pain points? How do these pain points influence how they buy products? What matters most to them? Why do they choose one brand over another?
Research and supporting material
Information without data are just claims. To add credibility to your market analysis, you need to include data. Some methods for collecting data include:
Target group surveys
You can also consult resources online. For example, the U.S. Census Bureau can help you find demographics in calculating your market share. The U.S. Department of Commerce and the U.S. Small Business Administration also offer general data that can help you research your target industry.
Step 4: Calculate market value
You can use either top-down analysis or bottom-up analysis to calculate an estimate of your market value.
A top-down analysis tends to be the easier option of the two. It requires for you to calculate the entire market and then estimate how much of a share you expect your business to get. For example, let’s assume your target market consists of 100,000 people. If you’re optimistic and manage to get 1% of that market, you can expect to make 1,000 sales.
A bottom-up analysis is more data-driven and requires more research. You calculate the individual factors of your business and then estimate how high you can scale them to arrive at a projected market share. Some factors to consider when doing a bottom-up analysis include:
Where products are sold
Who your competition is
The price per unit
How many consumers you expect to reach
The average amount a customer would buy over time
While a bottom-up analysis requires more data than a top-down analysis, you can usually arrive at a more accurate calculation.
Step 5: Get to know your competition
Before you start a business, you need to research the level of competition within your market. Are there certain companies getting the lion’s share of the market? How can you position yourself to stand out from the competition?
There are two types of competitors that you should be aware of: direct competitors and indirect competitors.
Direct competitors are other businesses who sell the same product as you. If you and the company across town both sell apples, you are direct competitors.
An indirect competitor sells a different but similar product to yours. If that company across town sells oranges instead, they are an indirect competitor. Apples and oranges are different but they still target a similar market: people who eat fruits.
Also, here are some questions you want to answer when writing this section of your market analysis:
What are your competitor’s strengths?
What are your competitor’s weaknesses?
How can you cover your competitor’s weaknesses in your own business?
How can you solve the same problems better or differently than your competitors?
How can you leverage technology to better serve your customers?
How big of a threat are your competitors if you open your business?
Step 6: Identify your barriers
Writing a market analysis can help you identify some glaring barriers to starting your business. Researching these barriers will help you avoid any costly legal or business mistakes down the line. Some entry barriers to address in your marketing analysis include:
Technology: How rapid is technology advancing and can it render your product obsolete within the next five years?
Branding: You need to establish your brand identity to stand out in a saturated market.
Cost of entry: Startup costs, like renting a space and hiring employees, are expensive. Also, specialty equipment often comes with hefty price tags. (Consider researching equipment financing to help finance these purchases.)
Location: You need to secure a prime location if you’re opening a physical store.
Competition: A market with fierce competition can be a steep uphill battle (like attempting to go toe-to-toe with Apple or Amazon).
Step 7: Know the regulations
When starting a business, it’s your responsibility to research governmental and state business regulations within your market. Some regulations to keep in mind include (but aren’t limited to):
Employment and labor laws
If you’re a newer entrepreneur and this is your first business, this part can be daunting so you might want to consult with a business attorney. A legal professional will help you identify the legal requirements specific to your business. You can also check online legal help sites like LegalZoom or Rocket Lawyer.
Tips when writing your market analysis
We wouldn’t be surprised if you feel overwhelmed by the sheer volume of information needed in a market analysis. Keep in mind, though, this research is key to launching a successful business. You don’t want to cut corners, but here are a few tips to help you out when writing your market analysis:
Use visual aids
Nobody likes 30 pages of nothing but text. Using visual aids can break up those text blocks, making your market analysis more visually appealing. When discussing statistics and metrics, charts and graphs will help you better communicate your data.
Include a summary
If you’ve ever read an article from an academic journal, you’ll notice that writers include an abstract that offers the reader a preview.
Use this same tactic when writing your market analysis. It will prime the reader of your market highlights before they dive into the hard data.
Get to the point
It’s better to keep your market analysis concise than to stuff it with fluff and repetition. You’ll want to present your data, analyze it, and then tie it back into how your business can thrive within your target market.
Revisit your market analysis regularly
Markets are always changing and it's important that your business changes with your target market. Revisiting your market analysis ensures that your business operations align with changing market conditions. The best businesses are the ones that can adapt.
Why should you write a market analysis?
Your market analysis helps you look at factors within your market to determine if it’s a good fit for your business model. A market analysis will help you:
1. Learn how to analyze the market need
Markets are always shifting and it’s a good idea to identify current and projected market conditions. These trends will help you understand the size of your market and whether there are paying customers waiting for you. Doing a market analysis helps you confirm that your target market is a lucrative market.
2. Learn about your customers
The best way to serve your customer is to understand them. A market analysis will examine your customer’s buying habits, pain points, and desires. This information will aid you in developing a business that addresses those points.
3. Get approved for a business loan
Starting a business, especially if it’s your first one, requires startup funding. A good first step is to apply for a business loan with your bank or other financial institution.
A thorough market analysis shows that you’re professional, prepared, and worth the investment from lenders. This preparation inspires confidence within the lender that you can build a business and repay the loan.
4. Beat the competition
Your research will offer valuable insight and certain advantages that the competition might not have. For example, thoroughly understanding your customer’s pain points and desires will help you develop a superior product or service than your competitors. If your business is already up and running, an updated market analysis can upgrade your marketing strategy or help you launch a new product.
There is a saying that the first step to cutting down a tree is to sharpen an axe. In other words, preparation is the key to success. In business, preparation increases the chances that your business will succeed, even in a competitive market.
The market analysis section of your business plan separates the entrepreneurs who have done their homework from those who haven’t. Now that you’ve learned how to write a market analysis, it’s time for you to sharpen your axe and grow a successful business. And keep in mind, if you need help crafting your business plan, you can always turn to business plan software or a free template to help you stay organized.
This article originally appeared on JustBusiness, a subsidiary of NerdWallet.
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