Have you heard of the boiled-frog concept? Imagine a frog you’d be trying to plunge into boiling water. Its natural reaction would be to immediately jump out of it to avoid dying, right? If you were to dip into cool water, and start boiling it slowly, the frog wouldn’t do anything, not realizing it’s about to die because the change of temperature was too slow to provoke any kind of reaction.
This metaphor is commonly used to illustrate the use of benchmarking (or competition analysis) in a business environment. If a company only focuses on its own business and not on what surrounds it on the market, chances are it won’t realize situations can change and won’t be able to adapt and remain competitive… and die.
Put simply, competitive analysis is an evaluation of your market environment. Its main aims are to make you understand how your competitors work and to identify trends and opportunities in the market. This article will detail the 4 steps to follow to run a complete competitive analysis.
1. Understand who is part of the competition (competitors and their products)
There are two types of competitors: on the one hand, you’ve got your direct competitors, businesses offering a similar product than yours and likely to steal your market share if they do a better job than you. On the other hand, you’ve got your indirect competitors, who don’t have a product comparable to yours, but which could still satisfy the need your product solves.
Let’s illustrate this with an example: business A makes ice creams in neighborhood 1. It’s a direct competitor of business B that also makes ice creams in neighborhood 1, but not of business C, which makes ice creams in neighborhood 6, too far from business A to steal their clients. The waffle-maker in neighborhood 6 however, business D, corresponds to an indirect competitor of business C. It doesn’t sell the same product, but it solves the same problem: craving a snack.
When you compare your brand with another business for your analysis, only focus on direct competitors (you cannot really compare two different products from two brands, because they surely won’t have the same business strategies), while keeping in mind indirect competitors can pivot and become direct competition.
If you want some tools to find out how big a company is, check this.
Once you have an overview of your competitors, have a look at the product they offer. Analyze the different categories of products, their quality and their pricing strategy. From this perspective, you can already identify how competitive your products are in comparison to the ones your competitors produce. If the quality and/or the number of features of your product is higher than your competitors’, you can ask for more money (unless your strategy is to be the lower-priced one).
2. Analyze your competitors’ sales and marketing strategy
Have a look at the whole process: on what channels can their product be bought? Are salespersons involved? Do they propose price reductions? Do they use third-platforms to sell? How much do they sell and how much money do they make out of it?
If you sell products people will need delivered, make sure your shipping costs are competitive as well, because expensive shipping is the first reason people decide to empty their shopping cart online.
Then, research how your competitors market their products on their channels (website, social media, blog, press releases, media kit…). Check if they post any type of original content (podcasts, videos, infographics, webinars, ebooks…), you could be inspired. Try as well to research if any other business (or people) shares their content.
Take note of their content strategy: do they post a lot? Do they post frequently? How accurate, deep, readable is it? How is the tone of the posts? Analyze enough of their posts to cover a variety of topics they post on, to have a fair picture. Do they use hashtags or share buttons? Is the content free of access? Who is writing for them? If you can scroll energetically through their content, it is usually a good sign: their posts do not look that impressive.
3. Examine the results of your competitors’ strategy
To see if their strategy works properly, have a look at their results by analyzing the level of engagement they have: check the number of followers, likes, comments and shares they get on their posts. Try to understand if certain topics do better than others, if the comments are overall positive or not. Take note of the amount of interactions they have with their community: do they like or respond to comments? Do they take people’s opinions into account? Do they mention their followers? Are their posts interactive?
Conduct a SERP (Search Engine Result Page) analysis. To do so, select a few keywords that describe your business as precisely as possible. Then, through a Google search, identify how your competitors rank against you for these keywords. If you’re not the first one to appear in the organic results (meaning if you don’t take the ads into consideration), it means your competitor(s) is/are the lead(s) on the market. This will help you realise the evolution of your competitive environment, and which business is more visible than the others.
If you’re looking for tools to assess how strong a company’s online profile is, with respect to backlinks and mentions in page rank or estimated monthly traffic, follow this link.
The analysis of results applies to sales as well: if you see a big increase in sales after a particular campaign, then you may understand the campaign was successful. Getting engagement on social media is great, but if it doesn't have a positive impact on your business, you might as well forget about it.
4. Run a SWOT analysis
To make a SWOT analysis, make for each business a table of 2 lines and 2 columns. The first line is made for the elements inherent to the business: its Strengths, and its Weaknesses. The second line is made for the elements independent of this business, those who are directly linked to the market itself: the Opportunities, and the Threats the business can encounter. Use all the data you collected in the first three steps of this guide to fill the table. Repeat this operation for each competitor, but also for yourself.
Finally, compare the overall results with your business to better position your company, and see better areas of improvement within your own brand, what works and what doesn’t.
In the “strength/weakness” category, you might want to put the companies’ funding. If you need some tools to find out about a company’s funding, follow this link.
If you want to know more about a company, you might want to reach out to its former employees (salespeople, in particular, are quite good to talk to). If you’re planning on doing an outreach campaign with LinkedIn, follow this link to find a few automation tools to facilitate the process.
Lastly, follow this link if you need tools to find the email address of people you want to reach out to.
By following this guide, you should have a clearer vision of your competitive environment, and should be able to better understand and anticipate its evolution. You’ll also be able to be more confident in the way you want to run your business. This can look like a tedious process, but in the entrepreneurial world, you will usually not have that much content to analyze, things will go quicker.