What is a competitor analysis
A competitive analysis is a process a business goes through to understand what its competitors are doing and how they stack up against them. This can include the products, the marketing, sales performance and other factors.
A word of note – we’ve used the word comprehensive in the title to make it clear that for a competitive analysis to be effective, you need to conduct it in depth. Simply flicking through your competitors’ websites and social media accounts every few weeks won’t cut it. Here we will highlight all the benefits of going through a thorough competitive analysis, how this will create new opportunities for you whilst protecting you from rivals, and vitally – how to do it well.
The benefits of competitor analysis
Proper competitive analysis is incredibly valuable for many reasons. It can help you reveal:
- New opportunity: what aspect of your competitors’ products are customers loving? And where are your competitors falling short? Could you amend your product to meet more customer needs?
- The right path: assumptions you’ve made about what matters to customers might not be correct. You don’t want to focus a lot of time, money and resource developing something that isn’t fit for purpose.
- Your unique value proposition: what should you be doing to help your product stand out? How are you going to solve customers’ biggest pain points?
- How you should benchmark your progress: a competitive analysis can show you how you’re performing against your biggest competitors now and show you where you need to be in the future to gain greater market share. This will indicate the targets and KPIs you should implement.
Ultimately, if done right, a comprehensive competitive analysis opens up the door to greater success via multiple angles.
You should conduct competitive analysis regularly so that your insight is always up to date. Markets and customer needs can change fast and you need your product to remain relevant by adapting it as things change. New entrants to the market, existing competitors developing a new product like yours, and changing market conditions are all potential threats to your success. You always want to have an up-to-date SWOT analysis (strengths, weaknesses, opportunities, threats) to understand your position in the market and how you may need to pivot in the short and medium term.
A thorough competitive analysis is even more important when it comes to launching your product in a new market. You will encounter potentially vast differences in user behaviour and you need to be aware of the cultural differences that could significantly impact how users in new markets interact with your product – more on this later.
How to do a competitive analysis (comprehensively)
Whilst this is an exercise to compare your product and your business against the competition, remember to keep a customer-centric focus. The overarching purpose of a competitive analysis is to find out how well your competitors are meeting the main needs of customers and solving the biggest pain points, and where they’re failing. Then you need to turn the lens on yourself and see where you fit into the market and how you can adapt your product to better suit customers/users.
1. Identify and categorise your competitors
You may have a good idea of your competition when comparing an existing product in an existing market, but for new product launches or when launching in a new market you may need to do some in-depth research.
Once you have identified your main competitors you need to split them into two categories, direct and indirect competitors.
Direct competitors offer a very similar product to yours to the same target market. For example, two national coffee shop chains on the same high street that sell barista-made beverages with a similar setup at a similar price.
Indirect competitors are those that provide products with some similarities to yours to a similar target market but with important differences. For example, two telecoms companies that both offer similar cloud-based phone systems to businesses but one focuses solely on SMEs and the other solely on enterprise customers.
2. Compare competitor products
Now you have identified and categorised your key competitors it’s time to start the product comparisons.
You should only conduct the rest of this competitive analysis process against the direct competitors that you’ve identified, not the indirect competitors. Don’t completely discard your list of indirect competitors as they may change their model at any time and become a direct competitor, which you will want to know about. For instance, using the example above, the telecoms company focusing solely on enterprise could start selling an SME solution, and vice versa, which would put them in direct competition.
Of course, it makes sense to start by analysing your competitors’ products that are the closest match to yours. However, in some cases you may opt to start with their main offering if you’re early in your product development journey or entering a new market.
What you analyse will come down to your type of product. If you’re selling physical products such as office supplies you will want to consider how you match up when it comes to distribution/delivery too, whereas if you have a software product you might look closer at the customer’s online journey to purchase.
Regardless of product type though you will always want to analyse your competitor’s product features, price, quality, ease of use, value, and how it looks and feels. Hopefully by this point you will have a clear idea of what customers want from a product like yours, even if they’re just assumptions at this stage (see point 4 below), so that you can begin to build a picture of how well each competitor’s product will be meeting these needs.
3. Examine customer satisfaction levels
A simple way to do this is to look at online reviews. This will give you a quick snapshot of each competitors performance.
That said, you should also dig deeper to find the invaluable qualitative feedback customers have left for the competition. It’s a smart idea to focus on the 3-star and 4-star reviews with a good write up. In these reviews you will find customer suggestions for improvements and what the issues were that prevented these being 5-star reviews. This in turn can help you develop your own strategy across the board, from adding new features to improving your marketing and your sales process.
4. Understand which of your assumptions about customer needs are correct (and which aren’t)
As mentioned above you can now use the information you gathered from your customer satisfaction research to identify the key customer pain points. This will help you understand what you need to do with your product to set yourself apart from the competition. Now you can start to establish your unique value proposition (UVP).
5. Benchmark performance
Following the above it’s a good idea to create a roadmap in the form of benchmarking. Where are you now and where do you want to be at various stages in the future as you continue to develop your product and your business? Which competitors do you ultimately want to take market share from, what’s your target and when are you going to hit it? Use precise figures that you can track your performance against.
6. Analyse competitor marketing strategies
You need to look closely at what your competitors are doing to attract new customers/users, both online and offline. You should look at:
- Advertising online: social media, Google, publications, influencers, partnerships etc.
- Advertising offline: TV, billboards, magazines etc.
- Content strategy: case studies, blogs, whitepapers, documentation, features, videos, podcast
- Social media accounts
You want to see what’s working for them and what’s not. You also want to get an understanding of how they communicate in terms of tone of voice and type of content. What sort of brand personality are they displaying? Is it working?
How to use this information to create a winning product
As you can see there is a lot you can learn from your competition, especially those that are successful and have been in the market a long time.
Now that you’re armed with all this valuable intelligence it’s time to put it to use. You’ve identified what matters most to customers and how you need to develop your product and your business to be a success. You now need to document this in a business development plan.
- Which customer needs are the most critical
- Your current key advantages and where you need to improve operations
- How you need to adapt your product or your idea
- The prioritisation of tasks
- A new marketing strategy based on your findings
- Any new systems you may need to implement
Competitive analysis in a new market
When you’re conducting competitive analysis in a new market you need to take everything a bit further because everything we’ve discussed here becomes even more important.
Your product may be performing perfectly well in your local market but you’re going to have to make some adaptations for it to be a success in a new global market.
You need to understand the competitive landscape as deeply as possible. That great new feature that’s made you the number one product in America might be of no use to users in Asia. Cultural variations can be vast and therefore customer’s needs in new markets can be in stark contrast to those in your core market.
Learning from established competitors in new markets is therefore even more valuable than it would be otherwise. Studying those with local market expertise whilst keeping your attention on customer centricity is essential if you’re going to succeed and avoid costly mistakes.
The ultimate task is to make your product accessible and in-demand by adapting it to reflect the language, cultural, and UX needs of customers in the new market. To do this successfully you need to know what’s already working for the competition, and what’s not.
Do you need help with your competitive analysis?
We understand that research in all forms can be daunting and extremely time consuming if you don’t have professional researchers in house.
At UX24/7 we provide UX research services to take this vital task off your hands. Get the expert competitor insight you need from us whilst you focus on your core strengths – developing your product and your business.