Why competitor analysis is important

«77% of competitive intelligence professionals believe the greatest risk to their business comes from an unknown competitor» - SCIP

By default, the word «competition» often carries a slightly negative connotation, sometimes even aggressive or combative. However, competition in business is more about sporting interest and the opportunity to improve. It’s impossible to imagine the modern world without competition, as it drives progress, innovation, technology, quality, service, development, etc. Successful companies are constantly «on their toes» in the competitive whirlwind. They pick up on fresh trends and quickly adapt, never stopping so as not to fall behind and be pushed out of the market. They are well-versed in the competitive environment but also know themselves well. Competition in business is about excitement, drive, interest, and with these comes growth and achieving the best results. It’s with this mindset that you should approach analyzing your competitors

Competitive analysis is…

Competitor analysis is the comprehensive process of researching and observing companies that offer similar products/services to yours and/or operate in the same market niche as your company. You analyze competitors, noting their strengths and weaknesses, strategies, tools, methods, and overall business activities

Often «competitor analysis» is referred to as «competitive intelligence» (CI), which translates literally as «competitive reconnaissance». Interesting, right? In other words, when you analyze your competitors, you become something of a detective, an agent, with a «special mission» that must be completed, as the success of your business project depends on it. Competitive intelligence is about thoroughly studying and delving into the nuances of competitors' activities, taking into account not only the «visible» characteristics but also what is usually hidden from the public eye. You need to consider all the details, not overlook key factors, and based on the acquired knowledge, develop the right strategies

By now, you should have the urge to once again research your competitors and try your hand at being a «competitive detective». But let’s heat up the excitement a bit more and figure out how crucial this analysis is, what to look for in competitors, and what benefits you get from a thorough study of them

How important is competitive landscape research?

The best way to demonstrate this is with global statistics:

1. 90% of Fortune 500 companies already use competitor analysis to gain a competitive edge (source: Emerald.com)
2. 94% of businesses plan to invest in competitor analysis because, without it, they will not be able to scale their business and stay competitive in an increasingly competitive market (source: Small Biz Trends)
3. 62% of companies foresee an increase in spending on CI (source: SCIP, State of Competitive Intelligence)
4. 40% of Fortune 500 companies, that’s 200 players (!), will be replaced because they failed to adapt to the growing need for quality competitor analysis to stay on top (source: a study by the John M. Olin School of Business at Washington University)
5. Data analytics accelerates decision-making for businesses by 5 times (source: TechJury.net)

As the numbers show, competitor analysis cannot be neglected. It’s no surprise that large and successful companies allocate substantial budgets to study their competitors and understand their strategies. Your competitors are those with whom you will «share» the market and the consumer, which means you need to know them «face to face»

Don’t hand your profits to the competition – analyze them and win!

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How to identify competitors?

First, you need to understand who you will consider your direct and indirect competitors. This is one of the key points. The accuracy of this distinction will influence your marketing strategy, goals, action plan, promotional strategy, and more

Difference between direct and indirect competitors

How to identify direct and indirect competitors? In brief:

• direct competitors offer similar products or services to the same target audience, competing directly for the same customers
• indirect competitors provide alternative solutions or products that meet the same customer needs but differ in form or usage method

For example, for McDonald's, direct competitors would be KFC and Burger King since they all offer fast food and target the mass consumer. Indirect competitors would be grocery stores offering ready-to-eat meals or meal kits for quick preparation. These stores solve the same need for quick and convenient meals but provide a different way to meet it

Tools to identify your competitors

After determining the types of competitors, it’s time to start searching for them. If your company has been in the market for a while, you probably already know who your competitors are. However, one more round of research won’t hurt, as the market changes so quickly that you need to stay constantly updated. Competitor analysis is no longer a one-time task; it’s an ongoing effort

Commonly used tools for competitor research include:

1. Google and other search engines, or in other words, SEO results

«Googling» is the simplest and most obvious way to start searching for competitors – it’s your starting point. You can begin by searching for your company’s name and seeing who Google suggests as competitors. Also, use a list of keywords that characterize your company and the products/services you offer. Don’t forget to consider the geographical location of your business

2. РРС results

In the same Google search, based on your keywords, advertisements typically appear above and below the search results. You can also find your competitors here. At the same time, make a note if they are using PPC advertising as a promotional tool. It's important to perform the search several times to compile as large a list of potential competitors as possible

3. Thematic forums, blogs, reviews, etc

This is a very interesting tool, as not only can you find out who your competitors are and who users recommend to each other, but you can also discover why they choose your competitors. Additionally, you can identify customer pain points that have not yet been addressed by anyone. Then the plan is simple: you offer the solution first and make maximum profit in the moment. Profit! In short, forums are also a place where you can conduct mini-research on your target audience. We wrote more about target audience analysis here

4. Industry rankings and reviews

The principle is the same: use keywords to search for relevant rankings and save the list of potential competitors. The advantage of rankings is that, in addition to a brief overview of each product, you can also see a rating based on reviews or selected criteria. This helps you identify industry leaders and those who deserve special attention

5. Ask your clients

Obvious but very effective. You can ask potential or current clients which companies they are or were choosing between. This way, you get direct and valuable feedback, as it might reveal new competitors that you hadn’t identified in other sources. List all discovered competitors at the top of your list

6. Social media

It’s simple here – search and see what potential clients are thinking, saying, posting, and filming (especially on TikTok). There’s a sea of information here, so dive in. Additionally, you can simultaneously analyze your target audience

You can also search for competitors organically on social media by entering the necessary keywords

Like Google, social media also has advertising – otherwise known as targeting. You’ll encounter ads in your feed, stories, recommendations, reels, and more. Targeting works in such a way that once you search for something using your keywords, algorithms will ensure you periodically see «relevant» ads. This way, you can keep adding potential competitors to your list

7. Media publications, industry reports, news, etc

In addition to potential competitors in the industry, these sources help you learn about new technologies, markets, or innovations they’re using. Two birds, one stone

Moreover, in the media, you can track newsworthy events or scandals involving your competitors and then use that in your campaigns with well-thought-out strategies. Conversely, if your competitor has confirmed a good reputation, try to understand what they did well and why. Again, use that in your strategies

You can also track mentions of relevant brands on the internet using Google Alerts (which is free)

These are just the main tools. You can also ask your partners, dealers, or use specialized paid tools, etc. This way, you’ll compile a preliminary list of competitors for further analysis

How to do competitor research?

Now for the interesting part — where to start and what to focus on?

First, you need to filter through your list of potential competitors by briefly reviewing each one to determine if they are indeed a competitor

Then, you form a final list of those to analyze in detail. How many competitors you analyze is up to you and the resources you have. We recommend selecting 5-10 main competitors. Fewer may lead to an incomplete picture, while analyzing too many might bog you down for months

Basic competitor analysis includes:

1. General information about the company: what they do, how long they've been in the market, size, reach, revenue, website, geography, customers, etc
2. Analysis of positioning and unique selling proposition (USP), positioning matrix
3. Analysis of competitors' products/services
4. Competitor target audience analysis
5. Price and pricing strategy analysis
6. Which channels are used for promotion and communication (РРС, SEO, PR, social media, email marketing, offline events, etc.). It's important not only to identify the channels but also to try to analyze how effectively they work
7. Analysis of social media presence and activity
8. Website structure and content analysis
9. Analysis of key messages and communication with customers, including tone of voice (ToV)
10. Visual presentation, design, and its consistency across platforms
11. Customer review analysis

This is the basic framework. However, you can include additional aspects in your analysis that are important for your niche. For example, this could be an analysis of the customer journey, product/service testing, research on investments, grants, revenues, specific legal information, etc. The main thing to remember is that this is not a mandatory algorithm to follow, but rather a guide from which you can start. Then, your logic, ingenuity, experience, and creativity come into play. Here you can confidently say, «I’m an artist, this is how I see it». The primary goal is to gather useful data about your competitors, which you can use to build your strategies and gain a competitive advantage

Don’t want to waste time and money on competitor analysis? Try CompetAI – a fast, affordable, and insightful tool for analyzing your digital competition

Analyze competitors 

What benefits do you gain from competitor analysis

A thorough competitor analysis is always an investment in the growth of your company. You’ll never feel that you wasted time doing competitive intelligence

Main benefits include:

1. If you have competitors, it’s a good sign. You can relax. This means that your product or service is in demand, meaning there is a pain point for your target audience. It would be worse if there were no direct competitors at all - in that case, you would need to question whether your product or service is even needed in the market

2. You understand exactly what kind of product competitors offer and how high its quality is, what it lacks, whether it addresses the target audience’s pain points, and you identify any pain points that remain unresolved. This is your moment to shine

3. You know which features, services, or characteristics must be included in your product/service because most competitors also use them, and consumers view these functions as an integral part of the product/service. You also note which features you can integrate into your product in the future

4. You gain insight into pricing and can compare the price-to-quality ratio, using this data to shape your pricing strategy

5. You develop a clear picture of your competitors’ positioning and USP (Unique Selling Proposition), identify open market opportunities, and craft your own positioning and USP 

6. You understand which promotion channels, communication methods, and tone of voice (ToV) your competitors use, and based on this, you can build your own promotion strategies (SEO, advertising, email, SMM, etc.)

7. You get a sense of competitors’ design systems and corporate styles, which allows you to navigate the overall visual «style» of the market and build your brand system, implementing your unique touches that will set you apart

After analyzing competitors, you have plenty of initial data to create your marketing strategy and continue moving toward increased sales and profits, all while having confidence in the decisions you’ve made

A bonus section or points to add a bit of inspiration

Ron Friedman, in his book Decoding Greatness: How the Best in the World Reverse Engineer Success, presents the results of a study by Harvard Business School professor Clayton Christensen. For years, he studied the differences between regular managers and breakthrough innovators. The results showed that the personalities of managers and innovators are very similar - entrepreneurs are not smarter than managers, and managers are no less tolerant of risk than entrepreneurs. The difference is not in personality traits but in behavior, specifically curiosity. Breakthrough innovators are much more likely to act out of curiosity - this is the main indicator of an innovator's mind. Entrepreneurs ask questions, while managers merely follow orders. Innovators seek to see the bigger picture and search for the root of the situation; they always dig deeper and examine a situation from various angles to identify all existing features

In the context of competitor analysis, be those innovators - cultivate curiosity and inquisitiveness within yourself, always dig deep and search until you find what you need. Ask questions and find the answers. These insights will then help you act confidently and achieve excellent results in your business

To sum up

Competitor analysis is important! It is truly a significant, extensive, and complex task that must be done well and, importantly, regularly. Without competitor analysis, you are operating blindly, risking time, money, resources, and even belief in your own business 

Let competitor analysis not be something burdensome or difficult for you. Approach it with excitement, curiosity, and drive, and try your hand at being a competitive detective-researcher. By doing so, you will be able to map out the competitive landscape in the most unique and critical details, and extract incredible insights to shape future strategies

And finally: Don’t know how to find clients? Analyze competitors. Can’t figure out how to promote products/services? Analyze competitors. Not sure how to work in SMM? Analyze competitors. In any unclear situation - analyze competitors! And success will follow

Sources: 

https://www.brandwatch.com/blog/competitive-analysis/  

Ron Friedman «Decoding Greatness: How the Best in the World Reverse Engineer Success»

https://www.emerald.com/insight/content/doi/10.1108/17515631111106821/full/html  

https://smallbiztrends.com/2020/01/competitive-intelligence-statistics.html  

https://www.scip.org/page/2021StateofCompetitiveIntelligence  

https://techjury.net/blog/business-intelligence-statistics/#gref