What is competitive analysis and how to conduct it?

Competitive analysis is a strategy that involves researching a business's main competitors to gain insight into their products, sales, and marketing tactics.

Competitive analysis (CA) can help you learn the ins and outs of your competitors and identify potential opportunities for further development. Analyzing the competitive environment also allows you to stay on top of industry trends and meet or exceed industry standards.

Based on the recommendations of the American business portal HubSpot and our own observations, we have compiled a competitive analysis guide that will help entrepreneurs: identify their competitors, their strengths and weaknesses, form their own unique selling proposition, and strengthen their role in the market.

What is competitive analysis?

Competitive analysis is a thorough strategy that takes a deep dive into the activities of your main competitors. It's not just about knowing what they offer. You need to understand their sales strategies, marketing policies, goals, and ideals that shape their brand. 

Researching the competitive environment allows a company to identify opportunities and threats in the market, optimize its strategy, and identify areas for innovation and improvement. 

Why analyze the competitive environment?

• To define industry standards. In a certain niche, companies can provide the same services and facilities that customers expect. For example, free delivery, seasonal discounts, etc. This will set the bar for other companies that want to work in this category.

• To identify competitors' shortcomings and create opportunities in the market and test new marketing strategies to develop your own product.

• To identify your own unique value proposition that distinguishes your product in the market.

• To determine what your competitor is doing right. This will help you update your product and marketing efforts.

• To identify criteria that would measure how well competitors' products meet real user needs. This would help you improve your product or create a new one.

5 key elements of the spacecraft

Competitive analysis can cover various aspects: 

1. Competitor overview: its history, market presence, mission.

2. Product/service analysis: comparing key products or services, their characteristics, and quality.

3. Marketing strategy: understanding advertising tactics, target audience, and unique selling propositions of competitors.

4. Operational analysis: studying their supply chain, customer service methods and practices.

5. Strengths and weaknesses: a clear definition of where the competitor excels and where it may be vulnerable. 

You don't have to research all aspects of the spacecraft, you can focus on the ones that are of most interest to you at the moment. 

How to conduct a competitive analysis? 

1. Who are your competitors

Competitors are usually divided into several categories. Direct competitors offer a similar product or service to a similar target audience. 

For example, Zarina or Zolotoy Vek may be competitors of the Ukrzoloto jewelry chain.

Indirect competitors offer other products in the same field, but they may meet the same customer needs or solve the same problem as your products. 

For example, an indirect competitor of Ukrzolot could be Minimal or Scythian Ethnics, which specialize in selling silver jewelry or costume jewelry but meet the same needs of women of all ages.

"Substitute" competitors exist outside your niche, but satisfy similar customer needs. In the case of jewelry, the main need of women is to emphasize the stylishness of their image, femininity, stand out from the crowd thanks to a beautiful original piece of jewelry, increase their status, etc. 

Competitors that meet such needs can be accessory stores that sell haberdashery, bags, scarves, wallets, clutches, glasses, and other style items.

You should focus primarily on direct competitors, but keep in mind others that indirectly influence the purchasing choices of your target audience.

Also at this stage, research the history, mission, and ideology of competitors with which they position their brand in the market.

2. What products are offered

Compare everything about the product: quality, main and additional features, and benefits. You can analyze your competitor's entire product line or focus on one.

3. At what price?

Analyze the prices and discounts offered by competitors to customers. Include the following questions in your analysis:

• What suppliers do they cooperate with?

• Do you work with wholesale sales or only retail?

• What is their market share?

• What are the characteristics and needs of their ideal customers?

• Do they use different pricing strategies for online purchases compared to traditional ones?

4. Study competitors' sales tactics and results

Find the answers to the following questions:

• What is the sales process of your competitors? 

• Through what channels? 

• Do they have several locations and what advantage does this give them? 

• Are they focused on expansion? 

• Do they have affiliate resale programs? 

• What are the reasons why their customers do not buy the product? 

• What is the average level of annual income and total sales? 

• Do they regularly offer discounts on their products or services? 

• How involved is the seller in this process?

This information will give you an idea of how competitive the sales process is and what you need to train your salespeople and sales representatives.

5. Analyze sales channels and geography

What channels do your competitors use to distribute their products, and how do they deliver them to the end user? Is it just a physical store, or is it also an online store, social media, messengers? What is the company's offline network? What locations do they target online? 

6. How is the competitor's website developed?

Analyzing your competitor's website is the fastest way to evaluate their marketing efforts. How fast does the site page load in search, do competitors use a mobile version, and how responsive is it to the main page? How well is the information on the site structured, and is the navigation and user journey easy to follow? 

Do they have a blog? What kind of content do they publish? Do they have a podcast or FAQ section? Do they do SEO optimization of their website pages? Do they use keywords in texts, meta tags, ALT for images, do they do internal linking, etc.

7. What is the content strategy of competitors

The previous questions can be elaborated on: how often, on what topics, and in what channels do competitors publish content? What is its quality? What resources does the competitor's team spend to create it?

8. How operational and business processes are set up

Knowing, for example, what software a competitor uses for business and sales management and customer service, you can improve your own to achieve the same level of service. You can also find out what platform the competitor's website is running on, as well as whether they use third-party plugins, ranging from analytical systems to CRM.

9. What marketing strategies are used by the competitor

Marketing analysis will give you a general idea of the level of interaction with customers, what marketing tools and channels your competitors use to promote their products or services, and how well does this promotion achieve their goals?

Look at the social media presence, how the brand communicates with its followers. Does the competitor focus on attracting people to landing pages, what is the quality of visual content, does it encourage engagement and brand awareness?

What channels of promotion the competitor uses: paid channels — contextual advertising, targeted advertising; organic method; referral programs; email correspondence, etc.

These indicators can be tracked using marketing services such as similarweb, semrush, ahrefs, serpstat, etc.

10. Conduct a SWOT analysis

As you evaluate each component of the competitor analysis (business, sales, and marketing), get in the habit of performing a simplified SWOT analysis at the same time. This means that you will pay attention to your competitor's strengths, weaknesses, opportunities, and threats every time you make an overall assessment. These questions will help you get started:

• What does your competitor do well? (products, content marketing, social media)

• What is your competitor's advantage over your brand?

• What is your competitor's weakest point?

• What is your brand's advantage over the competition?

• In what areas do you consider this competitor a threat?

• Are there opportunities in the market that your competitor has identified?

By doing so, you can better position your company and identify areas for improvement within your own brand.

SWOT analysis template

There are many templates for swap analysis available online. Be sure to include the following aspects: 

1. Strengths. Identify your strengths. This can be the product itself or a way of communicating with customers that is superior to the competition.

2. Disadvantages. Here, you can consider potential problems related to pricing, delivery, positioning, staff turnover, complexity of brand promotion, etc.

3. Opportunities. This part of the SWOT analysis can focus on exploring new market niches, revising your product range to reflect changing consumer preferences, or new technologies and trends in your industry.

4. Threats. These may include new taxes or regulations on trading, product manufacturing, or an increase in the number of similar products in the same market, which could negatively impact your overall share.

Competitive analysis is a key component of a company's strategic planning and management. It helps companies determine where they stand among their competitors, develop strategies to increase market share, adapt to changes in the industry, and anticipate competitors' moves.