How to conduct a competitor analysis

A competitor analysis is not as technical as it sounds, you just have to be brave enough to start looking.

As a small business owner, this can sometimes be daunting if you have never seen who you are competing with to win your customer’s attention and business. Conducting competitor analysis has three main components. Understanding who your competitors are and the difference between direct and indirect competitors, doing the competitor research. Finally creating perceptual maps to visualise your findings and identify gaps in the market to inform your positioning strategy. 

Difference between direct and indirect competitors

A key step in analysing your competitors is understanding the difference between direct and indirect competitors.

A direct competitor is someone who offers the same solution to your customers, to solve the same need. Comparing apples with apples.

An indirect competitor is someone who solves the same problem for your customers but whose offering is different. Comparing apples with oranges.

For example, restaurants that sell cheeseburgers are all direct competitors for each other. Whereas, Subway is an indirect competitor for these restaurants because while they may offer a product that can solve the same problem (hunger) the products themselves are quite different.
Understanding your competitors will help you determine your market share and think deeply about the way you position your brand. You’ll learn what your customers see by researching products similar to yours or typing a question into Google to find out who is serving a solution to a problem.

Competitor analysis research

For small businesses with small budgets, simple competitor research can be done easily through Google. There are expensive agencies that can provide research for you, but with a bit of spare time it’s easy to gain enough understanding of your competitors to start building a positioning strategy yourself. There are 6 main steps for how to do competitor research and they can all be done with a laptop and a bit of snooping.

1. Define your offering and who you serve

First and foremost, you will need to define your market, your products/services and the benefits you offer your customers. This way, when researching for other competitors, you know what to look for. Many new businesses have a hard time defining what it is that they do, this is especially common for newer products and services that have yet to be tested in the market. Make sure you know what it is you offer, who it’s for, the benefit and the problem you are solving.

2. Research competitors who offer a similar service (direct competitors)

Start to look at competitors who offer the same services/products, solve the same problems and serve the same people. Narrow down your search to be relevant to the market you serve, for example; in a geographic region (people who live in Wellington, New Zealand). Search for the problems you solve by thinking about what your customers will be asking Google. Take note of how your competitors are offering and positioning their solutions in comparison to yours.

3. Compare their features and benefits to yours

Feature comparison is a key decision-making factor when your customers are choosing a product or service. Look at your competition’s product or service and take note of the features and value they describe. Read their websites while putting yourself in your customers’ shoes. 

Ask yourself: 

• How does the customer journey feel? 
• Do they have useful information?  
• Are they making it easy for a customer to purchase a product or book a service?
• What value do they offer that might be different to yours? 
• Do you have more or better features than they do? 
• Do you offer something that they don’t, or vice-versa? 

An easy way to make this comparison is to create a simple list of features and benefits that you offer and then plot where each of your competitors sit in comparison.

You may find that you are the only business offering a certain feature and you know it solves a massive problem for your customers. You can then make strategic decisions to highlight this feature in your marketing and offer it from a place of confidence. Using your key feature differentiator to position your product as more desirable because of its lucrative feature.

4. Discover what language they use to describe their value

Look at how your competitors position their solutions. You can do this by reading the language they use to describe their solution and the problem they solve. 

Ask yourself: 

• What language do they use? Is it highly emotional, passive or direct? 
• What benefits do they highlight? 
• Do they have social proof from their customers? 
• Do they have testimonials on their website? 
• Do they have online reviews that validate their website messaging?
• How would your customer feel reading their website?

A lot of businesses have a core brand language that they use to consistently communicate with their customers. Think about the language they are using and how it compares to yours all while putting yourself in your customer’s shoes. Take note of how they describe their solution, if you realise you are using the same adjectives, it might be worth thinking about changing yours up to grab more attention.

5. Understand their audience size and engagement level

Look at their social media followers and online presence, are they featured in the news regularly, do other publications and news sites talk about them? From this, you can gauge how big their reach might be in comparison to yours. This might also give you some ideas about how your business shows up online, and how you engage with your target audience.

6. Compare their pricing and packaging

Look at their pricing, do they offer a cheaper solution than yours? Is their pricing higher than yours? Does their pricing reflect the benefits they discuss on their website?

Pricing and packaging can be a difficult thing to compare. It comes down to how your customers value what you offer. Is there an additional feature or service you could offer to your package to make it stand out to your competitors? Can you group your products or services together that offers more value to your customer? 

Perceptual mapping

A perceptual map (or positioning matrix) is a visual graph that highlights where your brand sits in the minds of your customers in comparison to your competitors. This is a great tool to identify gaps in the market where no one is currently serving your customers, and it can also aid in positioning strategies to differentiate your brand and compete more fiercely with others in the market. 

Start by selecting the points of differentiation that are important to your customer when they are comparing solutions and place them on the axes. Plot yourself and your competitors on the matrix like the example shown. From this, you should be able to recognise who your biggest competition is and strategize to position your brand as the preferable option. Doing this exercise may also present opportunities in the market that you could look to fill. Don’t just do one matrix, think about other points of importance for your customer’s decision-making and develop a range of positioning graphs.

A key thing to keep in mind is that a traditional perceptual map needs to reflect the actual perception of your customers and not your biased opinion of where you think your brand sits among others in the market.

However, you can also use it to map your competitors against your own without having to rely on customer research and expensive data sources. Using this matrix as a positioning tool can help you define your positioning strategy and stand out from the competition. 

Next Steps

If you are a small business owner, revisit your competitor analysis at least twice a year to stay ahead of your competitors. If you are a larger business with larger growth goals and in a highly competitive industry, think about dedicating time at least every quarter to reassess the competition and re-evaluate your positioning strategy. 

After all your competitors may very well be analysing your positioning and trying to win top choice in your customer’s minds too. Staying on top of the changes in positioning will mean your business is more agile and can pivot appropriately to maintain the top spot. Read more about why competitor analysis is important.