Learning how to do a competitor analysis is a crucial step for any merchant who wants to ensure long-term growth for their business. A competitive analysis will give you a detailed picture of what your competitors are doing to develop their products, increase sales, and inspire customer loyalty in their brand.
Armed with this information, you’ll have a better understanding of your own strengths and the competitions’ weaknesses, which you can then exploit to gain a stronger position in your market. In this small business guide, we’ll explain the form and purpose of a competitor analysis, and how you can carry out a competitor analysis that will help you reach your business goals.
How to do a competitor analysis for a small business
Though there are many ways small merchants can approach carrying out a competitor analysis, every competitor analysis should include certain tasks or follow a framework to ensure it’s as thorough and effective as possible. Before we explain the steps involved in carrying out a competitor analysis, we’ll take a brief look at an important question: what is competitor analysis?
Competitor analysis is a thorough assessment of your competitors’ businesses, such as their products, marketing tactics, and brand equity. This is done with the intention of understanding your own business’ position in the market, and how you can identify new business opportunities or mitigate weaknesses to stay competitive.
As a small business owner, your approach when looking at how to do a competitor analysis will be slightly different compared to the advice given to larger organisations. Some of the major differences to consider include:
Resource constraints that require you to focus on more accessible and cost-effective methods of primary competitor research. This could mean you’ll have to limit the spread of metrics you’ll analyse to ensure you’re keeping the process efficient and streamlined.
Greater flexibility compared to large organisations, which presents opportunities to pivot your competitor analysis quickly depending on emerging trends and changes in consumer behaviour.
Your business may exist in a more narrow, niche market with a view to scaling your business at a later stage. If this is the case, you’ll need to focus your analysis on competitors who are targeting the same niche to ensure your research is as effective as possible.
While it’s important to consider these differences as you strategise and carry out your small business competitor analysis, there are a number of universal steps worth following:
Identifying your competitors. This includes both direct competitors, who offer products or services that are similar to yours, and more distant, indirect competitors who you share a business category with, but don’t pose a direct threat.
Gathering as much information as possible about your competitors. To make this easier, you can use the 5 Ps or marketing mix framework (Product, Price, Promotion, Place, and People) which you’ve applied to your small business marketing strategy.
Analysing the competition’s key strengths and weaknesses as part of a SWOT analysis.
Analysing any advantages you have over the competition, and how these might translate into opportunities to further your business.
Why is competitor analysis important for small businesses?
The data gleaned from your competitor analysis can have a variety of applications which can create opportunities for your small business. Here are some of the key reasons why conducting a small business competitor analysis is so important.
It helps to distinguish your brand and business activities
One of the biggest advantages of carrying out competitor analysis is that it allows you to identify key areas where you can differentiate your business from similar companies in the same space. As you research your competitors and their distinguishing traits, you’ll build an understanding of the common features that are shared across your close competition. This will make it easier to identify the unique traits of your business and the competitive advantages to help gain a stronger position in the market.
It helps you develop a strong unique selling point (USP)
With any small business marketing strategy you carry out, you’ll need to think about giving your target audience a strong reason to choose your brand over competitors.
Your unique selling point (USP) is a key deciding factor that pushes customers to choose your product or service over your competition. For this reason, you have to make sure it’s as distinct and compelling as possible in the context of your business’ market.
Carrying out competitor research will help you build a better understanding of your competitors’ USP, which will make it easier to develop your own USP into something more engaging and unique against the background of your market.
It gives you clear benchmarks
Having benchmarks based on your competition is essential for measuring your growth. They’re helpful for making sure you’re setting targets that are ambitious enough to have a measurable impact on your business’ key performance indicators (KPIs). To start setting useful benchmarks, you’ll need to gather data across a number of your close competitors. You can then collate this information into data points that show what you should be aiming for to keep your brand competitive and relevant. Consider a scenario where you’re running a mobile personal trainer business and planning to engage in social media marketing.
To set useful benchmarks, you can work through your list of competitors and check their recent social media activity, along with the engagement metrics that show how effective their social media marketing is, such as likes, follows, comments, and so on. Once you have this data collated, you can find averages across all your close competitors, and use this as a benchmark to aim for in your own social media marketing.
It can be a great source of inspiration
When you’re first getting started with competitor analysis, it’s natural and practical to only focus on your close, direct competitors, and look for ways to compete in a narrow niche.
However, by expanding your competitor analysis to larger and more developed businesses in your category, you can map out possible paths towards development for your own business. This will not only act as a source of inspiration for new ideas to push your business forward and creative ways to make money, but also develop your awareness of pitfalls your competitors have encountered. This will help you take precautions to avoid these issues as your business expands. By using competitor analysis as an opportunity to study the development of brands in your industry, you can learn from their example and build a more robust roadmap for your own success.
What does a competitor analysis include?
Competitor analysis can be approached in many ways, and you can organise the data you gather from it according to the unique needs of your business. There are specific elements and phases of competitor research which you should always aim to include. Even if you’re going to diverge from this framework to tailor your competitor analysis to your needs, familiarise yourself with these conventions and consider your competitors in terms of these established elements and processes. To help you understand how competitor analysis might work for your business, we’ll look at how each of these elements can apply to the fictional merchant “Ken’s Cake Business”, a small home-based bakery based in Brighton, specialising in products made from local, sustainable ingredients.
Identifying your competitors
The first step in any effective competitor analysis is knowing who your competitors are. You’ll probably have an idea of the local bakeries you’re competing against already. However, revisiting this topic will help you determine exactly which businesses qualify as competitors, and their relation to your business within the market. Including a diverse spread of your competitors, whether they’re direct (like bakeries) or indirect (like cafes and restaurants), will ensure the insights you gain from your competitor research will reflect the whole picture of your market.
Here are some of the categories you can sort your competitors into to better organise your data and determine which competitors need the most attention:
Direct competitors. The businesses that are a similar size to yours, and will be focused on solving pain points shared by your target audience with a product or service that’s similar to yours. For Ken’s Cake Business, this will be other small bakeries with an emphasis on sustainability operating in the same local area.
Indirect competitors. Businesses that target the same customer base, but offer a different solution. For Ken’s Cake Business, this might be a coffee shop that solely sells vegan products, or pastries that use high-end luxury ingredients.
Niche competitors. Those who offer the same solution, but target a different customer base. For Ken’s Cake Business, this might be a larger bakery that sells to catering companies.
Carrying out market research
Once you’ve determined who your competition is, the next phase to think about is market research. This involves analysing the products and services offered by your competitors, including pricing strategies, their strengths and weaknesses, how they operate internally, and the impact of these offerings have on market conditions.
Your market research should include both primary and secondary research:
Secondary research relies on public, highly-accessible information
Primary research will require you to actively harvest your own original datasets.
Some ways that Ken’s Cake Business might carry out market research include:
Purchasing baked goods from competitors and comparing the quality or value for money compared to their own products.
Checking competitors’ online stores and social media pages to assess their food-related hashtags, quality of food photography, and how they approach seasonal events like Valentine’s Day and Mother’s Day.
Sending out customer review surveys after orders, or conducting more ad-hoc drives to interview customers and find out what they want to see from bakery businesses.
Keeping on top of developments in baking tools and more general business technology that could help develop the offering at Ken’s Cake Business.
Reading press releases and news about competitors in local news sites and food or hospitality trade journals.
Following trade journals and working to anticipate macroeconomic factors that could affect independent bakeries.
Gather business insights
Following your market research, it’s time to look at your competitors as individual businesses, and focus on the details that set them apart. Gathering data on the individual variables for each of your competitors will help you make a fair, accurate and unbias comparison with your own business. This will help you assess your own position in the market, and determine the kind of strengths and shortcomings you should focus on as you find practical applications for your competitor research. Some of the important things to consider when you’re gathering business insights include:
Products and services, for example the kinds of baked goods that competitors are offering and any kind of catering or delivery services they provide.
Competitors’ pricing, how closely this reflects the quality of their goods, and what the customer base considers a fair price for a given type of product.
The customer experience offered by competitors, both as it appears from your own primary research and any customer reviews you can find.
Competitor marketing campaigns and the kinds of channels or content they favour.
Location and logistics, e.g does the competitor bakery have one or more branches? Are they a franchise business? What is the scope of its delivery capabilities?
Identify market gaps for your small business
Armed with a thorough understanding of your target market, and the competitor businesses who make it up, you can begin putting your competitor research to good use.
To find practical applications for your competitor research, you’ll need to identify market gaps for your small business.
Market gaps are areas of business which there’s customer demand for, but which currently isn’t being served by your competitors.
This is often a modification to an existing product, service, or other value offering, but it can also be an entirely new business idea that serves a previously neglected need in your target audience.
However you accomplish it, finding a market gap can give you a major advantage over your competitors. Doing this can also reduce the time and resources you’d need to spend on staying competitive with businesses whose offerings overlap yours. Finding a market gap to target for your small business can be conducted by:
Analysing customer messages, reviews, and other interactions to identify acute issues that aren’t being addressed by you, or your direct competitors.
Studying the niche your business currently exists in, considering adjacent niches or subsets of this niche, and thinking of ways you can focus on a narrower, less competitive part of the market.
Assessing the unique strengths of your business, and finding a way to use these to create a gap by offering something your competitors can’t or won’t offer.
Thinking of unique innovations to your product or service that aren’t currently available to your target audience.
Following emerging trends, technologies, or legislation that’s poised to affect your industry, and positioning your business to satisfy demands that these changes will create.
How can a competitor analysis inform your marketing strategy?
One of the most effective ways you can apply your competitor analysis is by using the data gathered to develop a more effective small business marketing strategy. With detailed profiles of your competitors, you’ll have a better understanding of market trends, how to run your business more efficiently, pricing strategies, branding, product development, and other factors you can look at to inform your marketing decisions.
Here are some of the different aspects of your strategy where competitor analysis can be applied for a more informed and effective marketing strategy.
Establish a USP
Your USP and the way you communicate this to your target audience is going to have an impact on your business’ success. Though you may already have a USP defined, re-framing this topic with the data you glean through competitor research can help you ensure it’s as effective as possible. In some cases, the information you glean through your competitor research might even convince you to pivot your USP completely, and focus on an aspect of your business or product that’s more important in the current state of the market. So, how can competitor analysis help establish a USP? Here are some of the key competitor analysis data points worth looking at, and how they can be applied to your USP.
The USPs that are currently being communicated by your direct competitors. These can help validate initial USP ideas for your business, and highlight any that feel too vague or too similar to your competitors.
Primary market research like customer surveys, interviews, and focus groups. This can help you define the traits your target audience is looking for, and make it easier to tailor your USP to the demands of the market.
Internal assessments of your business’ unique strengths. This can help you focus on potential USPs which will allow you to accentuate your business’ strengths, and offer benefits to your customers which are lacking in your competitors’ offering.
Secondary research showing market trends. If you’re able to predict the rise in certain demands through market forces, adjusting your USP to satisfy these demands can make it much more compelling to your target audience.
Writing your business plan
When looking at how to write a business plan, you’ll need to devote a portion of the document to your marketing strategy. This part of the business plan is dedicated to showing your business’ position in the market, and the methods you’ll use to set your price point, promote your products or services, and retain your customer base over time.
While your marketing strategy should certainly take your business’ unique, internal assets into account, it’s important to keep the data from your competitor analysis in mind, and to ensure these findings are used to their full potential. Aim to understand your strengths and weaknesses in comparison to your competitors’, the way other businesses position themselves in the market, the pricing strategy of direct competitors, and your target audience analysis. These can all be useful as you work on developing a marketing strategy that’s suited to your brand and small business goals. When you come to this part of your business plan, be sure to revisit all the insights uncovered through your competitor research, and think about how these might influence the long-term direction of your marketing.
Setting clear objectives for marketing strategies
One of the most powerful applications for competitor research is benchmarking the conditions for success in your market. This is as relevant for your broad business goals as it is for your marketing strategy. Marketing focused competitor research can give you an objective view of how you can promote and advertise your small business in a way that aligns with the standards of your market, and gives you an opportunity to gain better exposure than direct competitors. Here are some of the ways you can use your competitor analysis to benchmark competitors and set clearer, more effective objectives for your marketing strategies:
Analysing your competitors’ social media profiles and finding averages between metrics like followers, posting frequency, likes and comments per post, etc.
Buying local newspapers and magazines where your competitors advertise.
Using a search engine optimisation (SEO) tool to track direct competitors’ organic rankings for keywords that are relevant to your business.
Taking notes on local sponsorships and partnerships your competitors engage in.
Subscribing to your competitors’ email marketing campaigns to determine how frequently emails are being sent, the kinds of offers they’re promoting, and other measurable variables.
Uncover product value and pain point solutions for your business
Honing in on your target audience’s pain points is one of the best ways to make sure your marketing initiatives are going to be effective.
Using competitor research to develop your knowledge of your target market, you can identify the problems faced by your target audience and present your product or service as a solution to these issues. This will help the messaging of your marketing campaign reach your audience more effectively, and improve the customer experience in the process. Consider a scenario where you’re running a plant-based cafe. One of your target audience’s pain points might be the inability to find a cafe that not only aligns with their personal ethics, but has a menu with variety and creativity compared to vegan dishes commonly found at more traditional cafes. Focusing on this pain point and mentioning it in your marketing content will help you build rapport with your target audience, and increase the likelihood that you’ll attract and convert new customers.
Elements of small business competitor analysis
The basic elements we covered earlier should form the core of your small business competitor analysis. Past this, the exact structure of your analysis should reflect the unique needs of your market and your wider business goals as a merchant. Here, we’ll walk through some of the common elements of a competitor analysis, as well as some questions you might want to consider to tailor your analysis to your own entrepreneurial journey.
Identify your competitors
Knowing who your competitors are is a fundamental first step to carrying out any effective competitor analysis. There are many accessible ways small business owners can identify their direct and indirect competitors, including using:
Search engines.
Local business directories.
Attending local industry events.
Monitoring social media accounts.
In this stage, it’s important to cover a diverse spread of competitors. Include businesses that are not only competing for the same customer demographics with similar products and services, but also those that pose a less direct threat through targeting different customers and business practices. If you’re running a cafe, for example, indirect competitors might be:
Department stores selling gourmet coffee.
Restaurants known for their dessert menu.
Bakeries.
Noting your competitors down in a spreadsheet, with columns showing different aspects (e.g direct or indirect, their key marketing channels etc) will give you a quick reference point to help develop more detailed research, such as a more in-depth document on each competitor.
Gather information about your competitors and start market research
Equipped with a list of your competitors, you can now start gathering information on these businesses and carrying out market research. When researching how to do a competitor analysis, you may come across materials that recommend large-scale primary research initiatives that aren’t practical in the current stage of your business. However, market research doesn’t have to be this complex or taxing. Creating and distributing surveys with free online tools like Google Forms and social media polls, observing your customers’ online and in physical stores, and other public touchpoints are all perfectly viable ways to research your market and gain useful insights.
What are your competitors' sales tactics, strategies and results or failures?
Building a keen understanding of your business’ sales tactics, wider business strategies, and marketing, you’ll learn which activities work and which ones fail. This will allow you to refine your own approach to strategy to focus on more efficient activities, and avoid pouring time and resources into activities that are less efficient or high risk for your business.
Locations
Knowing the exact number of physical locations your competitors have and their locations can help with your location and logistics planning. If you haven’t set up your first physical location yet, or you’re planning on expanding to further branches, mapping out your competitors’ business locations can help you target areas that have thriving market activity, or avoid oversaturated areas of your locality. Studying competitor locations can also reveal new business opportunities like setting up somewhere with easier order distribution, or drawing foot traffic from other businesses your target audience is likely to frequent.
How does your competitor design their brick-and-mortar premise?
The design of brick and mortar premises is another important variable to consider in your competitor research. If you’re running an independent coffee shop, for example, visiting your competitors’ branches and observing the physical customer journey can help you make design decisions that improve the flow of service and create a more comfortable, engaging environment. Looking at your competitors’ stores can also be a good opportunity to study the technology they’re using and how this impacts efficiencies and customer experience. Cafes and restaurants, for example, might have deployed self-service kiosks to free up time for their staff, or QR code payments so customers can pay their bill without having to wait for someone to be free. Finding common themes can be a very effective way to figure out what kind of standards your customer base are likely to expect from your in-store experience.
Pricing
Product pricing and service offerings are going to be major factors in any consumer’s decision-making process. Analysing your competitors’ pricing structure, as well as any supporting offerings like discounts, gift cards and loyalty programs, will allow you to determine a reasonable price range for your services or products according to what’s been set by the market. Using this, you can adjust your prices based on further insights about your customers’ price tolerance and your offering’s quality in relation to the norms of the market.
How competitors market their products or services
As we outlined earlier, using your competitor analysis to inform your marketing strategy can help you refine your advertising strategy, and set marketing benchmarks to inform effective targets. Studying both digital channels, like your competitors’ websites, social media, and email marketing, and traditional channels like direct mail and print marketing, will help inspire your own campaigns and identify gaps that can be exploited.
How much of the market share do your competitors have?
Like studying your competitors’ marketing, understanding their market share and customer sentiment towards these brands can give you effective benchmarks you can target for your business development. Assessing your own market positioning in relation to competitors will ensure you can set realistic goals, effectively evaluate your position in the market, and focus on key areas for improvement.
How do local competitors ship and deliver their products?
If you’re going to offer a delivery service, then studying your competitors’ approach to logistics is another important aspect to study as part of your competitor research. This includes the different options for delivering products into the hands of your customers, as well as the support you offer them throughout the process. Understanding shipping and delivery ensures better alignment with customer expectations and the market standard.
How do they provide customer support?
Analysing your competitors’ approach to customer support, both in their delivery and on an ongoing basis, will help you understand the level of service your target audience has come to expect. Similar to competitor analysis focusing on delivery and logistics, this will give you clear benchmarks to aim for as you develop your offering and provide a higher standard of customer service and support.
Newsletters and direct marketing materials
When it’s executed effectively, newsletters and other forms of direct marketing can make a big difference to any small business trying to develop their operations.
It’s important to study your competitors’ direct marketing activities in digital and print channels to find inspiration and differentiate your messaging from what’s expected in the market.
Online presence
Traditional marketing methods can be a great way to embed your brand in the local community and drive business to your physical premises. However, all businesses should have some kind of online presence to appeal to their audiences. Investigate your competitors’ websites and try to uncover how much engagement these receive by checking how they rank for search terms on Google, whether they receive a lot of online reviews, and other variables.
Frameworks to help small businesses conduct a competitor analysis
Competitor analysis is something that businesses can start at any point. The amount of information required to gather during competitor analysis can be daunting. However, there are a range of business analysis frameworks that can help you streamline the process and help make sense of the data. Here’s a brief look at some of the most commonly used frameworks, and how you can use them to support your small business competitor analysis.
Strengths, weaknesses, opportunities, and threats (SWOT) analysis
A SWOT analysis for small business is made up of 4 elements:
Strengths (Internal)
Weaknesses (Internal)
Opportunities (External)
Threats (External)
Examining each of these methodically will help you build a detailed picture of your business’ internal assets and shortcomings, as well as outside market forces that could help or hinder your business development. SWOT analyses can be useful for businesses of any size in any industry, though they’re particularly effective at collating and simplifying complex sets of information. This makes a SWOT analysis a great competitor analysis tool for businesses that have a multi-faceted business model, for example a small retailer that sells both from a physical brick-and-mortar store and an online store.
Porter’s 5 Forces
Porter’s 5 Forces is specifically focused on analysing the competitive entities in a given industry, and designed to keep the complexities of competitor analysis more manageable for those in charge of a business’ strategy.
While the 5 Forces framework can be used by any business, it’s particularly useful for entrepreneurs entering highly competitive markets like restaurants, e-commerce stores, and apparel brands. The stages of Porter’s 5 Forces are:
Competitive Rivalry, dealing with direct competitors selling similar products to the same target audience.
Supplier Power, which refers to a supplier’s ability to influence price and availability of products or resources.
Buyer Power, which refers to your customers’ ability to pressure businesses to change their prices.
Threat of Substitution, which refers to having to compete with businesses that sell competing products or services.
Threat of New Entry, referring to new and disruptive competitors entering your market.
Working through the stages of Porter’s 5 Forces will give you an effective framework for studying both established competitors and new entrants, while considering other external forces like how the bargaining power of consumers can affect the market.
The Segmentation, Targeting, Positioning (STP) Model
The STP model is focused on dividing your target market into segments based on their distinct traits, selecting segments to target with certain marketing efforts, and positioning your business in order to generate favourable interactions with your audience.
The STP framework is an especially useful tool for small businesses that sell to a diverse target audience, for example food trucks and food delivery businesses.
The methodical approach to separating and marketing to each of your audience segments has 2 major advantages. First, it will maximise the efficacy of your marketing. Second, it will help you understand your competitors’ approach to segmentation, and the assets and tactics they deploy to target different iterations of your shared audience. When you’re able to segment your audience effectively, you’ll be able to focus your time and marketing budget on people who are most likely to turn into customers, and maximise your chances of achieving a high return on investment (ROI).
Why use a framework for your competitor analysis?
When looking at how to do a competitor analysis, some of these popular frameworks may feel restrictive compared to taking a more ad-hoc approach where you adapt your analysis to the nuances of each competitor. Though it’s not essential to use an established framework as part of your small business competitor analysis, there are 3 core benefits that it’s important to consider when you come to carry out your analysis.
Analysing your competitors’ strengths and weaknesses
Using a framework like SWOT encourages you to analyse your competitors’ strengths and weaknesses. This gives you clear targets on what you should do to either compete with them directly, or work to differentiate your brand and circumvent the threats posed by your competitors’ main assets. It will also enable you to recognise opportunities that you can seize on, while assessing the risks posed by your market and direct competition.
Recognising strengths and weaknesses in both you and your competition ultimately helps you to optimise your resources by investing them in the areas that matter most.
Defining your competitive advantage
Many business analysis frameworks help you define the competitive advantage inherent in your small business, and map out ways to make your business as effective as possible at fulfilling its mission statement.
By stating your USP and competitive advantages, you’ll uncover clear paths towards improving your business processes for efficiency and customer satisfaction, while also recognising neglected areas that need your attention.
Tracking and monitoring results
The metrics you’ll focus on when conducting competitor analysis will in turn allow you to develop a strategy and framework for monitoring you and your competitors. This data will inform your ongoing strategy, and help you make the right decisions to stay aligned with market standards and seize opportunities that will allow you to get ahead of the competition. Free or affordable tools like Google Alerts can be used to continuously monitor developments related to your competitors or industry keywords, and enable you to dynamically adapt your strategy to the challenges of the market.
How often should you do a competitor analysis?
The frequency of your competitor analyses should allow you to keep up with changes in your industry, without being so frequent that you never have time to implement the lessons learned.
Merchants in industries that are more traditional and made up of long-established business models, for example coffee shops, should consider carrying out competitor analysis roughly once a year. For more dynamic businesses that change frequently according to rapid technological developments, for example e-commerce stores, should aim to carry out a competitor analysis once a quarter or more. Be sure to research the distinguishing features of your industry through plenty of secondary research, small business networking, and other methods to better understand the right frequency for your analyses.
Competitor analysis example table
When you’re learning how to do a competitor analysis, seeing the process in action often makes it much easier to execute it as effectively as possible.
Here’s an example of a competitor analysis table, using our earlier example of the fictional merchant Ken’s Cake Business.
| Main Offering | Pricing | Distribution Channels | Product / Service Range | Product Feature / Qualities | Shipping |
|---|---|---|---|---|---|---|
Ken's Cake Business | Signature Cakes | Average | Online, local retailers | Customised cakes | Unique designs, high-quality ingredients | Local delivery |
Sweet Delights Bakery | Deluxe Cupcakes | Premium | In-store, local markets | Cupcakes, cookies | Gourmet flavours, artistic presentation | Local delivery |
Heavenly Treats Co. | Wedding Cakes | Premium | Online, wedding venues | Wedding cakes, desserts | Customised for events, premium quality | Nationwide delivery |
Artisanal Sweets Boutique | Artisanal Desserts | Average | Online, pop-up events | Artisanal desserts | Handcrafted, unique flavours | Local and national |
Cake Haven | Custom Celebration Cakes | Budget | In-store, online | Celebration cakes | Budget-friendly, diverse designs | Local and national |
What to do after competitor analysis?
Once you’ve carried out your competitor analysis and collated all the relevant insights, you’ll be equipped to start putting this data into action and using it to benefit your business. Here are just some of the context and methods in which you can leverage your competitor analysis findings:
Innovation and product development: Creating new products, services and bundles, or developing your existing offerings to differentiate your business from the competition. Engaging in innovation usually comes with some risk, but this can be mitigated greatly by applying the lessons you’ve learned from your competitor analysis.
Market expansion. Branching out into new markets, whether that’s a new geographical location or a segment of your target audience. Using information such as the locations of your competitors’ branches and the segments you’re targeting will help your activities stay in-line with the standards of the market.
Operational efficiency. In the course of your competitor research, you’re likely to come across business ideas from your competitors on how to make your operations more efficient. You may also have observed common errors made by your competitors that undermine their operational efficiency. Taking inspiration from the competition’s successes and precautions from their failures will equip you to optimise various essential processes at your business.
Marketing and branding. Competitor analysis can help you uncover a range of powerful insights to help you make your marketing campaigns more effective. One of the common applications for competitor analysis in marketing is finding common themes in the marketing used by your competitors, and using this to differentiate your brand from the competition.
Pitfalls to avoid in competitor analysis
While competitor analysis has plenty of useful applications, there are common pitfalls in the process that can undermine its effectiveness. It’s important to be aware of these pitfalls and do everything you can to avoid them in each stage of your competitor analysis. Here’s some competitor analysis pitfalls you should be aware of.
Poorly-planned execution
One of the significant pitfalls in competitor analysis is the lack of a clear plan for applying the data. Businesses often invest a lot of time and resources in gathering data, but fail to create a robust roadmap for implementation. Insights without a plan for execution can lead to missed opportunities and ineffective decision-making. To overcome this, it's essential to review what you’ve learned in the course of your competitor analysis, at least once per quarter, and consider how this might be applied later. This will allow you to set actionable steps based on your small business competitor analysis, outlining how the information will influence marketing, product development, or other business strategies.
Falling for confirmation bias
Confirmation bias is a tendency to interpret objective information in a way that confirms beliefs you already have. This is a potential issue in many areas of business, but is especially problematic for entrepreneurs who are carrying out competitor analysis. It’s essential that your findings start objective and stay objective throughout your competitor analysis, and that you make a point of approaching the process with an open mind that will check any assumptions you hold. Wherever possible, try to engage in your competitor analysis with a team of people with various specialties and viewpoints on business. This will ensure you’re not looking at your findings from just one angle, and mitigate the risk of you manipulating data to fit predetermined conclusions.
Failing to use the right tools
Manual data gathering and analysis can be very time consuming for small business owners and prone to errors. Though it may be strenuous on your budget in the early stages of your business, you should try to leverage all available tools and technologies to streamline the research process and automate competitor data analysis. Utilising tools for market research, social media monitoring, and other tasks will ensure your analysis is up-to-date, comprehensive, and accurate, all the while saving you time which you can put towards other pressing tasks.
Disclaimer: The contents of this page are intended for informational purposes only and should not be construed as professional advice. For matters requiring legal or financial expertise, it’s recommended to seek guidance from qualified professionals.
How to do a competitor analysis FAQs
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