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A competitive market analysis is a comprehensive summary of your major competitors, including their sales, marketing strategies, demographics, market shares, and more.
Understanding your business’s place in the competitive landscape can inform pricing strategies, marketing decisions, and branding choices. It can also help you determine how your business impacts industry trends. A competitive analysis can help you identify what your competitors are great at, as well as gaps in their services.
For a small business, competitor insights can aid growth, help solidify your place in the market, and develop data-informed products and services.
How to perform a competitive business analysis:
To be ready for the analysis, further insights and details on these points will be elaborated in the upcoming section.
The first step of a competitive analysis is to identify your business’s direct and indirect competitors. Direct competitors are businesses that offer the same products and services. An indirect competitor provides products or services that could meet similar needs or desires but aren’t identical. It’s more useful to focus primarily on direct competitors in your small business competitive analysis, as you’re more likely to have similar customers on a similar buyer journey.
Your competitive market analysis should include both industry leaders and emerging players. Every market is evolving with new businesses establishing themselves and older businesses shifting their offerings. These shifts could impact your market position or present opportunities. It’s, therefore, essential to monitor competitor development so that strategies can be adjusted accordingly.
Your business can utilize resources to identify competitor insights, including tools that analyze their target keywords, social media reach, backlinks, customer reviews, and even job openings. Free tools to consider are Moz, Ahrefs, and Google’s suite of resources such as Google Analytics and Google Trends. This won’t give you every detail of your competitors’ strategies, but you will be able to build a comprehensive picture of their market penetration, social media engagement, customer satisfaction, and growth.
Competitor intelligence may include an analysis of your competitors’ products, services, and pricing. Where do they sell? What’s their chosen pricing strategy? What kind of sales funnels do they use to convert customers? Do they sell through physical or online locations? Do they offer unique perks or benefits?
Learning about your competitors’ sales and marketing strategies can help your business discover alternative channels and methods. Competitors in your industry could be dominating short-form content on TikTok or long-form videos on YouTube. Alternatively, they could be focused specifically on email and referral marketing. While you can’t gather their campaign results, you can see publicly available information and analytics, such as social media engagements and comments, backlinks, and keyword rankings.
Finally, reading reviews and feedback are great ways to gauge customer satisfaction levels. Customers could be citing specific product or service features in their 5-star reviews, or there could be a common issue shared within the 1-star comments. Taking note of this will help your business avoid similar customer service mistakes and understand what’s working for your most successful competitors.
These tips for performing a SWOT analysis will guide you through the process of identifying your competitors’ strengths, weaknesses, opportunities, and threats. This will help you and your team understand what direct competitors are doing well and not so well. A SWOT analysis will also help you identify opportunities for growth in the market along with limiting factors.
You can then compare your own SWOT analysis with your competitors’. This can help you identify similarities and differences, opportunities you may have missed, and emerging industry trends.
A competitive market analysis can help your business set performance metrics and benchmarks. Use that data to compare yourself to your competitors, evaluating anything related to your business’s performance, from customer lifetime value (CLV) to sales revenue.
There are many best practices to learn from your competitors, even if they take up a much larger portion of the market. Benchmarking can help your business:
Industry trends and developments have a direct impact on your business’s performance. They can affect what customers care about, how much they’re willing to spend, and what new innovations they want to see. It’s important your business doesn’t follow or chase short-lived trends – they won’t always present opportunities for growth. Instead, your business should adapt to the most profitable and long-lasting market changes.
A competitive market analysis can identify gaps in the market. These insights can help your business find opportunities and make the most of them, whether that’s providing a faster service than others in your industry or developing a product made from more sustainable materials.
It’s also important to measure how your competitors respond to market gaps and changes. Which industry shifts have they paid attention to and embraced? Which have they avoided? How have their business metrics changed as a result? Understanding these metrics will help your small business develop its own competitive position in the market.
Competitor insights can help your business learn about its current and future opportunities for growth, so it should be integrated into business planning. This allows your business to capitalize on its existing strengths and develop any of its weaknesses. Competitive insights can also inform sales techniques and build a marketing strategy that gets to the heart of what target customers are looking for. A competitive analysis should fuel, inform, and energize your business’s goal planning.
A competitive market analysis isn’t a one-time deal. Establishing a regular competitive analysis process can help your business continually monitor its market position and opportunities for growth. This keeps you and your team updated on changes in the competitive landscape and provides opportunities to test and adjust your existing strategies.
For more tips to create a competitive edge in your market, learn about how to create a marketing strategy.
In partnership with three expert business owners, the PayPal Bootcamp includes practical checklists and a short video loaded with tips to help take your business to the next level.
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