What is a competitor analysis, and why is it crucial?
It is the examination of your competitor’s marketing activities to compare your brand to the alternatives that consumers perceive. It enables you to evaluate the strengths and weaknesses of competitors who offer similar solutions, thereby highlighting growth opportunities and facilitating strategic decision-making.
Conducting a competitor analysis enables you to:
- Gain in-depth knowledge of your competitors’ activities and the external factors affecting your industry; and
- Recognize competitor expenditures (via tools such as Similarweb), market share, utilized channels, audiences, and their potential overlap
- Identify development and expansion opportunities for your marketing strategy
Three stages or conducting a competitor analysis
There is no correct or improper method. You can follow certain models (for guidance, see the conclusion of this blog), or, as we recommend, you can employ a more customized approach comprised of these three steps:
- Define the set of your competitors
- Obtain competitive intelligence
- Integrating and evaluating the preceding data to place it in context
This strategy is readily adaptable to the specific industries or marketing channels you may wish to target. Let’s examine each of these stages in detail.
Define competitor collection
To accomplish this, you must identify the relevant competitors for your business and industry. It should include all of the major competitors in your market, including those who sell similar products and those who target a similar audience.
If you do not have access to helpful tools like Similarweb or SEMrush, press reports for similar products, local chambers of commerce, industry directories, and industry events are also valuable resources.
Gather market intelligence
Next, collect competitor information regarding the most essential metrics.
To gain an omnichannel perspective, it is useful to start with high-level metrics that enable you to compare competitor performance across channels at a glance. What you choose to analyze for your business will be unique. Here are several illustrations of insightful metrics:
- Your search share relative to competitors
- Total traffic share relative to competitors
- Competitor’s channel mix
- Target audience overlap
If you want to take your analysis to the next level, you can begin to delve deeply into channel-specific metrics once you have identified the broad metrics. Using PPC as an example, you should monitor your spending habits, impression share, and return on ad spend (ROAS). You should conduct a keyword gap analysis for SEO purposes.
Bring back your expanded understanding and assess
After collecting all of this information, it is time to evaluate. Spend time contextualizing your initial findings in the context of the larger marketing environment. The objective here is to discern competitors’ strategies, identify growth opportunities, and determine if your strategy may need to be adjusted.
We suggest beginning by comparing your data with broader market metrics, such as total traffic share, to determine whether the market is expanding or contracting. After that, you can narrow your focus to specific channels or competitors.
As an illustration, overall market traffic is declining, as are search volumes for key products; therefore, the market is not presently expanding. However, the total traffic share of your main competitors is increasing. From this, you can deduce that they are growing and acquiring market share from other competitors in the industry – possibly from you.
The next stage is to examine specific channels or individual competitors, as this will help you determine your next course of action. Using the preceding illustration, you have already determined that the market is declining. Now, you notice that competitors are decreasing their PPC spending while simultaneously increasing their social media traffic. This may imply that they are shifting their PPC expenditure to social media, as the paid search may no longer be effective in a declining market. These insights will provide you with the knowledge and opportunity to proceed.
These three steps will provide you with a comprehensive comprehension of the market and competitive landscape, allowing you to determine the next steps for your strategy.
Models for competitor analysis
There are numerous competitor analysis models available for use. We have hand-selected several useful frameworks for conducting analysis. The optimal paradigm is the one that aligns with your unique business objectives.
If you wish to identify your unique selling proposition in comparison to competitors, the Points of Parity & Points of Difference model is appropriate; however, if you are searching for new opportunities in the market, a SWOT analysis may be more suitable.
Points of Similarity – Differences
The Points of Parity and Points of Difference model by Keller is a straightforward method for comparing your brand to those of its competitors. It assists in identifying three crucial factors:
Frame of Reference
This is the segment or category to which the business belongs and in which it competes, such as gyms.
Points of Parity:
These are the characteristics a business or product must possess to be considered by the intended market. Going back to our example of gyms, if your gym lacks a cycling studio or cardio area, the target audience may not view it as a viable alternative.
Points of Distinction:
These are the factors that distinguish your business from those of its competitors or USPs. In the context of gyms, a point of differentiation could be the addition of massage chairs, a swimming pool, or complimentary post-workout protein drinks to a cycling studio.
The analysis could appear as follows:
SWOT analysis has existed for a very long time, and with excellent reason! It divides business-related data into four categories.
Internal components that are advantageous to a business. (e.g. brand equity, marketing budget, internal culture)
Are internal elements that are detrimental to a business. (e.g. team structures, lack of quality tools and tech)
External factors that present a business with an opportunity (e.g. product innovations, partnerships)
External factors that pose a threat to a company. (e.g. replicable products, barriers to entry, the economic situation)
You can complete this for both your business and your competitors to obtain a broader understanding of the available opportunities in your market.
Porter’s Five Forces Analysis
The Five Forces of Porter is a framework for analyzing competitors by concentrating on five segments.
The ease with which new businesses can penetrate a market.
How many alternative products are available on the market?
The number of consumers in the market and how their presence may influence pricing.
The number of suppliers in the market and their potential impact on pricing.
The number and relative strengths of a company’s competitors.
The advantage of Porter’s Five Forces is that it enables analysis of an entire market or industry. In turn, this can assist you with goal-setting. If you are aware that there are many similar products on the market, you can concentrate on making yours more distinctive.
PEST & PESTLE
This model takes external factors into account and helps you determine your market position and that of your competitors. This can help you determine how to respond to alterations in each of the four quadrants. This, in turn, can inform strategies for domestic expansion or expansion into foreign markets.
Here, you are attempting to collect data on the following external factors:
Government structure and stability, tax policies or regulations.
Labor costs, the impact of globalization, business cycles, and the general economic climate.
Population growth, lifestyle selections, demographic identifiers, attitudes, and level of education.
Emerging technologies The degree of digitalization, and research and development endeavors.
Additionally, you may wish to consider the following:
This includes potential forthcoming changes to industry regulations and the identification of differences in employment laws abroad.
This includes both practical and legal considerations, such as climate, environmental laws, and consumer responses to your business. (i.e environmental NGOs and movements).
Instruments for competitive analysis
Numerous instruments facilitate the collection of all necessary data and insights. We have compiled a list of our favourite items. You should ideally use a combination of tools and investigation to validate your findings.
This is a potent tool that enables you to gather competitive intelligence. It will assist you in determining how much traffic they generate and from what channels. Are you or your clientele performing better or worse than the competition?
AdLibrary enables you to view advertisements that are or have been operating on the Meta channels of your competitors. Best of all, it’s free!
Google Trends is a free service offered by Google that allows users to compare search data. Using Google Trends data, you can identify seasonal trends and topics that are presently trending in specific regions.
Semrush is utilized for keyword research and allows you to monitor and research both your own and your competitor’s keywords.
Is an SEO and digital PR utility that allows you to examine the backlinks, keywords, and domain ratings of your competitors.
For more detail visit our website RZY Digital