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Making a Risk Management Plan for Your Business
It’s impossible to eliminate all business risk. Therefore, it’s essential for having a plan for its management. You’ll be developing one covering compliance, environmental, financial, operational and reputation risk management. These guidelines are for making a risk management plan for your business.
Developing Your Executive Summary
When you start the risk management plan with an executive summary, you’re breaking apart what it will be compromised of into easy to understand chunks. Even though this summary is the project’s high-level overview, the goal is describing the risk management plan’s approach and scope. In doing so, you’re informing all stakeholders regarding what to expect when they’re reviewing these plans so that they can set their expectations appropriately.
Who Are the Stakeholders and What Potential Problems Need Identifying?
During this phase of making the risk management plan, you’re going to need to have a team meeting. Every member of the team must be vocal regarding what they believe could be potential problems or risks. Stakeholders should also be involved in this meeting as well to help you collect ideas regarding what could become a potential risk. All who are participating should look at past projects, what went wrong, what is going wrong in current projects and what everyone hopes to achieve from what they learned from these experiences. During this session, you’ll be creating a sample risk management plan that begins to outline risk management standards and risk management strategies.
Evaluate the Potential Risks Identified
A myriad of internal and external sources can pose as risks including commercial, management and technical, for example. When you’re identifying what these potential risks are and have your list complete, the next step is organizing it according to importance and likelihood. Categorize each risk according to how it could impact your project. For example, does the risk threaten to throw off timelines or budgets? Using a risk breakdown structure is an effective way to help ensure all potential risks are effectively categorized and considered. Use of this risk management plan template keeps everything organized and paints a clear picture of everything you’re identifying.
Assign Ownership and Create Responses
It’s essential to ensure a team member is overseeing each potential risk. That way, they can jump into action should an issue occur. Those who are assigned a risk, as well as the project manager, should work as a team to develop responses before problems arise. That way, if there are issues, the person overseeing the risk can refer to the response that was predetermined.
Have a System for Monitoring
Having effective risk management companies plans includes having a system for monitoring. It’s not wise to develop a security risk management or compliance risk management plan, for example, without having a system for monitoring. What this means is there’s a system for monitoring in place to ensure risk doesn’t occur until the project is finished. In doing so, you’re ensuring no new risks will potentially surface. If one does, like during the IT risk management process, for example, your team will know how to react.
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Writing a Business Plan
While it may be tempting to put off, creating a business plan is an essential part of starting your own business. Plans and proposals should be put in a clear format making it easy for potential investors to understand. Because every company has a different goal and product or service to offer, there are business plan templates readily available to help you get on the right track. Many of these templates can be adapted for any company. In general, a business plan writing guide will recommend that the following sections be incorporated into your plan.
The executive summary is the first section that business plans open with, but is often the last section to actually be written as it’s the most difficult to write. The executive summary is a summary of the overall plan that highlights the key points and gives the reader an idea of what lies ahead in the document. It should include areas such as the business opportunity, target market, marketing and sales strategy, competition, the summary of the financial plan, staff members and a summary of how the plan will be implemented. This section needs to be extremely clear, concise and engaging as you don’t want the reader to push your hard work aside.
The company description follows the executive summary and should cover all the details about the company itself. For example, if you are writing a business plan for an internet café, you would want to include the name of the company, where the café would be located, who the main team members involved are and why, how large the company is, who the target market for the internet cafe is, what type of business structure the café is, such as LLC, sole proprietorship, partnership, or corporation, what the internet café business mission and vision statements are, and what the business’s short-term objectives are.
Services and Products
This is the exciting part of the plan where you get to explain what new and improved services or products you are offering. On top of describing the product or service itself, include in the plan what is currently in the market in this area, what problems there are in this area and how your product is the solution. For example, in a business plan for a food truck, perhaps there are numerous other food trucks in the area, but they are all fast –food style and unhealthy so, you want to introduce fast food that serves only organic and fresh ingredients every day. This is where you can also list your price points and future products or services you anticipate.
The market analysis section will take time to write and research as a lot of effort and research need to go into it. Here is where you have the opportunity to describe what trends are showing up, what the growth rate in this sector looks like, what the current size of this industry is and who your target audience is. A cleaning business plan, for example, may include how this sector has been growing by 10% every year due to an increase in large businesses being built in the city.
Organization and Management
Marketing and sales are the part of the business plan where you explain how you will attract and retain clients. How are you reaching your target customers and what incentives do you offer that will keep them coming back? For a dry cleaner business plan, perhaps if they refer customers, they will get 10% off their next visit. In addition, you may want to explain what needs to be done in order for the business to be profitable. This is a great way of showing that you are conscious about what clear steps need to be taken to make a business successful.
Financial Projections & Appendix
The financial business plan section can be a tricky one to write as it is based on projections. Usually what is included is the short-term projection, which is a year broken down by month and should include start-up permits, equipment, and licenses that are required. This is followed by a three-year projection broken down by year and many often write a five-year projection, but this does not need to be included in the business plan.
The appendix is the last section and contains all the supporting documents and/or required material. This often includes resumes of those involved in the company, letters of reference, product pictures and credit histories. Keep in mind that your business plan is always in development and should be adjusted regularly as your business grows and changes.
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How to create a competitive analysis (with examples)
Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own. In this guide, we’ll outline how to do a competitive analysis and explain how you can use this marketing strategy to improve your business.
Whether you’re running a business or playing in a football game, understanding your competition is crucial for success. While you may not be scoring touchdowns in the office, your goal is to score business deals with clients or win customers with your products. The method of preparation for athletes and business owners is similar—once you understand your strengths and weaknesses versus your competitors’, you can level up.
What is a competitive analysis?
Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own.
Direct competitors market the same product to the same audience as you, while indirect competitors market the same product to a different audience. After identifying your competitors, you can use the information you gather to see where you stand in the market landscape.
What to include in a competitive analysis
The purpose of this type of analysis is to get a competitive advantage in the market and improve your business strategy. Without a competitive analysis, it’s difficult to know what others are doing to win clients or customers in your target market. A competitive analysis report may include:
A description of your company’s target market
Details about your product or service versus the competitors’
Current and projected market share, sales, and revenues
Marketing and social media strategy analysis
Differences in customer ratings
You’ll compare each detail of your product or service versus the competition to assess strategy efficacy. By comparing success metrics across companies, you can make data-driven decisions.
How to do a competitive analysis
Follow these five steps to create your competitive analysis report and get a broad view of where you fit in the market. This process can help you analyze a handful of competitors at one time and better approach your target customers.
1. Create a competitor overview
In step one, select between five and 10 competitors to compare against your company. The competitors you choose should have similar product or service offerings and a similar business model to you. You should also choose a mix of both direct and indirect competitors so you can see how new markets might affect your company. Choosing both startup and seasoned competitors will further diversify your analysis.
Tip: To find competitors in your industry, use Google or Amazon to search for your product or service. The top results that emerge are likely your competitors. If you’re a startup or you serve a niche market, you may need to dive deeper into the rankings to find your direct competitors.
2. Conduct market research
Once you know the competitors you want to analyze, you’ll begin in-depth market research. This will be a mixture of primary and secondary research. Primary research comes directly from customers or the product itself, while secondary research is information that’s already compiled. Then, keep track of the data you collect in a user research template .
Primary market research may include:
Purchasing competitors’ products or services
Conducting online surveys of customers
Holding in-person focus groups
Secondary market research may include:
Examining competitors’ websites
Assessing the current economic situation
Identifying technological developments
Reading company records
Tip: Search engine analysis tools like Ahrefs and SEMrush can help you examine competitors’ websites and obtain crucial SEO information such as the keywords they’re targeting, the number of backlinks they have, and the overall health of their website.
3. Compare product features
The next step in your analysis involves a comparison of your product to your competitors’ products. This comparison should break down the products feature by feature. While every product has its own unique features, most products will likely include:
Age of audience served
Number of features
Style and design
Ease of use
Type and number of warranties
Customer support offered
Tip: If your features table gets too long, abbreviate this step by listing the features you believe are of most importance to your analysis. Important features may include cost, product benefits, and ease of use.
4. Compare product marketing
The next step in your analysis will look similar to the one before, except you’ll compare the marketing efforts of your competitors instead of the product features. Unlike the product features matrix you created, you’ll need to go deeper to unveil each company’s marketing plan .
Areas you’ll want to analyze include:
As you analyze the above, ask questions to dig deeper into each company’s marketing strategies. The questions you should ask will vary by industry, but may include:
What story are they trying to tell?
What value do they bring to their customers?
What’s their company mission?
What’s their brand voice?
Tip: You can identify your competitors’ target demographic in this step by referencing their customer base, either from their website or from testimonials. This information can help you build customer personas. When you can picture who your competitor actively targets, you can better understand their marketing tactics.
5. Use a SWOT analysis
Competitive intelligence will make up a significant part of your competitor analysis framework, but once you’ve gathered your information, you can turn the focus back to your company. A SWOT analysis helps you identify your company’s strengths and weaknesses. It also helps turn weaknesses into opportunities and assess threats you face based on your competition.
During a SWOT analysis, ask yourself:
What do we do well?
What could we improve?
Are there market gaps in our services?
What new market trends are on the horizon?
Tip: Your research from the previous steps in the competitive analysis will help you answer these questions and fill in your SWOT analysis. You can visually present your findings in a SWOT matrix, which is a four-box chart divided by category.
6. Identify your place in the market landscape
The last step in your competitive analysis is to understand where you stand in the market landscape. To do this, you’ll create a graph with an X and Y axis. The two axes should represent the most important factors for being competitive in your market.
For example, the X-axis may represent customer satisfaction, while the Y-axis may represent presence in the market. You’ll then plot each competitor on the graph according to their (x,y) coordinates. You’ll also plot your company on this chart, which will give you an idea of where you stand in relation to your competitors.
This graph is included for informational purposes and does not represent Asana’s market landscape or any specific industry’s market landscape.
Tip: In this example, you’ll see three companies that have a greater market presence and greater customer satisfaction than yours, while two companies have a similar market presence but higher customer satisfaction. This data should jumpstart the problem-solving process because you now know which competitors are the biggest threats and you can see where you fall short.
Competitive analysis example
Imagine you work at a marketing startup that provides SEO for dentists, which is a niche industry and only has a few competitors. You decide to conduct a market analysis for your business. To do so, you would:
Step 1: Use Google to compile a list of your competitors.
Steps 2, 3, and 4: Use your competitors’ websites, as well as SEO analysis tools like Ahrefs, to deep-dive into the service offerings and marketing strategies of each company.
Step 5: Focusing back on your own company, you conduct a SWOT analysis to assess your own strategic goals and get a visual of your strengths and weaknesses.
Step 6: Finally, you create a graph of the market landscape and conclude that there are two companies beating your company in customer satisfaction and market presence.
After compiling this information into a table like the one below, you consider a unique strategy. To beat out your competitors, you can use localization. Instead of marketing to dentists nationwide like your competitors are doing, you decide to focus your marketing strategy on one region, state, or city. Once you’ve become the known SEO company for dentists in that city, you’ll branch out.
You won’t know what conclusions you can draw from your competitive analysis until you do the work and see the results. Whether you decide on a new pricing strategy, a way to level up your marketing, or a revamp of your product, understanding your competition can provide significant insight.
Drawbacks of competitive analysis
There are some drawbacks to competitive analysis you should consider before moving forward with your report. While these drawbacks are minor, understanding them can make you an even better manager or business owner.
Don’t forget to take action
You don’t just want to gather the information from your competitive analysis—you also want to take action on that information. The data itself will only show you where you fit into the market landscape. The key to competitive analysis is using it to problem solve and improve your company’s strategic plan .
Be wary of confirmation bias
Confirmation bias means interpreting information based on the beliefs you already hold. This is bad because it can cause you to hold on to false beliefs. To avoid bias, you should rely on all the data available to back up your decisions. In the example above, the business owner may believe they’re the best in the SEO dental market at social media. Because of this belief, when they do market research for social media, they may only collect enough information to confirm their own bias—even if their competitors are statistically better at social media. However, if they were to rely on all the data available, they could eliminate this bias.
Update your analysis regularly
A competitive analysis report represents a snapshot of the market landscape as it currently stands. This report can help you gain enough information to make changes to your company, but you shouldn’t refer to the document again unless you update the information regularly. Market trends are always changing, and although it’s tedious to update your report, doing so will ensure you get accurate insight into your competitors at all times.
Boost your marketing strategy with competitive analysis
Learning your competitors’ strengths and weaknesses will make you a better marketer. If you don’t know the competition you’re up against, you can’t beat them. Using competitive analysis can boost your marketing strategy and allow you to capture your target audience faster.
Competitive analysis must lead to action, which means following up on your findings with clear business goals and a strong business plan. Once you do your competitive analysis, you can use the templates below to put your plan into action.
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How to Write the Competitive Analysis
Written by Dave Lavinsky
If you are writing a business plan, hopefully by this point you’ve conducted thorough market research to identify industry trends and identified the target market for your business. Now it’s time to conduct a competitor analysis. This section is included in virtually every business plan, and the information you include will depend on several factors such as how many competitors there are, what they offer, and how large they are in comparison to your company.
Download our Ultimate Business Plan Template here >
What is a Competitive Analysis?
A competitive analysis is a type of market research that identifies your competitors, their strengths and weaknesses, the strategies they are using to compete with you, and what makes your business unique. Before writing this section it’s important to have all the information you collected during your market research phase. This may include market data such as revenue figures, cost trends, and the size of the industry.
Why Do You Need the Competitive Analysis?
If you are planning to raise capital, the investor will require a business plan that includes the competitive analysis section. This section will also come in handy if your company is considering increasing prices or adding new products and services. You can use the information you find to determine how well-positioned your business is to perform in the competitive landscape.
3 Steps to Writing a Competitive Analysis
The steps to developing the competitive analysis section of your business plan include:
- Identify your competition.
- Select the appropriate competitors to analyze.
- Determine your competitive advantage.
1. Identify Your Competition
To start, you must align your definition of competition with that of investors. Investors define competition as to any service or product that a customer can use to fulfill the same need(s) as the company fulfills. This includes companies that offer similar products, substitute products, and other customer options (such as performing the service or building the product themselves). Under this broad definition, any business plan that claims there are no competitors greatly undermines the credibility of the management team.
When identifying competitors, companies often find themselves in a difficult position. On one hand, you may want to show that the business is unique (even under the investors’ broad definition) and list few or no competitors. However, this has a negative connotation. If no or few companies are in a market space, it implies that there may not be a large enough base of potential customers to support the company’s products and/or services.
2. Select the Appropriate Competitors to Analyze
Once your competition has been identified, you want to consider selecting the most appropriate competitors to analyze. Investors will expect that not all competitors are “apples-to-apples” (i.e., they do not offer identical products or services) and therefore will understand if you chose only companies that are closest in nature. So, you must detail both direct and, when applicable, indirect competitors.
Direct competitors are those that serve the same potential customers with similar products and services. If you sell your products or services online, your direct competitors would also include companies whose website ranks in the top 5 positions for your same target keyword on Google Search.
For example, if you are a home-based candle-making company , you would consider direct competitors to be other candle makers that offer similar products at similar prices. Online competitors would also include companies who rank for the following keywords: “homemade candles”, “handmade candles”, or “custom candles.”
Indirect competitors are those that serve the same target market with different products and services or a different target market with similar products and services.
In some cases, you can identify indirect competitors by looking at alternative channels of distribution. For example, a small business selling a product online may compete with a big-box retailer that sells similar products at a lower price.
After selecting the appropriate competitors, you must describe them. In doing so, you must also objectively analyze each of their strengths and weaknesses and the key drivers of competitive differentiation in the same market.
For each competitor, perform a SWOT Analysis and include the following information:
- Competitor’s Name
- Overview of Competitor (where are they located; how long have they been operating)
- Competitor’s Product or Service
- Competitor’s Pricing
- Estimated Market Share
- Potential Customers (Geographies & Segments)
- Competitor’s Strengths
- Competitor’s Weaknesses
By understanding what your competitors offer and how customers perceive them, you can determine your company’s competitive advantage against each competitor.
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3. determine your competitive advantage.
Perhaps most importantly, you must describe your company’s competitive advantages over the other companies in the space, and ideally how the company’s business model creates barriers to entry. “Barriers to entry” are reasons why it would be difficult for new companies to enter into or compete in the same market.
For instance, you may have a patent that provides value to your customers and makes them less likely to switch suppliers, which protects your business from potential competitors. Or, you may have more resources than the competition and thus be able to provide superior customer service.
Below is a list of areas in which you might have a competitive advantage:
- Size of the Company – Large companies have more resources and can usually offer lower prices than smaller businesses. This is a significant barrier to entry, as starting a small business and competing with a larger company may be difficult.
- Product or Service Differentiation – If your product or service is unique in some way, this will make it less likely that customers will switch to a competitor.
- Experience & Expertise – Experience and knowledge are valuable attributes that can help differentiate you from the competition.
- Location – If you are located in an area where there is high demand for your product or service, this can be a barrier to entry because competitors will not want to open new locations.
- Patents & Copyrights – Protecting intellectual property can prevent others from entering the same market and competing with your company.
- Brand Recognition – Customers are loyal to brands they have come to trust, which protects the company from new competitors.
- Customer Service – Providing excellent customer service can help you retain customers and prevent them from switching suppliers.
- Lowest Cost Offerings – If you can offer a lower price than your competitors, this makes it more difficult for them to compete with you.
- Technology – New technology that enables you to provide a better product or service than your competitors can be an advantage.
- Strategic Partnerships & Alliances – Collaborating with a company that your customers want to work with can help keep them from switching.
- Human Resources – If you have a highly skilled and talented workforce, it can be difficult for competitors to find and employ the same skills.
- Operational Systems – Strong operational systems that lead to greater efficiencies can protect your business from the competition.
- Marketing Strategy – Investing in strong marketing campaigns can make your business difficult to compete with.
For instance, you could say that your [enter any of the bullets from above] is better than your competitors because [insert reason].
The competitive landscape is one of the most important considerations in developing a business plan since it sets the stage by providing information on past and current competitors and their respective strengths and weaknesses. A strong understanding of the competitive landscape is needed before you can develop a strategy for differentiating your company from the competition.
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Other Resources for Writing Your Business Plan
How to Write a Great Business Plan Executive Summary
How to Expertly Write the Company Description in Your Business Plan
The Customer Analysis Section of Your Business Plan
How to Write the Market Analysis Section of a Business Plan
The Management Team Section of Your Business Plan
Financial Assumptions and Your Business Plan
How to Create Financial Projections for Your Business Plan
Everything You Need to Know about the Business Plan Appendix
Business Plan Conclusion: Summary & Recap
Other Helpful Business Plan Articles & Templates
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The Ultimate Guide to Competitive Analysis + Competitor Analysis Example Template
What is a competitive analysis?
What are the benefits of doing a competitive analysis, a step by step guide to conducting a competitor analysis, a competitive analysis template, tips and tricks for successful competitor analysis, competitive analysis - the takeaways and faqs.
Knowing your own products like the back of your hand is essential for getting your e-commerce store going. But stacking your offering up against the competition is what will keep it growing!
This is where competitor analysis comes in. It’s a handy competitive research tool that can help you effectively carve out an ever larger share of your market.
Competitor analysis can benefit you in multiple situations:
- Maybe you’re launching a new product and need to know how to present it,
- Maybe your brand is feeling stale and you need ideas (a great way to re-engage existing customers),
- Maybe you noticed your sales growth slowing, or even stopping completely,
- Or maybe you simply have some downtime in your marketing schedule and want to sharpen up your message and ads in relation to your competitors.
Whatever stage your business is at, analysing your competitors can help you find new opportunities and keep on top of industry trends.
Evaluating your competition might seem like a daunting task, but we’ve prepared a detailed guide to all things competitor analysis.
In this blog, you’ll find:
- A definition of what competitor analysis is;
- A breakdown of its main benefits ;
- A step-by-step guide to conducting a competitor analysis yourself;
- A free competitive analysis template you can use for your e-commerce store;
- And some tips and tricks for getting your competitor analysis right.
Ready to beat the competition? Then read on!
A competitive analysis - also known as a competitor analysis - is a process of evaluating what your current and potential competitors are up to . It involves looking at what the businesses you compete with are doing, and, more importantly, deciding on what you can do in response.
Competitor analysis is about understanding your competition by evaluating:
- their products,
- their marketing and sales strategies,
- their customers and audience,
- and their strengths and weaknesses.
So it’s less about just comparing prices and more about understanding the businesses operating in your niche, and what advantages you might have over them.
Analysing competitors is a crucial step in your business planning process. Ultimately, you’re going head-to-head with your competition to win the loyalty of the exact same customer base. Competitor analysis is a tool that reveals critical insights that can help you come out on top in this race.
The biggest benefit is that you will understand how to turbo-charge your business’ growth. That’s because you will know how to compete in the market. A clear competitive analysis will make any business decision you take more informed and more likely to succeed.
Here’s a breakdown of some of the main benefits of doing a competitive analysis:
Finding a competitive edge
While market research helps you find customers for your business, competitor analysis helps you make your business unique. A customer’s first question will be: Why do I need this product? But their second will be: Why do I need your version of this product? Focusing attention on your current and potential competition will help zero-in on specific product features, pricing strategies, and marketing approaches that can distinguish your brand from its competitors and persuade customers to pick you.
Learning from others
Competitive analysis helps you understand the businesses competing for your potential customers. This is key to figuring out where you can improve. By analysing your competitors, you can not only learn their best practices, but also avoid some of the mistakes that they’ve made.
Managing threats and reducing risk for your business
Even if your sales are rocketing right now, how can you be sure that this will continue? Understanding your competitive landscape well makes you better prepared to face any unpleasant surprises . Competitor analysis allows you to identify your competitive vulnerabilities and keep an eye on potential threats. Scoping out where customers may go if they don’t choose you is a good way of making sure it doesn’t happen.
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Capitalizing on opportunities
Is there a product or niche that is on fire right now, and could propel your store from five figure earnings to six figure? Well, there might be, but without competitive analysis there’s a good chance you’ll miss it. Competitive analysis makes it easier to spot gaps in the market and jump on these opportunities while they’re still hot.
Many businesses find themselves wrong-footed, not because they did something wrong, but because they failed to anticipate changes in the market. A competitor analysis will help you identify the strategies your competition uses to provide value to your target buyers. By looking at these strategies, you can better recognise how you can enhance your own long-term business strategy, or find alternative strategies to attract additional customers. Just imagine you’re selling DVDs online right before Netflix launched its streaming service! If you’re analysing the competition, you’d understand that your business needs to change (maybe a pivot to movie merchandise instead).
The more you can understand the businesses that directly and indirectly compete with you, the better you’re equipped for success. In essence, competitor analysis is a way to ensure you are one step ahead of your competition.
So, with no further ado, let’s see how it’s done.
It’s easy to burn hours of time on competitor analysis. To save you some time, we have set out a structured step-by-step guide that should help keep you focused on what to look for and where.
Let’s get into the how-to’s of a competitive analysis in 6 easy steps:
Step 1: Create a spreadsheet for collecting the data
The first step is the least interesting, but it’s important. You’ll need to be ultra organized when conducting your analysis, so get a spreadsheet set up. Make sure everyone working on the analysis can access it.
And in terms of the content of the spreadsheet, we’ll leave that for later in this blog, when we present your very own template for conducting a competitive analysis.
Step 2: Identify your competitors
It’s time to find the competition. Of course, good ol’ Google will be a valuable tool here. But one important point to remember is that you should always add modifiers to your search terms. These are additional words or phrases that will dramatically narrow down the number of results for a search, and help you find your direct competitors more easily.
For example, imagine you’re a US-based e-commerce business that sells monthly subscriptions of organic gourmet coffee. If you simply search for “Gourmet Coffee”, you return over 375 million results. And the first is a blog about coffee, not a competitor.
Now add the modifiers “Monthly subscription” + “US” + “organic” and you get an 87.5% reduction in search results. Plus, all the results are for e-commerce coffee stores. Bingo!
Once you have tried the most obvious modifiers, make some variations like “best”, “cheapest”, and “fastest delivery”. And don’t forget Google tries to work out the intention of a search too (eg. whether you’re trying to buy something, research something, compare something etc.) So adding “buy” or “for sale” into your search enquiry might also help with honing in on your competitors.
Step 3 - Define your competitors by type
Once you have a list of competitors, it’s time to organise them a bit. The key categorization is to divide them into direct competitors and indirect competitors.
These are e-commerce stores that are offering the same products (or very similar) to the same audience (or very similar) as you are. So, to go back to our coffee subscription example, any other e-commerce stores selling coffee as a subscription to customers in the same region and demographic would be a direct competitor.
These are e-commerce stores that are selling a similar product to you, but with some crucial differences. For example, you might be at opposite ends in terms of pricing (luxury vs low end). For our subscription gourmet coffee store, indirect competitors would either be those selling cheap, lower quality coffee, or those not selling as a subscription. You could even consider competitors selling a different product that solves a similar problem. For example, if you’re selling vitamin supplements, you may consider standard pharmaceuticals to be your competitors.
A different approach for different competitor types
It’s important to be careful when categorising your competitors into direct or indirect, because the way you respond to these types of competitors will differ.
In the case of direct competitors, you might need to change specific parts of your product or service in response to what you discover about your competitors. Furthermore, when you’re targeting the same audience you’ll need to focus on specific benefits (like free shipping) that you can offer over your direct competitors.
But with indirect competitors, you might think more about persuasion. How can I get a customer who buys low-end coffee interested in trying gourmet coffee instead? So you’re going to focus less on the specifics, and more on the general benefit you have to offer.
Step 4 - Analyse each competitor’s value proposition and positioning
Now things are starting to sound a bit “advertising agency.” But don’t worry, fancy terms like “value proposition” and “positioning” describe really simple ideas. Here’s what they mean:
- Value proposition - a summary of the main reasons to choose a product or brand.
- Positioning - where a brand fits within the overall market.
Analysing these elements are important, because they give you a lot of information about the company’s product, service, and audience. And this gives you an opportunity to stand out.
For example, take a look at this value proposition from Apple: Looks brand new. Feels like home.
Apple is emphasising an important feature to their customers - the fact that its new iPhone looks modern, but will feel familiar for Apple users.
Understanding this gives you important information about who Apple is targeting - existing Apple users looking for an iPhone upgrade. So, if you’re Samsung you can come up with a distinctive and different message. Something like this:
By creating a different value proposition - one focused on discovery - you stand out and offer something different. If you’re thinking about your own value proposition and how to make it stand out, check out this list of 9 great value proposition examples to get you inspired.
How to find your competitor’s value proposition and market positioning
While companies communicate a lot about their value proposition and market positioning, it can sometimes take a little bit of digging to find it. Here are some tips you can follow to make the process easier.
Go to the about us section of your competitor’s website then:
- Note what they say their mission is. For example, if they say their mission is to “Make gourmet accessible to more people”, this probably means they’re cheap and are targeting the low end of the market. If they say they want to “Provide lovers of coffee with unique tasting opportunities,” this means they’re highly personalised (and therefore probably expensive).
- See if your competitor compares itself directly to other products on the market. For example, Four Sigmatic spell out on their website exactly where they see themselves in the health food market.
You should also take a look at their social media activity. This can give you a good snapshot of their size and activity, and help you identify their target audience too.
Step 5 - Compile this data in one place
Add all the data you’ve gathered into your spreadsheet. You could create a scoring system to make it easier to analyse and help you pick out key trends.
Step 6 - Find your competitive advantage
Here comes the toughest part. But this is the whole point of the exercise - to find a way to present yourself that will give you an advantage over your competitors.
Start with your direct competitors. Look through your data to see if there are any gaps in the market positions. Are there loads of competitors in the low-end side of your market, but very few in the luxury segment. Or perhaps everyone is focusing on free shipping, but very little is mentioned about flexible returns policies.
Once you have looked through each competitor, you’ll need to turn the attention onto your e-commerce store. Ask yourself:
- What are our biggest strengths as a team?
- What do we do badly or find challenging?
- What do we enjoy and value most?
For example, let’s say you realise that you are highly creative but not so great at organisation. Then it would make sense for you to focus on building a brand people love by being active on social media, rather than thinking about logistics-intensive benefits like flexible returns.
Combine the two (your analysis of your direct competitors and your reflection on yourself) to find the perfect competitive advantage for you.
For example, take a look at this brilliant ad by Atoms shoes.
Here is a brand that knows exactly what its competitive advantage is:
creating comfortable, long-lasting shoes made from high quality materials.
They even spell out exactly what they’re not.
This level of clarity is what you’re aiming for with your competitive analysis.
Finally, once you have identified your competitive advantage, take a look at your secondary competitors. You might spot gaps in the market, or think of ways to convince some of their audience to try your product.
You’ve got a clear idea of the steps you’ll need to follow for your competitive analysis. Now, as promised, here’s a handy template you can use. It’s designed for general use for e-commerce stores, but of course you can adapt or tailor to your specific niche.
We’ve filled in the answers for our fictional gourmet coffee store to give you an idea of how to answer each section.
OK, just time for 5 handy tips to you should follow when you’re carrying out your competitor analysis.
- Analyse web traffic and organic performance: If organic traffic is a key component of your marketing strategy, look for organic competitors by seeing whose content performs well for specific search queries. You’ll need to look at the content they create and see how you can offer more value. You can also use tools like ahrefs or semrush to get more granular. Useful metrics to look for are number of referring domains and volume of organic search traffic .
- Check out the ads your competitors are running: If you rely mainly on ads for your marketing, look at your competitors ads to see how they engage their audience and sell their product. Here’s a step by step guide on how to find your competitor’s ads.
- Know when enough is enough: Although it’s always sensible to do competitor analysis, avoid obsessively researching every possible competitor. It’s easy to take research to the point where you get stuck in ‘analysis paralysis’ and never get round to actually taking action so your business grows. You could try limiting competition analysis to once every 3 or 6 months, and be tight on how long you give yourself for the process.
- Take everything you see from your competitors with a pinch of salt: Don’t assume that everything a competitor does actually works well. When looking at a competitor’s glossy website, it’s easy to think everything is perfect. But few businesses get everything 100% right for their customers. And many businesses do things that aren’t always ideal or profitable, but due to other pressures they never get round to changing. Even if it is right for them, it might not be right for you.
- Repeat, repeat, repeat at regular intervals: Competitive analysis isn’t a one-and-done exercise. While the frequency of analysis can differ depending on the industry, we recommend conducting a competitor analysis anytime from once a quarter to once a year. This gives you time to react to your discoveries and benchmark your progress.
Competitive analysis is an important tool in maintaining your store’s continuous growth. By keeping tabs on what the other e-commerce stores in your niche are doing, you can:
- Constantly improve and clarify your value proposition so you really stand out in the market,
- Identify opportunities in the market that can bring in big bucks,
- Manage potential risks i n the future so that your business is secure for the long term.
And to carry out a successful competitive analysis, just adapt the competitor analysis example template in this article to fit your specific area of business. Then follow these 6 steps:
- Create a competitive analysis spreadsheet based on the template in this article,
- Identify your competitors (don’t forget to use a range of modifiers when you’re searching for them on Google)
- Define your competitors by type (separate them into direct and indirect competitors)
- Analyse your competitors’ value propositions and market positioning (for analysing your competitors’ social media activity, take a look at this guide to spying on your competitors’ ads in Instagram and Facebook.)
- Compile all your data in your competitive analysis spreadsheet
- Find your competitive advantage (after all, this is the main benefit of conducting a competitive analysis).
So, you’ve got the competitive analysis template. And you’ve got the steps for completing your competitive analysis. Now all you need is schedule some time to put this strategy into action (we recommend once every 3-6 months, and annually at the very least). Then get ready to propel your business’ growth and secure its long-term future.
What is competitive analysis?
A competitive analysis - also known as a competitor analysis - is like an audit. You gather information on who your competitors are and what they’re doing. This usually includes looking at their products, their marketing and sales strategies, their customers and audience, and the strengths and weaknesses of their business.
How does it work?
There are 6 keys steps to follow when conducting your competitive analysis: create a spreadsheet (based on the template in this article), identify your competitors, categorise them into direct and indirect competitors, analyse them, compile your data, and then identify your competitive advantage.
Why is it worth doing?
There are 3 main reasons to conduct a competitive analysis. The first, and most important, is to identify your own competitive advantages. See what you can offer that your competitors can’t and use this to attract new customers. Secondly, a competitive analysis will help you identify new opportunities and gaps in the market. Thirdly, it will enable you to secure your business’ future by being ready for changes and shifts in the market.
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Competitive Analysis: What It Is and How To Conduct One (+ Template)
- by Kaleigh Moore
- Starting Up
- Nov 17, 2022
- 20 minute read
There's nothing more frustrating in business than seemingly doing everything right, only to see your competition continue to grow, while your own company remains stagnant.
Fortunately, doing a competitor analysis can be incredibly helpful for understanding your strengths and weaknesses and help you find your edge.
This post outlines a method for conducting a competitive analysis that any business can use, whether you’re a successful store owner that’s re-evaluating your view of the current market or you’re just getting ready to launch your business for the very first time.
Below, we’ll show you the tools you need to perform an effective competitor analysis and help you identify what to make note of (e.g., social/search presence, pricing, etc.). We’ve even included a free competitor analysis template you can follow along with and fill out while conducting your own analysis.
Find your competitive edge 🎯
What is a competitive analysis?
Why competitor analysis matters for ecommerce.
- How to do a competitor analysis
Collect data with these competitor analysis tools
A competitive analysis template.
- Pitfalls of competitive analysis in marketing
- Competitor analysis: your business edge
- Competitive analysis FAQ
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A competitive analysis , also referred to as a competitor analysis, is a comparison of competitors’ strategies used to evaluate the strengths and weaknesses of different marketing approaches within an industry.
It helps a business determine potential advantages and barriers within a market around a product or service and generally helps brands monitor how direct and indirect competitors are executing tactics like marketing, pricing, and distribution.
Competitive analysis example: what does one look like?
The competitive analysis can vary widely depending on what it is you’re trying to learn about your competitors. You might do a competitive analysis around a specific aspect—like a competitor’s website approach, for example—or you might do a high-level look at their marketing approach as a whole. Ultimately the goal is to help you understand your strengths and reach new potential customers.
There are a lot of different ways you can structure a competitive analysis, so let’s look at the different types of information that are frequently seen within this type of research.
If you’re doing a high-level competitive analysis, there are a few major elements you’ll want to be sure to include around around competitors’ market positioning, such as:
- Who their target customers are;
- What their main differentiator/ unique value add is for their business and products;
- Key features/benefits they highlight in sales materials;
- Price points for products across a variety of marketplaces ;
- How they approach shipping ;
- Whether they’ve received any funding or venture capital.
These sections will help you get a zoomed out look at what separates your competitors from each other and how they’re working to differentiate themselves from competition within your niche.
If you’re wanting to look at more specific elements of your competitors’ approaches, you might consider adding sections like these to your competitor analysis:
- Website features ( search tools, product images, design/layout, etc.)
- Customer experience elements ( checkout workflows, customer support, mobile UX, etc.)
- Copywriting tactics (product descriptions, calls to action, etc.)
- Social media approach (channels used, frequency of posting, engagement, etc.)
- Content marketing tactics (blog topics, content types, etc.)
- Marketing tactics (types of promotions, frequency of discounts, etc.)
- Email marketing approach (Newsletter, abandoned cart emails, promos, etc.)
- Customer reviews (language used around products, recurring complaints, etc.)
Generally, competitive analysis can take on many shapes and forms depending on what a company wants to evaluate about its competitors—but this gives you a rough idea of what could be included within the different sections.
Maybe at this point you’re thinking, “OK, but why does competitor analysis matter for me as a business owner or marketer?”
The main reason this activity is important is because you can’t effectively compete without knowing your competitors—and you can’t differentiate yourself if you don’t know what actually makes you different.
If you’re starting an ecommerce business , an analysis of competitors helps you to:
- Make more informed marketing decisions;
- Identify industry trends;
- Benchmark against competitors;
- Solidify a unique value proposition ;
- Determine pricing (upmarket, down, or mid);
- Unearth new ways of speaking to customers, or even new customers to speak to;
- Find a gap in the marketing and also ensure there’s a market in the gap.
This type of analysis is not just for first-time ecommerce retailers either. A competitor analysis can, and should, be a living document that’s constantly evolving as a company grows and matures over time.
Maintaining a resource like this is a powerful way to stay on top of how your brand stacks up against the competition right now—but it also can help provide clear direction on how you’ll continue to excel in the future.
Need an example for reference? Here’s one showing what a competitor analysis might look like:
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How to do a competitor analysis.
Once you’re ready to dive into a competitive analysis of your own, follow the steps outlined here to keep your research structured and organized appropriately.
1. Select 7–10 competitors
To identify relevant competitors to include in your analysis, start with searches on Google, Amazon, and Alexa around your product and business idea. You want a mix of competitors that:
- Sell similar types of products;
- Have a similar business premise;
- Market to similar and slightly different audience demographics;
- Are both new to the marketplace and more experienced.
To put together a list of diverse competitors that will give you a good look at the competitive landscape that’s not too small and not too large, it’s a good idea to stick with a group of seven to 10 relevant competitors.
2. Create a spreadsheet
As you collect data on this group of competitors, keep it organized within a table or spreadsheet that can easily be shared and updated over time. Within this document, you’ll compare and contrast competitors based on different criteria such as:
- Price range;
- Product offerings;
- Social media engagement;
- Content used for lead generation;
- First-time visitor offers;
- Other traits that are worth comparing.
3. Determine competitor types
Starting with your list of competitors, begin your spreadsheet by categorizing each one as a primary or secondary competitor. This will help you better determine how they’ll relate to your business.
- Direct competitors, or primary competitors, to your business that sell a similar product to a similar audience. Example: Nike and Adidas are primary competitors.
- Indirect competitors are secondary competitions that offer a high-end or low-end version of your product to a different audience. Example: Victoria’s Secret and Walmart are secondary competitors.
- Tertiary competitors are related brands that may market to the same audience but don’t sell the same products as you or directly compete with you in any way. They may be potential partners or future competitors if they choose to expand their business. Example: Gatorade and Under Armour.
4. Identify your competitors’ positioning
Positioning is the most persuasive marketing tool for a business. Good positioning helps you connect with a target audience and keeps them around longer. It also determines your messaging, values, and overall business strategy.
This is exactly why understanding your competitors positioning is so important. You can learn how to separate yourself and build a favorable reputation in your customers’ eyes. Differentiation also helps increase brand awareness and justify your prices, which impacts your bottom line.
Analyze these key channels to determine positioning and messaging:
- Social media;
- Press releases;
- Website copy;
- Product copy.
When identifying your competitors’ positioning, ask yourself the following questions:
- What story do they express to customers?
- How do they position their products?
- What’s their company description?
- How do they describe their unique value proposition ?
Understand how competitors interact with their followers, customers, employees, partners, and shareholders. If you can pinpoint their communication framework, you’ll be able to position yourself differently and set yourself apart from competitors.
5. Determine competitive advantage and offerings
Once you understand your competitors’ messaging, take a look at their competitive advantage and product or service offer. The vast majority of succesful companies have a clear "secret sauce" compared to their competition.
For example, a fashion retailer’s competitive advantage may be high-quality, reasonably priced products and expedited shipping services. An online educator may have 20 years of experience teaching and working in their specific industry. Unique selling propositions like these are not easy to replicate and can drive brand name recognition for a business.
Take time to look at your competitors’ goods and services and compare them to your own. Read online reviews of your target audience to see why customers choose their company. It could be that they offer similar products at a lower price or have a focus on sustainability. Either way, you’ll want to learn their advantage and figure out how you can offer something better.
6. Understand how your competitors market their products
Marketing is the secret to the most successful ecommerce stores. A good offering is the cost of entry, but marketing takes you to the top. Unfortunately, most businesses fail to undertake a review of their competitors’ marketing. They assume that everyone is on Instagram, running Facebook ads, and optimizing their site for search.
And a lot of them are. But understanding how your competitors market their products takes a different perspective. You want to find out what offers they are promoting, how they are building and managing their contact lists, and how they are distributing content online.
Along with the research you’re doing through software and tools, it’s a good idea to get hands-on with your competitive research, too. Assume the role of a potential customer and check out what your competitors are doing in the marketing department.
You can do this by:
- Signing up for their newsletters;
- Subscribing to their blogs;
- Following them on social media;
- Abandoning a product in the shopping cart;
- Purchasing a product.
As you execute these activities, be sure to document your findings with notes on each tactic you see. By studying their approaches to cart abandonment and looking at how they deliver support via social media (and beyond), you can spot interesting approaches your competition is using to attract more customers and to drive sales. The insights you gather during this stage can be incredibly helpful for your sales team specifically.
7. Conduct a SWOT analysis
Consider conducting a SWOT analysis to accompany the data you collect. It’s a competitive analysis framework that lists your company’s strengths, weaknesses, opportunities, and threats and is helpful in shaping your overall marketing strategy as well. SWOT leans into your competitors’ strengths and compares them to your business to define areas of improvement.
Strengths and weaknesses focus on the present. They are elements you control and can change over time, including:
- Product offering;
- Intellectual property;
- Number of employees;
- Market share;
Opportunities and threats are outside your control. You can plan for changes but can’t influence these elements. They include:
- Competitors’ products;
- The economy;
- Consumer trends;
- Market size;
- Market demand .
Aim to run a SWOT analysis annually. It helps inform your break-even analysis and keeps tabs on the competitive landscape. You can anticipate problems and make continuous improvements to your business. Should you seek funding , you’ll want to include an updated SWOT analysis in your proposed business plan .
🎯 TIP: If you're interested in writing a business plan but turned off by stodgy paperwork, we've developed a sample business plan template that you'll actually use. Thousands of people have made a copy to repurpose for their own plan, and it's completely free to use.
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Once you know which direct competitors you’ll be studying, it’s time to start diving into research and data collection for your competitive analysis. The good news is that today there are many different tools and software available that can make data collection for your competitive analysis simpler, more efficient, and more accurate.
Let’s look at a few different resources that can help you gather key insights into different aspects of your competition’s marketing approach from their product or service positioning to their content marketing and social media efforts as well.
- Ahrefs : checks any URL’s top-performing organic keywords and gets estimated traffic reports around those keywords.
- Alexa : helps define audience demographics and search rankings for your site as well as your competitors websites.
- SE Ranking : shows competitors’ paid and organic search performance, strategy, and keywords.
- SimilarWeb : gives insights into estimated monthly visits and key traffics sources for a website. Helpful for determining a rough view of your competitor's marketshare.
- SpyFu : helps you research and download the most profitable keywords your competition is using in their PPC campaigns.
- iSpionage : shows how many keywords competitors are using on Google Ads and which ones they’re targeting, as well as their projected monthly budget.
- SEMrush : helps identify your competition’s keywords, does a site audit, and analyzes backlinks.
- WhatRunsWhere : provides data around competitors’ advertising approaches across the internet.
Social media performance
- RivalIQ : shows how often competitors post across social channels, their average engagement rates, and their most successful content.
- Followerwonk : provides Twitter insights around follower demographics, key influencers, and performance metrics.
- Sprout Social : benchmarks around competitors’ social performance across social channels, influencer identification, and reporting.
- Owletter : analyses changes in sending frequency and spots trends in competitors’ emails.
- MailCharts : aggregates emails and provides insight into frequency of email sends, subject line tactics, and more.
Content marketing performance
- BuzzSumo : helps you see the top-performing content for topics and for specific competitors, as well as total social shares.
- Monitor Backlinks : helps monitor backlinks each time someone references your content, plus that of your competitors.
- Feedly : aggregates content as it’s published so you can study topics covered by competitors in one place.
Using these resources, start gathering data and dropping it into your competitive analysis spreadsheet so your findings are all stored in a single, organized space.
If you’re not still quite sure how to start laying out your template for your analysis, here’s an example and template you can work from to get the ball rolling.
Let’s say you sell makeup brushes. You’ll see how you could compare competitors’ approaches (and identify what you could do to stand out):
You can add as many sections as you want to your template, but remember to keep your group of primary and secondary competitors limited to seven to 10 so that your frame of reference is highly relevant.
Want a simple competitive analysis template to speed up the process?
Six pitfalls of competitor analysis in marketing
Now that you know how to put together a competitive assessment, let’s go over some of the main pitfalls to be aware of that can throw off the insights you’ve gathered.
1. Competitive analysis is not a one-and-done exercise
Never revisiting your original insights (or never updating them, for that matter) can lead to faulty data and poor decisions. Businesses are constantly evolving, so it’s important to remember that keeping an eye on your competitors is an ongoing process—not something you do once and then never again. Ultimately, you have to be at the top of your game consistently if you want to increase your market share.
2. Confirmation bias is real
As humans, we have a tendency to jump to conclusions around our assumptions. This is called confirmation bias . As you work through your analysis, it’s important to be aware of your initial assumptions and to test them thoroughly rather than leaning on what you “think” is true about your competitors. Let the data inform your decisions rather than letting assumptions take the lead.
3. Data without action is useless
If you’re putting in the work to do a competitor analysis, be sure that you’re acting on the findings rather than letting them gather virtual dust on your computer, buried in an obscure file folder. Make a strategic plan around your findings and execute on the unique angles and tactics that you’ve discovered during this process.
4. Working harder instead of smarter
With so many great resources available that simplify the data collection process around competitive analysis today, putting together a top-notch, highly accurate comparison is easier than ever before. Don’t reinvent the wheel and do things the hard way: make the investment into tools that speed up the process and provide the important insights you need to make informed, data-backed decisions about your business.
5. Starting without a direction
If you’re directionless while putting together your competitive analysis and have no clear end objective, the work will be much, much harder. Before diving into research, define your goal and what you hope to learn about your competition. What do you want to accomplish? What do you want to build? It is your own business after all!
6. Not accounting for market timing
When looking at competitor data, be sure to study how companies have grown and progressed over time rather than examining their approaches at a single fixed point.
Sometimes information about how your competitors have evolved their tactics can be even more useful than knowing what they did in the early days (or what they’re doing right now). Understanding past, current, and future industry trends will help you make better decisions.
Competitive analysis: your business edge
Competitive intelligence is key to starting a business . By doing market competition analysis on an ongoing basis, you can always be on top of your competition. You’ll be able to break into new markets, launch new products, and keep tabs on your competitors’ customers—giving you a cutting edge approach to small business that keeps your business or startup agile.
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Competitive analysis faq, what is the meaning of competitive analysis, what is in a competitive analysis.
- Who a competitor’s target customers are;
- What market share they currently own;
- What their main competitive advantages are;
- Key product features/benefits;
- Price points for products, even across different marketplaces;
- How they do shipping;
- If they’ve received any funding or venture capital.
How do you write a competitive analysis?
- Choose seven to 10 competitors.
- Create a spreadsheet to track your data.
- Determine competitor types.
- Identifying positioning.
- Determine competitive advantage and offering.
- Understand how your competition markets themselves.
- Conduct a SWOT analysis.
Is SWOT a competitive analysis?
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- Building Your Business
- Becoming an Owner
- Business Plans
How to Write the Competitor Analysis Section of the Business Plan
Writing the business plan: section 4.
Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.
The competitor analysis section can be the most difficult section to compile when writing a business plan because before you can analyze your competitors, you have to investigate them. Here's how to write the competitor analysis section of the business plan.
First, Find Out Who Your Competitors Are
If you're planning to start a small business that's going to operate locally, chances are you already know which businesses you're going to be competing with. But if not, you can easily find out by doing an internet search for local businesses, looking in the online or printed local phone book, or even driving around the target market area.
Your local business may also have non-local competitors that you need to be aware of.
If you're selling office supplies, for instance, you may also have to compete with big-box retailers within a driving distance of several hours and companies that offer office supplies online. You want to make sure that you identify all your possible competitors at this stage.
Then Find Out About Them
You need to know:
- what markets or market segments your competitors serve;
- what benefits your competitors offer;
- why customers buy from them;
- as much as possible about their products and/or services, pricing, and promotion.
Gathering Information for Your Competitor Analysis
A visit is still the most obvious starting point - either to the brick and mortar store or to the company's website. Go there, once or several times, and look around. Watch how customers are treated. Check out the prices.
You can also learn a fair bit about your competitors from talking to their customers and/or clients - if you know who they are. Other good "live" sources of information about competitors include a company's vendors or suppliers and a company's employees. They may or may not be willing to talk to you, but it's worth seeking them out and asking.
And watch for trade shows that your competitors may be attending. Businesses are there to disseminate information about and sell their products or services; attending and visiting their booths can be an excellent way to find out about your competition.
You'll also want to search for the publicly available information about your competitors. Online publications, newspapers, and magazines may all have information about the company you're investigating for your competitive analysis. Press releases may be particularly useful.
Once you've compiled the information about your competitors, you're ready to analyze it.
Analyzing the Competition
Just listing a bunch of information about your competition in the competitor analysis section of the business plan misses the point. It's the analysis of the information that's important.
Study the information you've gathered about each of your competitors and ask yourself this question: How are you going to compete with that company?
For many small businesses, the key to competing successfully is to identify a market niche where they can capture a specific target market whose needs are not being met.
- Is there a particular segment of the market that your competition has overlooked?
- Is there a service that customers or clients want that your competitor does not supply?
The goal of your competitor analysis is to identify and expand upon your competitive advantage - the benefits that your proposed business can offer the customer or client that your competition can't or won't supply.
Writing the Competitor Analysis Section
When you're writing the business plan, you'll write the competitor analysis section in the form of several paragraphs.
The first paragraph will outline the competitive environment, telling your readers who your proposed business's competitors are, how much of the market they control and any other relevant details about the competition.
The second and following paragraphs will detail your competitive advantage, explaining why and how your company will be able to compete with these competitors and establish yourself as a successful business.
Remember; you don't have to go into exhaustive detail here, but you do need to persuade the reader of your business plan that you are knowledgeable about the competition and that you have a clear, definitive plan that will enable your new business to successfully compete.
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Sample Marketing Plan Competitive Analysis
- Small Business
- Advertising & Marketing
- Marketing Plans
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The competitive analysis section of a business plan is a vital component to demonstrating your viability. It shows investors that you are aware of the competition, that you understand your marketplace and that you have plans in place to compete at the same level as established competitors. You can pursue several angles to display how competitive your business will be, explains Gabler.com .
Comparing Your Service or Product
In this sample marketing plan competitive analysis, you would need to describe the product or service that you offer and how it stacks up against what the competition has to offer. Using the example of a new running shoe, you can state that your shoe has specially designed treads that reduce the stress on a runner's joints. List similar products your competitors offer and how your product is better. Be realistic in this section and avoid pumping up your product too much.
Market Positioning Analysis
If your company has unique market positioning, this needs to be clear in the competitive analysis. Discuss how to take advantage of your target market and how your competitors have not yet discovered or used this market to its full potential. An example of this would be a new app designed for users of games that contains all of their current high scores. If no other company offers this kind of application or has not yet marketed a similar app to its full potential, this would give you unique market positioning.
Specialized Marketing Technique
If you have an innovative way to market your product to consumers and no one else in your industry is using this technique, this would provide you with a unique strategy. This would need to be outlined in your competitive analysis.
Describe the current methods of your competitors and detail how you will be improving or changing these techniques. For this example, using a carpet cleaning company, imagine that you have a situation where local companies are using television and radio ads to reach their markets, but they are not using social networking. Your unique method would be to use this powerful tool at a local area to publicize your service and develop word-of-mouth advertising.
Unique Selling Differential
When you have a feature, benefit (such as free delivery or three-year warranty) that competitors don't have, you have a unique selling differential, or proposition. This could be anything from a new kind of product or a new way of advertising or having an entirely different strategy in place to market an old product in a new way.
This would need to be included in your competitive analysis. Look at how your competitors are doing and describe how your company plans to do it better. Going back to the example of running shoes, if other companies are not networking with chiropractors to recommend their products, this is something you could do that would help you gain marketing leverage over your competition.
Competitive Analysis Tools
A number of companies offer software and online tools to help you analyze your competition. For example, if you sell on Amazon, you can add JungleScout to your browser, do a product search in Amazon, then analyze the results. You'll find your competitor's estimated sales by units and dollars, number of reviews and changes in prices over time. A Google search of "competitor analysis tools" will help you find the options available.
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What's a Competitive Analysis & How Do You Conduct One?
Published: November 10, 2022
When was the last time you ran a competitive analysis for your brand? And most importantly, do you know how to do one efficiently?
If you're not sure, or if the last "analysis" you ran was a quick perusal of a competitor's website and social media presence, you're likely missing out on important intelligence that could help your brand grow.
In this detailed guide, you'll learn how to conduct a competitive analysis that will give your business a competitive advantage in the market.
What is a competitive market analysis?
A competitive analysis is a strategy that involves researching major competitors to gain insight into their products, sales, and marketing tactics. Implementing stronger business strategies, warding off competitors, and capturing market share are just a few benefits of conducting a competitive market analysis.
A competitive analysis can help you learn the ins and outs of how your competition works, and identify potential opportunities where you can out-perform them.
It also enables you to stay atop of industry trends and ensure your product is consistently meeting — and exceeding — industry standards.
Let's dive into a few more benefits of conducting competitive analyses:
- Helps you identify your product's unique value proposition and what makes your product different from the competitors', which can inform future marketing efforts.
- Enables you to identify what your competitor is doing right. This information is critical for staying relevant and ensuring both your product and your marketing campaigns are outperforming industry standards.
- Tells you where your competitors are falling short — which helps you identify areas of opportunities in the marketplace, and test out new, unique marketing strategies they haven't taken advantage of.
- Learn through customer reviews what's missing in a competitor's product, and consider how you might add features to your own product to meet those needs.
- Provides you with a benchmark against which you can measure your growth.
What is competitive market research?
Competitive market research focuses on finding and comparing key market metrics that help identify differences between your products and services and those of your competitors.
Comprehensive market research helps establish the foundation for an effective sales and marketing strategy that helps your company stand out from the crowd.
Next, let's dive into how you can conduct a competitive analysis for your own company.
10 Competitive Analysis Templates
Fill out the form to access the templates., competitive analysis in marketing.
Every brand can benefit from regular competitor analysis. By performing a competitor analysis, you'll be able to:
- Identify gaps in the market
- Develop new products and services
- Uncover market trends
- Market and sell more effectively
As you can see, learning any of these four components will lead your brand down the path of achievement.
Next, let's dive into some steps you can take to conduct a comprehensive competitive analysis.
How to do a Competitive Analysis
- Determine who your competitors are.
- Determine what products your competitors offer.
- Research your competitors' sales tactics and results.
- Take a look at your competitors' pricing, as well as any perks they offer.
- Ensure you're meeting competitive shipping costs.
- Analyze how your competitors market their products.
- Take note of your competition's content strategy.
- Learn what technology stack your competitors' use.
- Analyze the level of engagement on your competitors' content.
- Observe how they promote marketing content.
- Look at their social media presence, strategies, and go-to platforms.
- Perform a SWOT Analysis to learn their strengths, weaknesses, opportunities, and threats.
To run a complete and effective competitive analysis, use these ten templates, which range in purpose from sales, to marketing, to product strategy.
Featured Resource: 10 Competitive Analysis Templates
1. Determine who your competitors are.
First, you'll need to figure out who you're really competing with so you can compare the data accurately. What works in a business similar to yours may not work for your brand.
So how can you do this?
Divide your “competitors” into two categories: direct and indirect.
Direct competitors are businesses that offer a product or service that could pass as a similar substitute for yours, and that operate in your same geographic area.
On the flip side, an indirect competitor provides products that are not the same but could satisfy the same customer need or solve the same problem.
It seems simple enough on paper, but these two terms are often misused.
When comparing your brand, you should only focus on your direct competitors. This is something many brands get wrong.
Let's use an example: Stitch Fix and Fabletics are both subscription-based services that sell clothes on a monthly basis and serve a similar target audience.
But as we look deeper, we can see that the actual product (clothes in this case) are not the same; one brand focuses on stylish everyday outfits while the other is workout-centric attire only.
Yes, these brands satisfy the same need for women (having trendy clothes delivered right to their doorstep each month), but they do so with completely different types of clothing, making them indirect competitors.
This means Kate Hudson's team at Fabletics would not want to spend their time studying Stitch Fix too closely since their audiences probably vary quite a bit. Even if it's only slightly, this tiny variation is enough to make a big difference.
Now, this doesn't mean you should toss your indirect competitors out the window completely.
Keep these brands on your radar since they could shift positions at any time and cross over into the direct competitor zone. Using our example, Stitch Fix could start a workout line, which would certainly change things for Fabletics.
This is also one of the reasons why you'll want to routinely run a competitor analysis. The market can and will shift at any time, and if you're not constantly scoping it out, you won't be aware of these changes until it's too late.
2. Determine what products your competitors offer.
At the heart of any business is its product or service, which is what makes this a good place to start.
You'll want to analyze your competitor's complete product line and the quality of the products or services they're offering.
You should also take note of their pricing and any discounts they're offering customers.
Some questions to consider include:
- Are they a low-cost or high-cost provider?
- Are they working mainly on volume sales or one-off purchases?
- What is their market share?
- What are the characteristics and needs of their ideal customers?
- Are they using different pricing strategies for online purchases versus brick and mortar?
- How does the company differentiate itself from its competitors?
- How do they distribute their products/services?
3. Research your competitors' sales tactics and results.
Running a sales analysis of your competitors can be a bit tricky.
You'll want to track down the answers to questions such as:
- What does the sales process look like?
- What channels are they selling through?
- Do they have multiple locations and how does this give them an advantage?
- Are they expanding? Scaling down?
- Do they have partner reselling programs?
- What are their customers' reasons for not buying? For ending their relationship with the company?
- What are their revenues each year? What about total sales volume?
- Do they regularly discount their products or services?
- How involved is a salesperson in the process?
These helpful pieces of information will give you an idea of how competitive the sales process is, and what information you need to prepare your sales reps with to compete during the final buy stage.
For publicly held companies, you can find annual reports online, but you'll have to do some sleuthing to find this info from privately owned businesses.
You could find some of this information by searching through your CRM and reaching out to those customers who mentioned they were considering your competitor. Find out what made them choose your product or service over others out there.
To do this, run a report that shows all prospective deals where there was an identified competitor.
If this data is not something you currently record, talk to marketing and sales to implement a system where prospects are questioned about the other companies they are considering.
Essentially, they'll need to ask their leads (either through a form field or during a one-on-one sales conversation) to identify who their current service providers are, who they've used in the past, and who else they are considering during the buying process.
When a competitor is identified, have your sales team dive deeper by asking why they are considering switching to your product. If you've already lost the deal, be sure to follow up with the prospect to determine why you lost to your competitor. What services or features attracted the prospect? Was it about price? What's the prospect's impression of your sales process? If they've already made the switch, find out why they made this decision.
By asking open-ended questions, you'll have honest feedback about what customers find appealing about your brand and what might be turning customers away.
Once you've answered these questions, you can start scoping out your competitor's marketing efforts.
4. Take a look at your competitors' pricing, as well as any perks they offer.
There are a few major factors that go into correctly pricing your product — and one major one is understanding how much your competitors are charging for a similar product or service.
If you feel your product offers superior features compared to those of a competitor, you might consider making your product or service more expensive than industry standards. However, if you do that, you'll want to ensure your sales reps are ready to explain why your product is worth the additional cost.
Alternatively, perhaps you feel there's a gap in your industry for affordable products. If that's the case, you might aim to charge less than competitors and appeal to prospects who aren't looking to break the bank for a high-quality product.
Of course, other factors go into correctly pricing a product , but it's critical you stay on top of industry pricing to ensure you're pricing your product in a way that feels reasonable to prospects.
Additionally, take a look at any perks your competitors' offer and how you might match those perks to compete. For instance, perhaps your competitors offer a major referral discount or a month-long free trial version. These perks could be the reason you're losing customers, so if it feels reasonable for your brand, consider where you might match those perks — or provide some unique perks of your own if competitors' don't offer any.
5. Ensure you're meeting competitive shipping costs.
Did you know expensive shipping is the number one reason for cart abandonment ?
Nowadays, free shipping is a major perk that can attract consumers to choose one brand over another. If you work in an industry where shipping is a major factor — like ecommerce — you'll want to take a look at competitors' shipping costs and ensure you're meeting (if not exceeding) those prices.
If most of your competitors' offer free shipping, you'll want to look into the option for your own company. If free shipping isn't a practical option for your business, consider how you might differentiate in other ways — including loyalty programs, holiday discounts, or giveaways on social media.
6. Analyze how your competitors market their products.
Analyzing your competitor's website is the fastest way to gauge their marketing efforts. Take note of any of the following items and copy down the specific URL for future reference:
- Do they have a blog?
- Are they creating whitepapers or ebooks?
- Do they post videos or webinars?
- Do they have a podcast?
- Are they using static visual content such as infographics and cartoons?
- What about slide decks?
- Do they have a FAQs section?
- Are there featured articles?
- Do you see press releases?
- Do they have a media kit?
- What about case studies?
- Do they publish buying guides and data sheets?
- What online and offline advertising campaigns are they running?
7. Take note of your competition's content strategy.
Then, take a look at the quantity of these items. Do they have several hundred blog posts or a small handful? Are there five white papers and just one ebook?
Next, determine the frequency of these content assets. Are they publishing something new each week or once a month? How often does a new ebook or case study come out?
Chances are if you come across a robust archive of content, your competitor has been publishing regularly. Depending on the topics they're discussing, this content may help you hone in on their lead-generating strategies.
From there, you should move on to evaluating the quality of their content. After all, if the quality is lacking, it won't matter how often they post since their target audience won't find much value in it.
Choose a small handful of samples to review instead of tackling every single piece to make the process more manageable.
Your sampler should include content pieces covering a variety of topics so you'll have a fairly complete picture of what your competitor shares with their target audience.
When analyzing your competitor's content, consider the following questions:
- How accurate is their content?
- Are spelling or grammar errors present?
- How in-depth does their content go? (Is it at the introductory level that just scratches the surface or does it include more advanced topics with high-level ideas?)
- What tone do they use?
- Is the content structured for readability? (Are they using bullet points, bold headings, and numbered lists?)
- Is their content free and available to anyone or do their readers need to opt-in?
- Who is writing their content? (In-house team? One person? Multiple contributors?)
- Is there a visible byline or bio attached to their articles?
As you continue to scan the content, pay attention to the photos and imagery your competitors are using.
Do you quickly scroll past generic stock photos or are you impressed by custom illustrations and images? If they're using stock photos, do they at least have overlays of text quotes or calls-to-action that are specific to their business?
If their photos are custom, are they sourced from outside graphic professionals or do they appear to be done in-house?
When you have a solid understanding of your competitor's content marketing strategy, it's time to find out if it's truly working for them.
8. Learn what technology stack your competitors' use.
Understanding what types of technology your competitors' use can be critical for helping your own company reduce friction and increase momentum within your organization.
For instance, perhaps you've seen positive reviews about a competitor's customer service — as you're conducting research, you learn the customer uses powerful customer service software you haven't been taking advantage of. This information should arm you with the opportunity to outperform your competitors' processes.
To figure out which software your competitors' use, type the company's URL into Built With , an effective tool for unveiling what technology your competitors' site runs on, along with third-party plugins ranging from analytics systems to CRMs.
Alternatively, you might consider looking at competitors' job listings, particularly for engineer or web developer roles. The job listing will likely mention which tools a candidate needs to be familiar with — a creative way to gain intel into the technology your competitors' use.
9. Analyze the level of engagement on your competitor's content.
To gauge how engaging your competitor's content is to their readers, you'll need to see how their target audience responds to what they're posting.
Check the average number of comments, shares, and likes on your competitor's content and find out if:
- Certain topics resonate better than others
- The comments are negative, positive, or a mix
- People are tweeting about specific topics more than others
- Readers respond better to Facebook updates about certain content
- Don't forget to note if your competitor categorizes their content using tags, and if they have social media follow and share buttons attached to each piece of content.
10. Observe how they promote their marketing content.
From engagement, you'll move right along to your competitor's content promotion strategy.
- Keyword density in the copy itself
- Image ALT text tags
- Use of internal linking
The following questions can also help you prioritize and focus on what to pay attention to:
- Which keywords are your competitors focusing on that you still haven't tapped into?
- What content of theirs is highly shared and linked to? How does your content compare?
- Which social media platforms are your target audience using?
- What other sites are linking back to your competitor's site, but not yours?
- Who else is sharing what your competitors are publishing?
- Who is referring traffic to your competitor's site?
- For the keywords you want to focus on, what is the difficulty level? There are several free (and paid) tools that will give you a comprehensive evaluation of your competitor's search engine optimization.
11. Look at their social media presence, strategies, and go-to platforms
The last area you'll want to evaluate when it comes to marketing is your competitor's social media presence and engagement rates.
How does your competition drive engagement with their brand through social media? Do you see social sharing buttons with each article? Does your competitor have links to their social media channels in the header, footer, or somewhere else? Are these clearly visible? Do they use calls-to-action with these buttons?
If your competitors are using a social network that you may not be on, it's worth learning more about how that platform may be able to help your business, too. To determine if a new social media platform is worth your time, check your competitor's engagement rates on those sites. First, visit the following sites to see if your competition has an account on these platforms:
Then, take note of the following quantitative items from each platform:
- Number of fans/followers
- Posting frequency and consistency
- Content engagement (Are users leaving comments or sharing their posts?)
- Content virality (How many shares, repins, and retweets do their posts get?)
With the same critical eye you used to gauge your competition's content marketing strategy, take a fine-toothed comb to analyze their social media strategy.
What kind of content are they posting? Are they more focused on driving people to landing pages, resulting in new leads? Or are they posting visual content to promote engagement and brand awareness?
How much of this content is original? Do they share curated content from other sources? Are these sources regular contributors? What is the overall tone of the content?
How does your competition interact with its followers? How frequently do their followers interact with their content?
After you collect this data, generate an overall grade for the quality of your competitor's content. This will help you compare the rest of your competitors using a similar grading scale.
12. Perform a SWOT Analysis to learn their strengths, weaknesses, opportunities, and threats
As you evaluate each component in your competitor analysis (business, sales, and marketing), get into the habit of performing a simplified SWOT analysis at the same time.
This means you'll take note of your competitor's strengths, weaknesses, opportunities, and threats any time you assess an overall grade.
Some questions to get you started include:
- What is your competitor doing well? (Products, content marketing, social
- Where does your competitor have the advantage over your brand?
- What is the weakest area for your competitor?
- Where does your brand have the advantage over your competitor?
- What could they do better with?
- In what areas would you consider this competitor a threat?
- Are there opportunities in the market that your competitor has identified?
You'll be able to compare their weaknesses against your strengths and vice versa. By doing this, you can better position your company, and you'll start to uncover areas for improvement within your own brand.
Competitive Product Analysis
Product analysis drills down to discover key differences and similarities in products that share the same general market. This type of analysis if you have a competitor selling products in a similar market niche to your own - you want to make sure that wherever possible, you aren’t losing market share to the competition.
Leveraging the example above, we can drill down and discover some of the key differentiators in product offerings.
Step 1: Assess your current product pricing.
The first step in any product analysis is to assess current pricing.
Nintendo offers three models of its Switch console: The smaller lite version is priced at $199, the standard version is $299, and the new OLED version is $349.
Sony, meanwhile, offers two versions of its Playstation 5 console: The standard edition costs $499 and the digital version, which doesn’t include a disc drive, is $399.
Step 2: Compare key features
Next is a comparison of key features. In the case of our console example, this means comparing features like processing power, memory, and hard drive space.
Step 3: Pinpoint differentiators
With basic features compared, it’s time to dive deeper with differentiators. While a glance at the chart above seems to indicate that the PS5 is outperforming its competition, this data only tells part of the story.
Here’s why: The big selling point of the standard and OLED Switch models is that they can be played as either handheld consoles or docked with a base station connected to a TV. What’s more, this “switching” happens seamlessly, allowing players to play whenever, wherever.
The Playstation offering, meanwhile, has leaned into market-exclusive games that are only available on its system to help differentiate them from their competitors.
Step 4: Identify market gaps
The last step in a competitive product analysis is looking for gaps in the market that could help your company get ahead. When it comes to the console market, one potential opportunity gaining traction is the delivery of games via cloud-based services rather than physical hardware. Companies like Nvidia and Google have already made inroads in this space and if they can overcome issues with bandwidth and latency, it could change the market at scale.
Competitive Analysis Example
How do you stack up against the competition? Where are you similar, and what sets you apart? This is the goal of competitive analysis. By understanding where your brand and competitors overlap and diverge, you’re better positioned to make strategic decisions that can help grow your brand.
Of course, it’s one thing to understand the benefits of competitive analysis, and it’s another to actually carry out an analysis that yields actionable results. Don’t worry - we’ve got you covered with a quick example.
Sony vs. Nintendo: Not all fun and games
Let’s take a look at popular gaming system companies Sony and Nintendo. Sony’s newest offering - the Playstation 5 - recently hit the market but has been plagued by supply shortages. Nintendo’s Switch console, meanwhile, has been around for several years but remains a consistent seller, especially among teens and children. This scenario is familiar for many companies on both sides of the coin; some have introduced new products designed to compete with established market leaders, while others are looking to ensure that reliable sales don’t fall.
Using some of the steps listed above, here’s a quick competitive analysis example.
In our example, it’s Sony vs Nintendo, but it’s also worth considering Microsoft’s Xbox, which occupies the same general market vertical. This is critical for effective analysis; even if you’re focused on specific competitors and how they compare, it’s worth considering other similar market offerings.
Playstation offers two PS5 versions, digital and standard, at different price points, while Nintendo offers three versions of its console. Both companies also sell peripherals - for example, Sony sells virtual reality (VR) add-ons while Nintendo sells gaming peripherals such as steering wheels, tennis rackets, and differing controller configurations.
When it comes to sales tactics and marketing, Sony and Nintendo have very different approaches.
In part thanks to the recent semiconductor shortage, Sony has driven up demand via scarcity - very low volumes of PS5 consoles remain available. Nintendo, meanwhile, has adopted a broader approach by targeting families as their primary customer base. This effort is bolstered by the Switch Lite product line, which is smaller and less expensive, making it a popular choice for children.
The numbers tell the tale : Through September 2021, Nintendo sold 14.3 million consoles, while Sony sold 7.8 million.
Sony has the higher price point: Their standard PS5 sells for $499, while Nintendo’s most expensive offering comes in at $349. Both offer robust digital marketplaces and the ability to easily download new games or services.
Here, the key differentiators are flexibility and fidelity. The Switch is flexible - users can dock it with their television and play it like a standard console, or pick it up and take it anywhere as a handheld gaming system. The PS5, meanwhile, has superior graphics hardware and processing power for gamers who want the highest-fidelity experience.
5. Analyze how your competitors market their products.
If you compare the marketing efforts of Nintendo and Sony, the difference is immediately apparent: Sony’s ads feature realistic in-game footage and speak to the exclusive nature of their game titles; the company has managed to secure deals with several high-profile game developers for exclusive access to new and existing IPs.
Nintendo, meanwhile, uses brightly-lit ads showing happy families playing together or children using their smaller Switches while traveling.
6. Analyze the level of engagement on your competitor's content.
Engagement helps drive sales and encourage repeat purchases. While there are several ways to measure engagement, social media is one of the most straightforward: In general, more followers equates to more engagement and greater market impact.
When it comes to our example, Sony enjoys a significant lead over Nintendo: While the official Playstation Facebook page has 38 million followers, Nintendo has just 5 million.
Competitive Analysis Templates
Competitive analysis is complex, especially when you’re assessing multiple companies and products simultaneously. To help streamline the process, we’ve created 10 free templates that make it possible to see how you stack up against the competition - and what you can do to increase market share.
Let’s break down our SWOT analysis template. Here’s what it looks like:
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10 free templates to help you understand and beat the competition.
If you still have questions or prefer to get help directly from an agent, please submit a request. We’ll get back to you as soon as possible.
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Business Plan - Competitive Analysis
What is the Competitive Analysis Section of the Business Plan
Written by Jason Gordon
Updated at April 14th, 2022
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Table of Contents
What is the competitive analysis portion of my business plan.
Barriers to entry, competitors, and how you will beat them. In this section, you are trying to identify all of the aspects of the market that could keep you out. Many business plans simply identify the competitors and products that will compete with their intended products/services; however, this is only one-half of the story. If there are a certain number of competitors or competitive product/services, why is that?
- Tell why others aren't entering the market;
- Tell why you will be able to enter the market;
- List those who are going to attempt to keep you from taking their market share or will try to take your market share;
- List how you will be successful in taking their share, making the pie bigger, or fighting off their attempts.
Back to: Entrepreneurship
If there is market potential, why are others NOT in this awesome market?
What are your barriers to entry? Assuming that you are not yet in the market, what is it going to take to get there? This will generally be the same explanation as to why others are not in the market. Remember, the chances are not good that you are the first person or business to come up with an idea for a product or service. There has to be something that is keeping others out. This may not be obvious at first, but identifying these early will allow you to make adjustments to meet these hurdles. Identify the barriers to entry and explain how they may affect your business or industry. Common barriers to entry include:
Funding or Capital Concerns
How much capital is required upfront? Will it require some level of revolving capital needs? Where are you going to get this capital?
Legal Barriers (Licensing, Regulatory approval)
Is there a required state or federal license? Does the product or service require inspection and approval by a state or federal regulatory agency? Is the business subject to some state or federal regulation that is subject to change? (ex. Labor laws, foreign embargos, etc.)
Costs of Production
Cost of sales and marketing .
Suppose you have the perfect product. How are you going to let people know about it? (Remember, the Apple operating system was superior that of Microsoft in the early days of each company. Nonetheless, Microsoft dominated the market with a largelyinferior product.) Can you market and pitch sales sufficiently to create customer awareness and drive sales of your product. Often you will have to market far more than the established brands in order to convert existing customers to your product.
How are you going get your raw material or other supplies for conducting business. How are you going to deliver your goods or services to your customers? Will it involve outsourcing or international shipping? Will this require strategic presence or distribution centers in various locations? All of these go into logistical concerns. Basically, you need to brainstorm of how every aspect of the business that requires the movement of product or material from one place to another will take place. Much of this information can be gleaned from competitors or businesses with similar business models. Understanding the logistical concerns will allow you to estimate costs and budgeting. Further, you may uncover a logistical aspect that supplies a competitive advantage to another business or, potentially, your planned business.
Required Skills and Knowledge
Who are you going to need to involve in order to carry out your business? It's a common mistake for the entrepreneur to believe that he or she can carry on too many of the actual business functions. If you haven't realized, you will be preoccupied with countless tasks and will not be able to carry on many of the tasks that you now assume will be your responsibility. You need to have an understanding of what you don't know have the time or ability to do. Again, look to competitors or similar businesses to determine the skills or market knowledge necessary to carry on your planned business operations.
Employee concerns are countless and daunting. There is no way to project for the types of employee troubles that you may face in starting your business. Types of employee issues include: hiring, training, employee benefits (healthcare, retirement), union negotiations, lawsuits (discrimination or hostile environment), and firing. The employee concerns for which you can plan include hiring, training, and employee benefits. All of these issues can entail considerable costs that were not previously anticipated. Planning and buying insurance for unplanned legal events can help to minimize these issues.
Every business is going to pay taxes on the identifiable profit. The question is how much tax you will have to pay. Are there any tax advantages that exist for carrying on your business? Importantly, what tax advantages are your competitors employing that allow them to carry on business in an otherwise unprofitable venture. For example, there may be economic development or energy savings associated with your business venture. Another example is the effect or choosing a particular business entity above another. If you are going to need to use Net Operating Losses from the current year to offset personal income tax then an LLC may be a better option than an S-Corporation. Again, a percentage of tax savings can make a considerable difference in the profit margin or overall profitability of your business.
How strong are the competitors? What tactics are they likely to employ to defeat your product or service or to keep you from stealing market share? A large, well-capitalized competitor may be able to engage in a price war that you cannot withstand. This will require both primary and secondary research of your actual and potential competitors. (This concept is developed further below.)
Competitive Analysis - Who Will You Have to Compete within This Market Space?
Who will be your competitors? Here you should prepare an exhaustive list of the players who will compete against you in your immediately relevant and prospective markets.
- List each competitor's name, location, and give a brief profile of their product or service.
- Create sub-categories and groupings for the competitors who are your most direct competitors.
- Classify the extent to why the subcategorized competitors are the greatest threat. (You will list aspects such as location, percentage of the market held - customer base, type of product or service lines, competitive or innovative nature of the firm, etc.)
- Expand on the secondary or indirect competitors. (Give an explanation of why you believe their product or service is a competitor to yours. This could explain how their product or service is a substitute product. Explain the situation in which these secondary or indirect competitors would be the greatest threat to your projected business, e.g., if they offer an inferior good (product or service) then a downturn in the economy may drive customers away from your more economically elastic product.
- Explain how your product or service is superior (or competitively advantaged) against each competitor's product service. The most difficult part of this component is identifying all of the characteristics that customers covet in the product or service, such as: design, speed, ease of use, dependability, price, customer service, etc. It may be useful to use a table listing the attributes of the products side-by-side. This allows for quick assessment by third-parties, as well as provides a framework for you to conceptualize the market position of your product or service. You can create multiple tables comparing your product or service to each category or individual competitor. You will need to compile the lists of competitive factors for that competitor or competitor's product. Note: These individual tables may not fit within the body of the business plan. You can always append or attach them to the end of the business plan.
Developing a Competitive Analysis section requires a great deal of research and knowledge about other businesses' products or services; however, the most difficult portion is assessing your product or service strength and weaknesses. In developing this section it is important to as honest and objective as possible in analyzing your value proposition. It may be useful to enlist third parties who are unbiased or unrelated to your business to provide their opinion on your product. This will help avoid the cognitive bias that nearly all entrepreneurs have when assessing the competitive strengths of their own product or service. Remember, even if you can explain away any fears or negative perceptions that customers have about your product, the customer's input is extremely valuable. You will not be there to explain away these fears or concerns at the point in which the customer learns of the product. These will be the perception issues that you have to address in marketing your product or service.
- Business Plan, Part 1 (Outline Overview)
- Business Plan, Part 2 (The Executive Summary)
- What is a Mission Statement?
- What is a Values Statement?
- Setting Company Goals
- Business Plan, Part 4 (Market Analysis)
- Business Plan, Part 5 (Competitive Analysis)
- Business Plan, Part 6 (Marketing Plan)
- Business Plan, Part 7 (Operations)
- Business Plan, Part 8 (Management and Organization)
- Business Plan, Part 9 (Financial Projections)
- Business Plan, Part 10 (Appendices)
- Business Plan , (Final Modifications)
- Aggregator Model - Explained
- PESTEL Factors - External Analysis
- Commoditize (Product) - Explained
How to Do a Competitive Analysis
egular competitive analyses can help you spot opportunities to innovate, promote your business, enhance your products or services, and outshine your competition.
- With a competitive analysis, you can discover where your business is doing well, where you need to improve, and which trends you need to get ahead of.
- Complete a competitive analysis when your company isn’t moving forward as fast as you want or when competitors are securing orders from your ideal customers.
- A competitive analysis should examine your competitors’ features, market share, pricing, marketing, differentiators, strengths, weaknesses, geography, culture and customer reviews.
- This article is for new and established small business owners who want to analyze their competition to improve their products or services.
Your company chases roughly the same customers as its competitors. You offer comparable products or services to each other. But you’re not entirely sure why you win some orders but lose others. A competitive analysis can provide you with the road map needed to capture a greater share of the market and better understand the future trends that will affect your sector.
How to complete a competitive analysis
Josh Rovner, business consultant and bestselling author of Unbreak the System: Diagnosing and Curing the Ten Critical Flaws in Your Company (Lioncrest Publishing, 2020), shared with us nine steps for completing a competitive analysis.
1. Identify the products or services you want to evaluate.
For most analyses, they will be the products or services that generate the highest revenues or demonstrate the most significant potential for growth.
2. Seek direct competitors.
These companies compete for roughly the same market with comparable products or services. For example, accountants competing against other accountants.
3. Pinpoint indirect competitors.
These companies target the same market but with different products or services. For example, accountants competing against bookkeepers.
4. Examine replacement competitors.
These companies offer a different product or service, but address the same issue as your products or services (for example, apps that assist entrepreneurs).
5. Determine which parts of your competitors’ businesses are worth investigating.
These aspects could be pricing, distribution and delivery strategies, market share, new products or services coming to market, who their long-standing, highest-spending customers are, the quality of after-sales support, and which sales and marketing channels they use.
6. Research all identified competitors.
You may only find minimal accounting and operational records for most competitors, especially nonpublic companies. Other useful information – like target customers, product features, type of staff employed and price points – will be easier to find.
7. Document your research in a written analysis.
Make sure your document is substantive and actionable, but not so long that your staff won’t read it. Comparison charts and graphs are useful to help you and your team visualize your position in the market in relation to your competitors.
8. Identify areas to improve and execute the changes.
Could you improve the quality of your products or services by adding or amending a feature, lowering the price to be more affordable or improving after-sales support? Could you achieve a better ROI on your marketing budget by investing in a more capable CRM for better lead management ?
Rovner recommends including information about related trends in your market and region for a more complete picture of the entire competitive landscape. “Document what threats are out there that could have a negative impact on your business, and document the opportunities out there that you could take advantage of better than your competitors.”
9. Track your results.
Measure your sales with a profit and loss statement to determine if the changes were successful.
Limit the number of competitors you analyze to 10-12, and focus your attention on direct and indirect competitors with similar market shares rather than replacement competitors.
Competitive analysis explained
A competitive analysis – also known as a competitor analysis – is a way of evaluating how well your business and its products or services are performing compared to other companies selling similar products or services in your market.
“A competitor analysis focuses on identifying market participants positioned to encroach on your opportunity and isolates each participant’s operational strengths, substantive weaknesses, product offerings, market dominance, and missed opportunities,” said David Taffet, CEO of Petal.
Competitor analyses help you improve your business in these ways:
- Identify your strengths and weaknesses. When you know where you’re ahead of the competition, you can focus your marketing message to press home that advantage. When you know where you’re behind, you can better understand how you need to improve your products, services or after-sales to exceed your competitors.
- Understand the marketplace you operate in. You know who many of your competitors are but you won’t know all of them right off the bat and may not be aware of the latest entrants to the market . Identifying your primary competitors (as well as any upcoming threats), and how they differ from your business is key to beating them.
- Evaluate trends in your sector. Which new or improved product, service or feature are competitors offering to gain an advantage? Which trends have they seen that you haven’t yet? By examining the behaviors and actions of other companies in your marketplace, you can judge whether they’ve taken the right course and whether you should be going head-to-head with them. [Related content: Top E-Commerce Challenges Facing SMBs ]
- Plan future growth. Want to be the third-largest firm in your sector instead of the fourth? A competitive analysis gives you the information you need to get there, including how much more you need to sell, the demographics to market and any skill gaps your organization has.
Factors your competitor analysis should include
Colin Schacherbauer, executive marketing assistant at Investor Deal Room, recommended the following 10 components for an effective competitor analysis.
Find all the features that each direct competitor’s product or service has. Keep this information in a competitor insight spreadsheet to visualize how companies stack up against one another.
Market share percentage
Evaluating the marketplace by percentage helps identify the main competitors in your area. Don’t exclude larger competitors entirely, as they have much to teach you about how to succeed in your industry. Instead, practice the 80/20 rule: Keep an eye on 80% direct competitors (companies with similarly sized market shares) and 20% top competitors.
Pinpoint how much your competitors charge and where they fall on the quantity versus quality spectrum.
What type of marketing plan does each competitor employ? Look at competitors’ websites, their social media strategy, the type of events they sponsor, their SEO strategies, their taglines and current marketing campaigns. [Follow these tips to create a great business marketing plan .]
What makes your competitors unique and what do they advertise as their best qualities? How is that different from your company?
Identify what your competitors are doing well and what works for them. Do reviews indicate they have a superior product? Do they have high brand awareness? Can you test a competitor’s products yourself to see where they are performing better?
Identify what each competitor could be doing better to give you a competitive advantage. Do they have a weak social media strategy? Do they lack an online store? Is their website outdated?
Look at where your competitors are located and the regions they service. Are they brick-and-mortar companies or is the bulk of their business performed online?
Evaluate your competitors’ objectives, employee satisfaction and company culture . Are they the type of business that advertises the year it was established or are they recent startups? Read employee reviews for further insight into competitors’ culture. [Learn the best ways to improve your company culture .]
Analyze your competitors’ customer reviews, both positive reviews and negative ones. In a 5-star system, look at 5-star, 3-star and 1-star reviews. Three-star reviews are often the most honest.
Benefits of carrying out a competitive analysis
In an era of digital innovation , no business can remain preserved in time and expect to survive. Companies can disappear overnight if they don’t pay attention to new trends. A clear example of this is Blockbuster’s catastrophic error of initially dismissing Netflix’s services. Today, Netflix is a juggernaut, while Blockbuster is virtually extinct.
Even if your sector is not susceptible to this type of seismic change, it’s worth knowing what drives your clients’ decision-making processes. By keeping a regular eye on your marketplace through a competitive analysis, you’ll also be aware of these trends:
- Changes to competitors’ existing products or services that make them more attractive
- New complementary products or services from your contenders that you could also offer or alter
- The threat posed by new market entrants or transformative products
“In some cases, you may find that you are at a competitive disadvantage, in which case you may need to make a change in order to maintain your sales volumes,” Rovner said. “In other cases, you may notice that you have an advantage that could enable you to make a change that increases your sales or profit.”
Some other useful methods are the SWOT analysis (an assessment of your company’s strengths, weaknesses, opportunities and threats), PEST analysis (how external political, economic, social and technological factors affect your business) and BCG matrix (another way to examine the competitive landscape).
How often you should perform a competitive analysis
Regular competitive analysis is key. You may want to do the analysis once a year on a large scale and quarterly on a smaller scale.
“Too many businesses do a competitor analysis early on and then neglect it once their brand is established,” Schacherbauer added. “Industries are constantly changing, and each time a new company enters your space, they are doing a competitor analysis on you. It’s important to continually evaluate your competitors.”
Analyzing your business regularly against your competitors will reveal opportunities to improve your products, better serve your target customers and increase levels of profitability. You may also want to consider using another model – like Porter’s Five Forces – to further analyze the competition.
“Understanding one’s competitors allows one to distinguish oneself from the competition, focus on the underserved market opportunities, determine the services to offer, identify the best practices to employ and isolate the worst practices and rotten players,” Taffet said.
Entrepreneur Edward Lowe outpaced his competition by foreseeing a trend: He realized the clay from his father’s industrial absorbent business could be used as a first-of-its-kind kitty litter. Lowe, whose Edward Lowe Foundation is a champion of competitive analyses, saw a space in the marketplace and built his business into a multimillion-dollar company.
How competitive analyses help small businesses
Your successful business today won’t necessarily be a successful tomorrow if you don’t keep an eye on the competition. By employing a competitive analysis, you can evaluate the current marketplace and where you stand compared to your competitors. With that knowledge, you can make adjustments to set your company up for continued success.
Skye Schooley contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.
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