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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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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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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?
There has to be some factor that keeps others producer/providers from entering the market. These are commonly known as "barriers to entry". In the market analysis, you made the determination that the market is sufficiently big that you could be successful by grabbing even a conservative percentage. So, now:
- 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 Write the Competition Section of Your Business Plan
You can learn a lot about your competitive advantage, market opportunity, and how to position your business by looking at the competition. Knowing who your competitors are, how they operate, and the necessary benchmarks you need to hit are crucial for your business to succeed. It’s also an analysis that investors will want to see within your business plan .
What if I don’t think my business has any competition?
Never suggest to an investor that you don’t have competition —not in your formal plan, not in your pitch, and not in any summary.
Most investors take that as an indicator of lack of experience. Every good business has competition. If it’s so new that it doesn’t have competition today, then it will have competition tomorrow. In that case, your competitive analysis should guess which big competitors will enter the market. Furthermore, if a business really has no competition, it may not really be a good business to enter.
How to identify your competition
If you think you don’t have competition, take a step back from your plan and look at the problem you solve. How are people solving it? What kinds of businesses are likely to jump in on it if you create a new market and become successful? That’s your competition.
In the early days of business plan software, when I first developed and sold templates to do business plan financials in the middle 1980s, I was the first to do that. But I never for a second thought I didn’t have competition. The competition back then wasn’t other spreadsheet templates, but books, classes, and blank spreadsheets that people could program. There is always competition.
How to write your competitive analysis
Your competitive analysis will help you define the competition section within your business plan. Here’s how to do it in a few simple steps.
1. Define your business use
For the competition section of your business plan, first, settle on which of these two business uses applies to your situation:
Internal management plan
In the management plan for business owners, a competition section serves as a vehicle for understanding competition and developing strategic positioning. You and your team look at comparative strengths and weaknesses . It leads you straight to strategy.
Formal business plan
In a business plan event situation, with a plan to be shown to potential investors or as part of a bank loan, you’re describing the competition mainly to reassure your target reader that you are aware of and understand the competition, and are positioned to take advantage of opportunities and avoid the pitfalls.
How do you know what you’ll use your plan for?
In the first case, your business goal is on the offensive and proactive. It’s about foreseeing problems and opportunities likely to arise in the near future. You are trying to generate ideas and responses. You want open discussions. What might happen? What should we worry about?
In the second case, your business goal is defensive and—unless you’re careful—reactive. You want to show that you know the territory, have your defenses set, and will be able to overcome the challenges.
The difference is nuanced and not overwhelmingly obvious. As you develop your competition section, keep your goals in mind . That will help you decide what’s important. How comprehensive do you have to be? If it’s just a management plan, you can skip the details and look for the high points. With the formal business plan, you will look unprepared if you’re missing details.
2. Establish your competitive position
You need to know how your business stacks up, in terms of the values it offers to its chosen target market. Key marketing tactics including pricing, messaging, and distribution, while others are about positioning your business against the background of the other offerings. How do you stack up against the others?
The goal is positioning (setting your business up against the background of other offerings), and making that positioning clear to the target market . How are you going to take advantage of your distinctive differences, in your customers’ eyes? What are you doing better? How do you work toward strengths and away from weaknesses? What do you want the world to think and say about you and how you compare to others?
I often refer to marketing expert Philip Kohler’s simple strategic positioning map of breakfast, shown here. You can easily draw your own map with any two factors of competition to see how a market stacks up. It’s a good reminder.
You’ll also see positioning maps set up with two axes, vertical and horizontal. It’s quite common to see the price on one axis and some important qualitative factor on the other, with the assumption that there should be a rough relationship between price and quality. For example, the illustration here of breakfast options:
Nowadays many businesses work up a competitive matrix showing how different competitors stack up according to significant factors. Compare your product or service in the light of those factors of competition. How do you stack up against the others? This is a good place to include the competitive matrix showing.
For the record, I’ve seen dozens of competitive matrices in plans and pitches, and yet I’ve never seen a single one that didn’t show that this company does more of what the market wants than all others. So maybe that tells you something about credibility and how to increase it. Still, the ones I see are all in the context of seeking investment, so maybe that’s the nature of the game.
3. Establish regular competitive review channels
Know your business needs. Use your competition section to guide decisions, if that’s what you need; or to support your pitch, if that’s your case. Like all of your business plan, you measure its value by the decisions it causes.
These days, with competitive information, it’s not a matter of finding a needle in a haystack; it’s figuring out which needles to choose from a mountain of needles. You can find an amazing wealth of information about competitors on the web and in mobile apps. The hard part, of course, is sorting through it and knowing what to emphasize.
Use online reviews
When it comes to finding and using information, I do suggest here that you stay flexible and pragmatic. Look for available information that will stand for what you want to show. For example, I might use stars and such in reviews, from Amazon or Yelp, as a surrogate for quality. That would be way more practical than conducting primary research, and it’s credible to the audience.
There was once a problem finding information on smaller privately owned competitors, compared to the wealth of financial information available for companies traded on one of the major stock markets. Nowadays, websites, social media, and reviews are widely available on lots of local businesses. Not having some way to rank and evaluate competitors is usually for lack of trying, not for lack of information. Here too, beware of having too much. Spare your readers proof of how good you are at gathering information, and give them only the information they need and will use.
Sourcing financial information
Don’t assume you can get financial information on companies that are privately held. Use a surrogate if you have to, like numbers of employees, rooms, tables, vehicles, or (here too) stars in reviews. If possible, you may want to take on the task of playing the role of the potential customer and gain information from that perspective.
Industry associations, industry publications, media coverage, information from the financial community, and their own marketing materials and websites may be good resources to identify these factors and “rate” the performance and position of each competitor.
Industry financial profiles are also available online; you can find statistics like average annual growth, the average number of employees, sales per employee, sales per square foot, average profits from sales, and similar benchmarks for sale from competing providers, for $100 or less for a single profile. Start with a Google search to find this information for your industry.
Additionally, LivePlan bundles these profiles broken by industry type and size of business as part of the web app license.
Always remember — You do have competition
There are only two reasons for real businesses being without competition even for a short time:
The first is that your business or product is so new, so innovative, that nobody else can duplicate it. The second is that there’s a fatal flaw that others know and you don’t. It’s not a good enough business to attract others.
Either way, you have competition. In the first case, your competition is waiting in the wings, getting ready to jump in, so you should be preparing for it. In the second case, get a clue.
Editor’s note: This article was originally published in 2016 and updated for 2021.
Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry .
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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.
Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in
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Identify Potential Competitors · Who are my current competitors? · What market do current competitors target? · Are competing businesses growing or
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A competitive analysis – also known as a competitor analysis – is a way of evaluating how well your business and its products or services are