What is Competitive Analysis and How can I Conduct it Online?
Learning from the competition also means learning how to win. This has been true for a long time. Moreover, the Internet offers many opportunities to conduct a competitor research analysis quickly, comprehensively, and reliably.
But the question is, how does it work? The following provides answers to questions about online competitive analysis.
Why do you need a competitive analysis?
What is the purpose of competitive analysis? The answer is simple: competitive analysis is the key to understand the workings of the market in which you operate. It produces valuable insight into:
- Who are your competitors and how do they operate?
- What changes are taking place in the market?
- How are your competitors reacting to this change?
A competitive analysis allows you to look over your competitor’s shoulder — like copying in school. However, the difference is that a competitive analysis is legal. Studying the behavior of market participants paves the way for developing your own strategies to successfully compete in the marketplace.
A structured examination of your competitors’ strategies will provide answers to important questions:
- What scope of action is available for your company?
- Where will opportunities for new products and services open?
- What kind of niches are in the market?
What is the difference between market analysis, competitor analysis and competitive analysis?
These three terms often come up in context, always used as synonyms, but sometimes used incorrectly: market analysis, competitor analysis and competitive analysis. The lines between these individual areas are fluid. There are many overlaps. They involve the following:
- Market analysis focuses on the current state of the market and provides reliable figures to this effect.
- Competitor analysis focuses on the competitors’ properties. These are also best expressed in figures, data, and facts.
- Competitive analysis examines the competition as such. Therefore, the question is, what strategies are competitors using in a particular market?
Competitive analysis is a generic term for competitor analysis and market analysis. This is because the market and the competitors are the participants in this competition. If you want to understand the competition, knowledge about the market and the market participants is indispensable.
What questions will competitive analysis answer?
A competitive analysis provides orientation. Three basic questions must be answered before a company ventures into a new market or makes a strategy decision:
- Where is the competition located?
- What rules apply in the competition?
- What are the focal points of the competition?
The first question, for example, refers to whether you choose to operate in the core market or in a niche of that market. A fundamental distinction is also whether the market is digital or plays out in real life as well.
When it comes to rules, there are two alternatives: adapt or redefine? The second option is promising, but it is also risky. In most cases, this alternative requires a certain amount of market expertise.
There are also two alternatives regarding the focus of competition. This is frequently the pricing policy. Here, the aim is to increase market share by charging lower prices. But the quality of the product or the fulfillment of special customer demands are also promising approaches.
What are the individual steps in competitive analysis?
It is important to proceed step by step in the competitive analysis. The following are the five steps that lead to useful results:
- Setting a goal. What questions should the analysis answer?
- Who are the competitors? Which of these competitors are in the leading positions?
- Defining individual questions and categorization.
- Evaluating the information.
This is the rough chronological order of a competitive analysis. The individual phases can, of course, overlap. It is therefore possible that new and important competitors are only identified during online research.
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Step 1: Setting the goal
The first step is to define the goal. The goal of a competitive analysis can be, for example, gathering information for an individual SWOT analysis. This research method (which has its roots in the field of military research) helps companies put their own strengths, weaknesses, opportunities, and threats in the market into a structural relationship. This involves four potential strategies:
- S-O (Strengths – Opportunities): Which strengths can be exploited for which opportunities?
- S-T (Strengths – Threats): How can you use your strengths as an insurance against risks of the market?
- W-O (Weaknesses – Opportunities): Which of your weaknesses do you have to overcome to take advantage of existing opportunities in the market?
- W-T (Weaknesses – Threats): Which specific weaknesses face risks?
The juxtaposition of these points often leads to startling insights. However, a preliminary competitive analysis is essential, especially when it comes to market challenges and opportunities.
Step 2: Who are your competitors?
Exactly who are your competitors in the targeted market?
- Make a list of the competitors you are already aware of.
- Search the Internet for other competitors (these can be found on the pages of the Chamber of Industry and Commerce or other Business Directories).
- Then select five to ten competitors from this list who are particularly suitable for an analysis.
A simple Google query with the five most important keywords that the company wants to rank with, provides an initial selection. In most cases, the companies that land in the top positions here are also your direct competitors.
It is important to avoid comparing apples with oranges. This can be prevented by paying attention to the following points:
- have a similar product portfolio?
- are of comparable size?
- address the same target group?
This will help limit the number of companies that need to be examined to gain a basis for analyzing the competition.
Step 3: Determining individual questions and categories
The third step of the competitive analysis is particularly important. You need an intelligent structure for the analysis as well as the right questions to determine the quality of the results.
- The fundamental factors are, of course, the general characteristics of the companies operating on the market. These are, for example, the size of the company, the number of employees, customers, locations and company history.
- The strategic orientation and the product strategy also provide valuable information about your competition.
- What marketing measures does the company use?
- How is the company positioned on the internet? What are the activities in social media?
- What is the structure of the company’s distribution?
Other categories include service, logistic, cooperation with other companies, planned outsourcing projects, marketing budgets and more. At this stage, it is important to always select the criteria that are useful for your own objectives. Too much information is confusing. It is better to focus on the essentials.
Step 4: Research
Next, it is time to get down to work and start research. The Internet is, of course, ideally suited for this purpose. Apart from Google, other sources can also provide a lot of information:
- The company’s website
- Trade directories
- Information from industry associations
At this stage, every company should ask itself whether it can outsource this work.
When doing research, it is helpful to immediately note and assign the information found. This can be done by creating an Excel spreadsheet that includes the following columns:
- Name of the company
- Website address
- Products and services offered by the company
- Main keywords with which the company works
- Target group (the initial impression of images on the website can be a revealing factor here)
- Price structure of the products
- Value proposition of the company
A Google Alert for the respective companies being analyzed is extremely helpful: it provides immediate information when news about the company appears on the web. This tool is particularly useful for long-term competitive analyses.
Step 5: Evaluating the information
Research is complete when enough information has been gathered. The analysis is successful when the facts provide a solid basis for identifying the strategies of competitors and thus for shedding more light on the competition.
A systematic analysis of the information has numerous benefits. Your company can learn from the strengths of your competitors, avoid mistakes in advance, and get to know your customers or target group better.
How can social media be used for competitive analysis?
Every successful company depends on social media presence. Today, this is true not just for businesses that operate primarily online. Traditional retail, the “store around the corner,” also has a Facebook, Instagram, or Twitter account. These portals provide a lot of useful information for a competitive analysis.
- For example, which companies appear when relevant search terms are entered on Facebook?
- Which brands does the target group follow on social media?
- How many followers does a company have? The number and growth of this group allows valuable insights into the company’s strategies.
There are numerous tools on the web that make this task much easier and monitor individual social media portals for the activities of selected competitors.
A competitive analysis is a good method. It can provide a company with a better understanding of the market. How does the competition work? This can be determined primarily by analyzing the strategies that competitors use. When it comes to competitive analysis, the Internet offers numerous ways to obtain information. The implementation of a constant competitive analysis in a company is ideal because it enables prompt reaction to changes.