Ah, those pesky competitors. They're like mosquitoes in the woods of New Hampshire in July, always buzzing about and occasionally biting you where you can't slap them. So it seems.
You don't have to spend thousands of dollars or days on end to analyze your competitors. You can get most of the information you need by spending a couple of hours online and using a few free tools and, maybe, one paid tool to get a full picture of their strengths and weaknesses. Based on this information, you can craft a plan to exploit their weaknesses to your advantage.
Here's a simple 8 step framework about how to do a competitive analysis:
Step 1 - Choose your Top Competitors
Choose your top 3 to 5 competitors for the analysis. Be realistic in the competitors you pick. Consider competitors you come up against on a regular basis and where you have similar capabilities. In other words, if you're making computers in a small warehouse, don't choose Apple or Dell for one of the companies you analyze unless you are directly competing. If your customer base is mainly local or regional, then select local or regional competitors. If you consistently compete for business with one or two companies where you win some, or you lose some, by all means, put them on your list.
Step 2 - Describe Each Competitor
Choose attributes you can quantify and measure for your competitor description. The attributes you choose to define your competitors should be meaningful for your market and should help to understand what you're up against as far as general resources. For example, if you are a metal fabrication company, you might choose to describe your competitors based on manufacturing space, the number of machines, or quality certifications. Most competitive analyses will include company size in employees and annual revenue as well. If you are analyzing a public company, be sure to include their critical financial metrics like gross margin, net margin, cash on hand, etc.
If your competitors are private companies who do not disclose financial information, a good rule of thumb to estimate annual sales is to take the number of employees and multiply it by $150,000 and $200,000 to get a bracket for annual net sales. Many private companies will share their employee count on their website, or you can get a pretty good estimate of employess on LinkedIn.
Step 3 - Describe Their Competitive Offering
Describing the offering is an easy step to do since most companies go to great lengths in describing their offering on their public websites. You can usually download brochures and spec sheets galore from any website to get a full understanding of the competitive offering. Be sure to list those products or services you also offer and those that you do not provide. This step is a good place for a table if it helps to clarify who offers what.
Step 4 - Summarize Their Online Presence
This is the most important step of the competitive analysis. The reason it is most important is that the online presence has the most potential for gaining advantage or for losing out to your competitor. We all start our buying process with an online search, so this is the most obvious place to gain an advantage or lose the advantage. It is essential to understand your competitors' online presences as it compares to your online presence. Products like Ghostery or Datanyze give you a window into the tools they use on their websites like the type of platform, ad tools, plug-ins, or marketing automation platform.
- Do a quick analysis of their website structure. I like to use the HubSpot Website Grader free tool, but you can also use various other tools like Google Page Speed Insights to get an understanding of your tech savvy (or not) competitors. You'll know right away if your competitors are stuck in a 1990s website, if they are on the leading edge, or someplace in between. This analysis alone may uncover a enormous potential opportunity for your business to gain competitive advantage.
- For example, if your competitor's website is not mobile responsive, that means they won't show up in mobile searches. If your customers are using mobile for search, there is an opportunity to gain an immediate advantage by making sure your website is mobile responsive.
- Analyze your competitor's keyword performance. This information is publicly available to anyone and everyone. SEMRUSH offers a free analysis of your competitor's website, or you can sign up for a subscription for more in depth results. Moz also provides free analysis but requires you to sign up for a free trial. Another useful tool for keyword analysis is SpyFu. By understanding the top keywords your competitors are ranking for, you can compete organically with more and better quality content, or you can see how they may be attracting new customers. You can also determine if they are using online advertisements to promote their business. Not only can you determine whether they are advertising online, but you can also see the actual ads they are using. Similarweb is another great tool to research your competitors' websites.
- For example, if you see that your competitor is ranking on page 1 of the SERP for a local term like "sheet metal fabrication in Denver" all by themselves, you could use that knowledge to get your company ranked above them. If you see a competitor ranking high for a paid keyword at a low price, you could outbid them and take the top spot.
- Peruse their website and observe how much and what type of content they are offering. Make a note of how it is offered (gated or open). A competitor that provides a lot of educational content, in addition to product or service content, will be a strong contender for market share. If the only content offering is product or service brochures and company profiles, they are weak marketers and your firm could gain an edge in top of mind awareness and credibility.
- As you peruse your competitor's website, observe how they offer engagement with the site visitors. Do they just offer email, a phone number, and a contact form? If yes, there is an opportunity for your firm to engage in a broader and more meaningful way by offering education in the form of webinars, white papers, educational videos, infographics, etc.
Step 5 - List Their Strengths
Now that you have a good idea of your competitor's business attributes and online presence, you can put together a list of their strengths. This step is not a time to be biased. Be honest with yourself as you compile the list of strengths compared to your company. Examples of strengths include company size, location, focused value proposition, specific target market, deeper or broader offering, faster delivery, lower price, certain quality standards, etc.
Be sure to list strengths they have in their online presence such as high website traffic, high rank in critical search keywords, large library of content, multiple ways to engage, ease of doing business, use of a marketing automation tool, etc.
Step 6 - List Their Weaknesses
Weaknesses should be considered in the context of the market where you compete. Examples of weakness include having a small or non-existent sales team, low gross margin, low net profit margin, low cash flow, high employee turnover, location, building size, etc.
Be sure to list the weaknesses in their online presence. This will be the low hanging fruit where you can gain a very quick advantage if they have a weak online presence. Online presence weakness could include poor website structure, non-mobile responsive design, complex or confusing user interface, lack of useful content, product or company focus, slow page load time, no paid ad strategy, lack of awareness in critical keywords, etc.
Step 7 - Identify Your Opportunities
Opportunities will manifest based on the list of weaknesses you have compiled in the previous step. Some opportunities will require a lot of resources and other opportunities will require only time. It's a good idea to meet with your team to prioritize the opportunities you choose to pursue.
A frequent opportunity for a manufacturing company might be to develop educational content if your competitor does not offer any content themselves. By developing educational content and posting it on your website, you will gain the advantage in search results and audience engagement which both lead to more business for you and less for your competitor.
Step 8 - Identify Threats
There will be some competitors who have formidable strengths which are, or could be, a threat to your firm. Consider what, if any, your response will be to current or potential threats. In some cases, you may be able to easily counter a threat, such as optimizing for a critical key phrase or taking over top position for a paid keyword. In other cases, you may concede a strength to your competitor and focus on your strengths. Every threat does not warrant a response, but you should be aware of as many threats as possible.
It is important for you to understand the SWOT for your own company as a pre-requisite to taking any actions in response to a competitive analysis. As you conduct your competitive analysis, you will probably be surprised at what you discover both in their strengths and their weaknesses. Most companies do not pay too much attention to their competitors, and this is an opportunity for those firms that do conduct competitive analyses on a regular basis.
It's important to note that this framework will not give you the perception of you and your competitors in the target audience. It is always a good idea to do some primary research to learn how the audience perceives your firm and your competitor's firms.. Good luck!