What is Competitive Analysis? It will not be an exaggeration to say that all companies benefit from a properly conducted Competitive Analysis.
Competitive Analysis, or Competitor Analysis, is the most popular and one of the essential marketing tools (recommended for any company, whatever the size and scope).
Competitive Analysis (Marketing Competitive Analysis) - definition
Competitive Analysis (Competitive Benchmarking) consists in collecting, categorizing and organizing data on companies operating in the same market.
Companies with similar production, service or production and service profile.
It is a method recommended at each phase of a company formation and operation:
- Before market entry
- In the period of gaining and strengthening market position
- In the boom and recession periods
- In the situation of crisis and stability
- In pre- and post-investment situations
- When placing new products and services on the market.
A multidimensional approach (data acquisition from a range of sources, on different aspects of business operations) enables an organization to:
- Asses its position and role in the market structure
- Set objectives
- Identify direct and indirect competitors
- Assess strengths and weaknesses of products and services, and of own and competitors’ brands
- Assess deficiencies (e.g. organizational, technological, in human resources and finances)
- Develop an image, and select marketing tools relevant to the situation, objectives and capabilities
- Compare strategies, methods, measures, results, and ways to respond
- Formulate hypotheses and set research objectives used in other marketing surveys
- Indicate competitive advantages.
Competitive Analysis enables you to act in the following manner:
- Purposeful - by identifying short- and long-term goals, expected and possible as well as probable and desired
- Rational - due to systematic, exhaustive (as far as possible) and methodical aggregation and analysis of publicly available data
- Strategic - through regular updating of methods, means and ideas for achieving the objectives set
- Competitive - by finding additional values, hidden or unknown advantages, identifying market gaps, unmet needs and previously unknown issues
- Preventive - by preparing a company for the emergence of new competitors, ways to compete in the market, new solutions, products and services
- Flexible - due to customer segmentation, and offer customization to meet the (individual and group) needs, standards and expectations
- Adaptive - by developing scenarios of actions in crisis situations, and scenarios of adaptation to market changes (resulting from natural market evolution or sudden market revolution).
Competitive Analysis - goals
The purpose of Competitive Analysis (point-based competitive analysis) is to ask the appropriate questions and to find the most detailed answers possible to them.
The fundamental questions to be asked in the first place are the questions about:
- Number of companies operating in a given market
- Market structure, defined according to the criterion of company size, scope of activities, typical / innovative offer, profile similarity, percentage market share, growth potential, extent and depth of need fulfillment, and effectiveness of problem solving
- Financial standing of the competitors, which may be indicated by investments (e.g. in modern technologies), employment growth, acquisitions of other companies, mergers
- Target group structure, B2B customer segmentation methods
- Images and brands of competitors
- Method of communication with customers (channels, tools, methods, language, e.g. social media)
- Mistakes made by the competitors
- Possible competitors’ strategies and ways to react
- Competitors’ successes, in particular, their reasons and conditions enabling them (e.g. why products or services are more likely to be purchased)
- Market expectations, prevailing trends and fashions, routines and expectations (e.g. competitor price analysis, SEO competitor analysis)
In the strict sense (as regards research methods and techniques) it is a Desk Research. The most commonly analyzed materials are:
- company websites (the information contained in them is analyzed for product, service and offer description and presentation, service methods, company and team presentation, ways of making contact and establishing relationships, functionalities used, technologies, system design)
- Company fanpages (analysis of popularity, methods for communication and attaching customers, responding to negative opinions, solving customer problems)
- Forums, discussion groups, discussions under the articles in blogs (analysis of opinions, issues, ratings, emotional reactions, levels of satisfaction and frustration - Voice of Customer)
- Content published in external (industry, general) media, in particular for company self-presentation, description of its capabilities, Tone of Voice
- Recommendation, review and rating systems - quantitative (number of negative, positive and neutral ratings) and qualitative (analysis of advantages and frustration and disappointment highlighted by the customers) analysis, analysis of a specific product popularity
- Advertising materials and promotional activities (sponsoring, ATL, BTL, online, ambient, buzz).
How to conduct a Competitive Analysis - techniques
Competitive Analysis is an activity which should be conducted in a regular, systematic and exceptionally reliable manner.
Definitely avoid the analyses that are:
● Superficial - reduced to only a few major market rivals
● Shallow - focused on a limited number of factors (e.g. prices, service provision conditions, product parameters)
● Temporally selective - conducted incidentally, in emergency situations or in an economic downturn
● Static - covering a short period, not allowing to see trends, cycles, repetitions, tendencies and preferences resulting from the analysis of large volumes of data
● Not organized using indicators, not allowing comparison
● Biased - reduced to positives and negatives of competitive offers; analyses that are only qualitative or only quantitative
● Narrow - favoring only short-term or only long-term goals
● Strict - not taking into account indirect competition.
Products and services responding to and fulfilling the same need, but not belonging to the same category (e.g. a need for security can be fulfilled by both door and door phone).
A way to reduce the risk of creating an incomplete and unreliable Competitive Analysis is to use the same methodology.
Competitive Analysis - methods
The analysis of market and competition should primarily include:
● Full (i.e. continuously updated and including every entity) list of market competitors
● Set of precisely defined indexes, criteria, scopes and characteristics
● Way to compare, evaluate and prioritize, in particular, a way to indicate and define direct competitors
● Periodicity of subsequent analyses and a way to aggregate further data
● Platform, methods and types of competing (in particular, in terms of time, space, price, function and service)
● Methods of data acquisition and possible errors and inaccuracies
● Ways to formulate recommendations.
If you want to conduct a Competitive Analysis, you should take into account the above issues.
Otherwise, the information collected will be incomplete, inconclusive and can lead to wrong conclusions and risky and harmful actions.
Competitive Analysis in Marketing - examples of application
A professionally conducted Competitive Analysis will take into account various levels of company operation.
The most popular are the analyses of:
- Trends, cycles, fashions: market and competition assessment, indicating changes within a specified time, increases and declines in interest, conditions determining market variability and dynamics
- Competition description: comparative of products and services, functional and qualitative characteristics
- Values: Value Proposition, Unique Selling Proposition
- User Journey, User Story
- Competitive SWOT (Strengths, Weaknesses, Opportunities,Threats) analysis, indicating threats, strengths and weaknesses of a product, service or brand as well as chances and opportunities encountered by a company during further operations and when competing with other businesses.
Equally popular is Competitive Analysis (competitor research) using the analysis of four dimensions, proposed by Philip Kotler, a marketing guru.
Under this approach, competing is analyzed on the levels of:
- Brand (brand competitive analysis): comparison of corresponding products and services in the most important dimensions of price, function and usability
- Industry: comparison of all manufacturers or service providers allows you to get a broader market perspective
- Form: enables you to look at competing as an activity consisting in meeting the needs in a similar and/or different manner
- General: describing economic and industry situation affecting all companies, and their mutual competitiveness.
Benefits of Competitive Analysis
Primarily, it allows you to answer the key questions: what does market competition consist in, how is it expressed, with what tools and methods.
The main advantages of Competitive Analysis (market competitive analysis) include:
- Attracting new customers, not interested so far, or winning over the customers of the competition
- Higher profits (positive), avoiding losses (negative)
- Development of coherent strategy for growth or survival
- Discovery of market niches
- Orientation in market conditions and specifics
- Evaluation of risk and possible benefits
- Learning from the competitors’ mistakes
- Knowledge of the strengths and weaknesses of the competitors
- Development of criteria for evaluation and comparison
- Getting to know customer needs across a broader spectrum
- Possibility to build an image, communication and uniqueness based on specific information
- Avoiding the risk of replicating solutions, and being accused of unfair competition.
UX (User Experience) Competitive Analysis - UX Benchmarking
A company’s competitive edge is also expressed in a user-attractive website and web application.
Competitive Analysis of a company, the analysis of the customer market and competition, and of competitors’ characteristics, also includes company website and company tools (e.g. SaaS - Software as a Service).
It allows you to asses to what extent:
- Similar, enhanced solutions have a chance to succeed in the market
- The technology used builds competitive advantage or gives a chance to gain advantage.
- Website and application comply with the latest standards of UX, SEO, and with UI trends
- Non-standard solutions are accepted by the users; what reactions, attitudes, emotions and impressions they evoke
- The competitors customize their offer and make it available to different customer segments
- The competitors’ offer provides a positive and negative role model, in terms of technology, functionality, usability and UX
- Digital products, technologies, standards and social media support sales, automate processes, make shopping easier, facilitate ordering services, solve specific business problems as well as individual and group customer problems
A given product or a service can be offered digitally or supported by digital solutions.