Keeping an eye on your competitors helps you anticipate shifts in the market, spot new trends and successful tactics, and stay on the cutting edge of what’s working within your niche.
But it’s not enough to just spy on your competitors’ social media accounts and subscribe to their email lists. You need a strategy behind your efforts to ensure you’re effectively monitoring your competitors on an ongoing basis and updating your view of the competitive landscape as it changes.
Enter the competitive analysis: a document that gives you both a bird's-eye view and an in-depth understanding of the key players in your market.
In this post, we'll outline a method for conducting a competitive analysis of your own, geared towards ecommerce businesses.
Whether you’re a seasoned store owner re-evaluating your view of the current market, or you’re getting ready to bring your product to market for the very first time, here are the steps, tools, and even a template (skip to the template) to help you put together your own competitive analysis.
What is a competitive analysis?
A competitive analysis is the analysis of your competitors and how your business compares. By evaluating the strengths and weaknesses of your competition, you can begin to formulate how to give your company an advantage.
Competitive analysis helps a business determine potential advantages and barriers within a target market around a product or service, and generally helps brands monitor how direct and indirect competitors are executing tactics like marketing, pricing, and distribution.
What should you cover in a competitor analysis?
Your competitive analysis can vary widely depending on what you’re trying to learn about your competitors. You might do a competitive analysis around a specific aspect of your competitors’ business—like their website, for example—or you might do a high-level look at their marketing approach as a whole.
There are a lot of different ways you can structure a competitive analysis, so let’s look at the types of information that are frequently seen within this kind of research.
If you’re doing a high-level competitor analysis, there are a few major elements you’ll want to be sure to include around competitors’ market positioning, such as:
- Who their target customers are
- What market share to they currently own
- What their main differentiator or unique value-add is for their business and products
- Key features/benefits they highlight in sales materials
- Price points for products, even across different marketplaces
- How they approach shipping
- If they’ve received any funding or venture capital
These sections will help you get a zoomed out look at what separates these businesses from each other and how they’re working to differentiate themselves from the competition within the niche.
If you want to look at more specific elements of your competitors’ approaches, you might consider adding sections like these to your competitive analysis:
- Features on competitors' websites (like search tools, product images, design/layout, etc.)
- Customer experience elements (cart abandonment strategy, customer support, mobile UX, 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, promo codes, 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 should give you a rough idea of what could be included within the different sections.
Why competitive analysis matters for ecommerce
Maybe at this point you’re thinking, “Okay, but why does competitor analysis matter for me as a business owner?”
The main reason this activity is important is because you can’t effectively compete without knowing your direct competitors—and you can’t differentiate yourself if you don’t know what actually makes you different.
For ecommerce businesses in particular, a competitive analysis can also help:
- Make more informed decisions about your marketing strategy
- Identify industry trends
- Create benchmarks for yourself
- Determine your pricing strategies
- Unearth new ways of speaking to customers, or even new customers to speak to
- Finding a gap in the market, but also ensuring there’s a “market in the gap”
This type of analysis is not just for first-time business owners, either. A competitive analysis can be a living document that’s constantly evolving as your company grows and matures over time.
Maintaining a resource like this is a powerful way to measure 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.
How to conduct a competitive analysis
Once you’re ready to dive into a competitive analysis of your own, you can follow the steps outlined here to keep your research structured and organized appropriately.
Step 1: Create a list of 7-10 competitors
- 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 create a list of 7-10 relevant competitors, before deciding on the ones you want to analyze.
Step 2: Create a spreadsheet
As you collect data on this group of competitors, keep it organized within a table or spreadsheet that can be easily shared and updated over time. Within this document, jot down the different criteria you want to compare and contrast, such as:
- Price range
- Product offerings
- Social media engagement
- Content used for lead generation
- First time visitor offers
- Other traits that are worth exploring
Step 3: Identify primary/secondary competitors
Starting with your list of competitors, begin your spreadsheet by categorizing each one as a primary, secondary, or tertiary competitor. This will help you better determine how they’ll relate to your business:
- Primary competitors are your business' direct competition, selling a similar product/service to your target audience. These are the brands that your customers may compare you to. Example: Nike and Adidas are primary competitors.
- Secondary competitors sell similar products or services but to a different audience (e.g. they focus upmarket or downmarket with their products). Example: Victoria’s Secret and Wal-Mart are secondary competitors.
- Tertiary competitors are related brands who 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.
Step 4: Collect data via tools
Once you know which competitors you’ll be studying, it’s time to start diving into research and data collection for your competitor analysis. The good news is that today there are many different tools available that can make data collection for your competitive analysis simpler, more efficient, and more accurate.
Depending on what stage you’re at with your business and the size of your budget, you can invest in more powerful tools like Ahrefs and SEMrush to monitor the competition over time. But for the sake of this post, we’ll explore some of the more accessible options to help you research your competition.
SimilarWeb offers insights into estimated monthly visits and key traffic sources for a website. This can help you guess at where your competitors are focusing their marketing efforts. You might even discover other websites like yours, and thus new competitors to monitor and learn from.
Mailcharts can give you insight into your competitors’ email marketing, from the frequency of email sends, their subject line tactics, and more.
You can plug your competitor’s domain into Buzzsumo to see their top-performing content, as well as total social shares and where that content has been shared. You can also use this to discover other websites that are producing content in your space.
Alexa helps you identify the audience demographics and search rankings related to a website, as well as some of the sites that are linking to and mentioning your competitors to get a handle on their PR and SEO strategy.
Facebook Audience Insights (access through your Facebook Business Manager) can give you a variety of information about audiences on one of the largest social networks around. For many established competitors, you can even see the breakdown of their Facebook page’s followers, including age, gender, and geography.
Using these resources, you can start gathering data and dropping it into your competitive analysis spreadsheet so that your findings are all stored in a single, organized space.
Step 5: Do some hands-on research
Along with the research you’re doing through software and tools, it’s a good idea to get hands-on with your competitive research. Assume the role of a potential customer and check out what your competitors are doing in the marketing department.
You can do this by:
- Subscribing to their blog
- Following them on social media
- Abandoning a product in your shopping cart
- Even purchasing a product and evaluating the customer experience
As you execute these activities, be sure to document your findings with notes on the tactics 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 drive sales.
You can further expand the insight you gain from your competitive analysis by also gathering information about the market, such as industry-specific trends and economic indicators.
Consider doing a SWOT analysis to accompany this data set, which outlines the Strengths, Weaknesses, Opportunities, and Threats around your business and your competitor’s. Defining these areas will help you take an objective look at your business and can help you make smarter, more informed choices that future-proof your brand.
Competitive analysis template
If you’re still not quite sure how to start laying out your template for a competitive analysis, here’s a free competitive analysis template you can work from to get the ball rolling. Simply copy it to your own Google Drive, or you can download the spreadsheet to work through. Go to File > Make a Copy... OR Download as.
An example of a competitive analysis
Let’s say you sell make-up brushes, here’s one way you could use this template to compare competitors’ approaches to your own (and identify what you could do to stand out):
Remember that you can add as many sections as you want to your analysis, but be sure to keep your list of competitors limited to under 10 to ensure your research is focused and highly relevant.
Common pitfalls to avoid
Now that you know how to put together a competitive analysis, let’s go over some of the major 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 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.
2. Ignoring your own biases
As humans, we have a tendency to jump to conclusions around our assumptions. This is called confirmation bias. As you work through your competitive 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 competitive 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 marketing tactics that you’ve discovered during this process.
4. Creating more work than you need to
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. Don’t reinvent the wheel and do things the hard way: use tools that speed up the process and provide the important insights you need to make informed 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.
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 in time. 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).
Competitive analysis: Your business edge
With the above template as a starting point, along with the resources and tools we covered, hopefully you’re better equipped to approach your own competitive analysis.
By conducting a competitive analysis, and evolving your understanding of your market over time, you can help yourself stay on top of your competitors and even learn from them too.
Original Article: https://www.shopify.com/blog/competitive-analysis