## 5 Steps for Conducting an Effective Competitive Analysis

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# What is Competitive Analysis and Why Conduct It

Competitive analysis is the process of studying what your competitors are doing to achieve their goals and objectives. For example, you can analyze their product range, pricing strategies, market positioning, advertising campaigns, and customer loyalty programs. Additionally, you can approach it from a technical perspective by examining competitors’ website parameters: evaluating their position in search engine results, studying page structures, backlink profiles, SEO titles, and other metrics.

Depending on your goals, this analysis can focus on specific criteria or be comprehensive, covering all possible aspects. Competitors can be direct, operating within the same niche, or indirect, offering products or services that do not overlap with your target audience. There are also substitute products that serve as alternatives to yours but only in certain characteristics. For instance, in the case of “IKEA” mattresses, the manufacturer exited the market, yet many continue to seek their mattresses. Other sellers may not have the rights to sell products protected by intellectual property but can offer the closest possible alternatives in terms of features.

Why is Competitive Analysis Needed?

Let’s highlight its main objectives:

• Building an Effective Marketing Strategy: On one hand, competitive analysis provides a deeper understanding of the market and allows you to assess how competitors operate. On the other hand, it helps determine how effective your previous strategies or marketing activities have been.

• Identifying Strengths and Weaknesses of Your Product: By comparing yourself with competitors, you better understand customer needs and can formulate a unique selling proposition that distinguishes your product in the market.

• Monitoring Market Trends: Competitive analysis enables quick responses to market changes, allowing you to expand or adjust your product range accordingly.

• Planning Pricing Policies: Analyzing competitors’ pricing helps you develop your own pricing strategy effectively.

• Identifying Free Niches: By studying the market, you can find areas with low competition, providing opportunities to launch your product before others.

• Making Business Decisions: Based on competitor analysis, you can assess the viability of new business ideas and startups, making informed decisions about whether to expand or, conversely, close a business.

# How to Conduct Competitive Analysis

Let’s explore 5 essential steps for conducting competitive analysis.

## Step 1. Define Your Analysis Goals

Start by deciding what exactly you want to learn about your competitors. Based on this, set specific objectives such as:

• Pricing and Product Range: Understand competitors’ product offerings, their advantages, and primary locations.

• Market Positioning: Analyze turnover, revenue, as well as the size and behavior of the target audience.

• Customer Service Quality: Evaluate warranty conditions, support channels, and feedback mechanisms.

• Communications and Promotion: Identify the channels used and the type of content shared, how media respond, and the process of reputation management.

• Technical Parameters: Examine competitors’ online presence, including SEO support for mobile applications and websites, email marketing, and CRM systems usage.

This step is crucial because your analysis goals will shape the tasks, budget allocation, assignment of responsibilities, and selection of appropriate analysis tools. For example, separate teams composed of specialized professionals might be formed for each goal, making it more effective to use dedicated software for task management.

## Step 2. Compile a List of Competitors

While it may seem obvious, compiling a list of competitors is not as straightforward in practice. Selecting too many competitors can make the research time-consuming, while choosing the wrong ones risks formulating an ineffective development strategy. Therefore, it’s essential to clearly understand which competitors truly align with your analysis goals.

Tips for Compiling a List of Competitors:

1. Define Your Target Audience: Create a profile of your ideal customer. This will help narrow down the pool of competitors relevant to their interests.

2. Research Online Platforms: Use search engines and tools like Google Maps to identify and list potential competitors’ websites for analysis.

3. Utilize Specialized Services: Platforms like Google Trends can help you find precise or related search queries that match your target audience’s interests.

4. Don’t Forget Offline Channels: Attend industry exhibitions and conferences to discover new competitors. If necessary, visit competitors’ retail locations in your area.

## Step 3. Gather Necessary Information

The type of information you collect about competitors depends on what you aim to discover. For instance:

• Product Assortment: Study competitors’ websites, landing pages, and marketplace catalogs.

• Market Behavior: Conduct test purchases, examine reviews, return policies, and warranty services.

• Promotions and Advertising: Analyze competitors’ promotional activities and advertising in various channels like websites, social media, or billboards.

• Partnership Programs: If a competitor has a partnership program, closely examine its rules and analyze the websites of selected partners.

• Official Statistics: Pay attention to available official statistics and sales data.

## Step 4. Summarize and Structure the Collected Data

At this stage, you need to select and analyze the most critical data to develop a competitive strategy or make other business decisions. For clarity, consider using various report formats and metrics. In some cases, this can simplify the understanding of large amounts of information, while in others, it allows you to see trends and thoroughly analyze quantitative indicators.

Recommended Structuring Methodologies:

• SWOT Analysis: Identifies strengths, weaknesses, opportunities, and threats.

• ABC Analysis: Categorizes products or services based on importance.

• Three Cs Analysis: Examines company, customers, and competitors.

• Porter’s Five Forces: Assesses competitive intensity and attractiveness of a market.

• Value Chain Analysis: Analyzes internal company activities to create value.

• SPACE Matrix and BCG Matrix: Evaluate strategic positions and business portfolios.

Each methodology offers a unique perspective and helps you better understand the competitive environment and opportunities for growth.

## Step 5. Compile the Final Research Report

Such reports can vary widely but must be thoroughly prepared to address the set questions and research goals. After analyzing the report with the obtained research results, you can proceed to develop your company’s competitive strategy.

# Conclusion

Assessing competitors and developing a corresponding competitive strategy is one of the key tasks in marketing and company management. It’s important to understand that market analysis is not the only tool for strategy planning. All business aspects should be considered: available resources, quality and range of your own products, risks and threats, investor expectations, financial performance indicators, and more.

Once again, it’s essential to thoroughly justify and test your competitive strategy before implementation to avoid unforeseen consequences. Ensure that the chosen strategy aligns with the current business realities and is resilient to market changes.

About Co-Founder Ai

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