Competitor analysis – what it is, how to do it, examples

In the age of a data-driven economy, the power lies with those who have the information. To this end, many companies often conduct a competitive analysis. Who carries it out and what can you learn from it? How can it allow your company to gain a market advantage?

In this article you will learn:

• What is a competitive analysis?
• What is the purpose of a competitive analysis?
• What does a competitive analysis provide?
• What are the methods of competitive analysis?
• What are the most common mistakes made in competitive analysis?
• What are the tools for competitor analysis?
• What is the process of competitor analysis?
• How do you carry out a sample competitor analysis?

Competitor analysis definition

Competitor analysis is the process of studying the activities and strategies of competing companies in order to better understand their market, identify their own strengths and weaknesses, and develop a competitive advantage. It is one of the most important elements of business and marketing strategy as it allows you to adapt to the market and gain advantages over your competitors. It involves collecting and comparing data on products, services, prices, promotional methods or distribution channels used by competitors. An important aspect of analysis is the observation of market trends.

Competitor analysis is the process of examining and evaluating the activities, strategies, strengths and weaknesses of other companies operating in the same industry or offering similar products or services. It is an extremely important tool in strategic management that enables companies to better understand their competitors and identify opportunities and threats in the market.

Definition of competitive analysis

American economist Phillip Kotler distinguished four levels of competitive analysis: brand (companies offering a similar product at a similar price to the same group of customers as yours), branch (all companies producing similar products regardless of customers and prices); product (companies producing things with the same purpose) and overall (all companies competing for the same share of customers’ purchasing power).

Purpose of competition analysis

The main use of the information gleaned by competitive analysis is to identify the competitive advantages of your brand and to identify the values unique to it. The data can help determine the Unique Selling Proposition of your products, which can significantly improve your company’s market positioning.

Additionally, by comparing your operations with your competitors, your company can identify its advantages and disadvantages. This allows you to focus your efforts on those aspects that have the greatest impact on success. Based on these and the results of the analysis, you can adapt your strategy to the specifics of your brand o market conditions.

Among the objectives of competitive analysis is to understand the market. It allows you to identify the main players in the market and better understand their strategies, product offers and promotional activities.

Competitor analysis is also conducted to monitor market trends. In turn, by continuously monitoring your competitors’ activities and adapting to changes in the market, your company can maintain its leadership position and achieve long-term success.

A well-conducted competitive analysis identifies market gaps that can be filled with unique offerings. It also enables you to optimise your own marketing strategies. It is worth mentioning that competitive analysis is an ongoing process that requires constant monitoring of dynamic changes in the market.

The information gathered in the course of competitor analysis makes it possible to determine the goals that a company wants to achieve in terms of positioning itself on the market. It can also influence the mission, vision and values of the company – thanks to the data obtained, the company’s values can be aligned with market realities.

The results of competitor analysis help to create different types of strategies for your company – marketing, pricing or advertising. They can also influence your product and service offering. Often, the information obtained is used to improve business processes to bring them in line with the best market standards.

Benefits of competitor analysis

Competitor analysis is an important tool for companies that want to compete effectively in the market. When carried out correctly, it brings many benefits, among which are:

• Learning about thecompetition – information about strategy (e.g. advertising strategy), strengths and weaknesses and how competitors operate in the market allows you to develop your own strategy that is better suited to the demands of the market and customers.
• Identifying competitive advantages – allows you to leverage your company’s strengths to succeed in the marketplace.
• Learning aboutcustomer preferences and needs – learning about the preferences and needs of your target audience makes it easier to develop products and services that are more aligned with market and customer requirements. This allows you to build consumer loyalty.
• Determining prices – information from competitive analysis can help you develop your own pricing strategy that is more effective than your competitors.
• Improving customer service – by learning about the quality of your competitors’ customer service, you can improve processes of this type in your company.
• Learning about trends and changes in the market – enables you to adapt your company’s strategy to changing market conditions.
• Avoiding the wrong business decisions – competitor analysis helps you to avoid making wrong or incompletely informed business decisions.
• Learning about new markets and segments – this can provide potential growth opportunities for the company.
• Improving business efficiency – identifying areas where your business is not performing well can help you improve production processes or customer service.
• Increase profits and market share – developing an effective competitive strategy can help with this.
• Increase brand awareness – learning about competitive brand promotions and marketing activities of others can help you develop a more effective marketing strategy and increase brand awareness.

Competitor analysis methods

There are a number of methods for analysing competitive activity. Each covers a slightly different scope and approaches the analysis itself differently. For this reason, it is worth using more than one method. This will give your company a broader picture of the activities of others, allowing you to better plan your own. The most commonly used methods of competitive analysis include:

SWOT analysis

Swot analysis focuses on identifying your company’s strengths, weaknesses, opportunities and threats from the business environment, including competitors.

Benchmarking analysis

Benchmarking is a method in which you compare your own business (products, services, procedures in the company and business practices) with the best practices of your competitors. It allows you to find areas for improvement and develop a competitive advantage.

Market environment analysis

This involves mapping the market, identifying the main competitors and analysing their strategies, offerings and marketing activities.

Porter’s five forces analysis

Porter’s five forces analysis is based on an analysis of five factors influencing market attractiveness. These are: rivalry between competitors, threat of new competitors, negotiating power of customers, negotiating power of suppliers and threat of substitute products.

Price analysis

Comparing the prices of competitors’ products or services to understand pricing strategies and market positioning.

Desk research

Also known as secondary research. Involves gathering information from available sources such as publications, reports, websites and other documents.

Marketing research

The process of collecting and analysing information about the market, including competitors, in order to better understand customer needs and preferences and to develop a marketing strategy. It allows you to learn about your competitors’ activities, their strategies and objectives, and identifies gaps in the market that your company can fill.

Business intelligence

Gathering information about competitors, the industry and the market through face-to-face interviews with people related to the business area, such as competitors’ representatives, industry experts, suppliers, customers and others. They can be a very valuable tool in competitive analysis, as they allow you to find out the opinions of people directly related to that business area.

Mystery shopping

More widely known as mystery shopping. This technique involves sending a mystery shopper into a shop, service outlet or other business to assess the quality of service, the quality of products and services and the overall quality of the customer experience.

The most common mistakes in competitor analysis

Competitor analysis is a process that requires regularity, attention, knowledge, and skill. It is important to remember that if carried out poorly or inaccurately, it can produce erroneous results. These, in turn, can lead to the wrong conclusions, which can result in the deterioration of your business. It is worth bearing in mind some of the most common mistakes to avoid in your own operations.

One of the most common mistakes is to limit the analysis to a single research method. This can lead to an incomplete picture of the competition, so it is worth using different methods and tools. However, it is necessary to remain sceptical about them. For example, in the case of desk research, publicly available information such as competitors’ websites, financial reports, etc., is important but does not always reflect reality. Competitor analysis can be prone to bias and subjectivity, especially if it is based on judgements and opinions rather than data.

Another common mistake is to limit the analysis to direct competitors only. Overlooking other players in the market can have a bad effect on subsequent marketing or sales activities.

When dealing with competitors, it is also worth avoiding the tendency to copy the actions of other companies without providing additional value to customers. It is always better to develop your own unique strategies. When doing so, it is worth analysing and understanding the strategies of other organisations – this will allow you to refine your own.

The customer perspective is often forgotten in competitive analysis, and it can be crucial in developing market-matched strategies. Failure to consider changing trends and customer preferences can lead to misjudging the competition and making the wrong business decisions.

Wrong results are often obtained by underestimating the importance of marketing and innovation. Both factors can lead to a loss of competitive advantage, reduced investment in product or service development and difficulty in acquiring customers.

It is also worth remembering that in a competitive analysis it is good to take into account not only market factors, but also political, social and legal developments. These can greatly affect the industry and the competition. Random factors should also not be forgotten – they can never be predicted completely, but they cannot be excluded.

Competitor analysis tools

Competitor analysis tools are most easily divided by application and area covered. As with methods, it is a good idea to use a number of them, as this allows you to obtain more data and, consequently, you can make more effective business decisions. The most common distinction is between tools for:

• social media monitoring (Hootsuite, Brand24, Social Mention),
• sEO analysis (Senuto, Ahrefs, Majestic),
• market analysis (IBISWorld, Euromonitor International, Mintel; give access to information on industries and markets in which competitors operate),
• data collection (SurveyMonkey, Google Forms, Typeform; they are used to conduct surveys and obtain data from customers on preferences, opinions and behaviour),
• competitive analysis in online advertising (SpyFu, AdEspresso, whichadswork; they enable tracking of competitors’ advertising campaigns and analysis of their strategies),
• price analysis (PriceGrid, Price2Spy),
• website traffic analysis (Google Analytics, Hotjar).

Various types of performance and competitive market analysis methodologies such as Porter’s five forces analysis or SWOT can also be included in the tool.

Competitor analysis process

Competitor analysis should cover as many scopes as possible. The more information your company acquires from different areas, the better it will be able to plan its own actions. For this reason, once possible competitors have been identified, the most common areas to be analysed are:

• Products and services,
• Target market
• Target group,
• Sales channels and methods,
• Competitive advantages,
• Financing and pricing strategies.

Separately, issues related to competitor marketing should be highlighted. In this case, it is worth analysing social media, SEO activities and websites of other companies and the content they create. This will give you an idea of marketing trends and will also influence the more detailed development of your marketing strategy.

Sample competitor analysis

Any competitor analysis should include 6 steps:

1. Creating a competitive overview
2. Market research
3. Comparison of product / service features
4. Comparison of marketing activities
5. SWOT analysis
6. Determining your own position in the market

If you set about conducting a competitive analysis of your business do it this way:

Step 1: Construct a list of your competitors using Google. Check the phrases and keywords that you think will relate to your products and services. This way, you will find companies that have already built up their visibility in the search results. At this point, when preparing a competitor analysis, we often verify the company’s revenue and income data from the KRS (if it is a limited liability company) which gives a picture of the company’s growth dynamics.

Steps 2, 3 and 4: Review your competitors’ websites and use professional SEO analysis tools such as Ahrefs. These will give you comprehensive information on the services and marketing strategies offered by each company. You will see what phrases they are visible for in the search results, what adverts they publish and which audiences they target with their content marketing.

Step 5: Focus again on your business and conduct a SWOT analysis to assess your company’s strategic goals. This method will allow you to visualise the strengths and weaknesses of your business.

Step 6: Finally, create a chart to represent the market environment. Assume that, after your analysis, you conclude that there are two companies that outperform your company in terms of customer satisfaction and market presence.

Carrying out these steps correctly will enable you to gain the necessary information to analyse the market more accurately and support your business decisions.