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Today, the number of competitors is increasing in many industries, and the competition is getting stronger. 

Business and marketing leaders need to understand where their brand fits into the puzzle to best conduct ROI-positive campaigns, reach the right audience, and drive revenue growth.

Competitive analysis is a foundational business exercise that has broad applications for a firm, ranging from product strategy to go-to-market motions, pricing, and sales processes. There are many ways to conduct competitive research and many ways to use the insights to inform decision making within an organization. 

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1. Strategic Decision Making

If a business’ competitive analysis reveals a competitor is planning to launch a lower-priced variant of a similar product, the business could differentiate based on quality, positioning, or consider a value-based pricing strategy.

Competitive analysis also guides decisions related to market entry or expansion. If the analysis indicates that a competitor isn't meeting demands in a specific geographic market, it could present an opportunity for expansion into that market.

2. Identifying Market Trends and Gaps

Market trends reveal key shifts in customer behaviors, industry advancements, and economic conditions that may have a direct and indirect impact.

For example, if a competitive analysis reveals customer demand for sustainability, businesses can adapt to align with the growing trend by adopting environmentally friendly processes, sourcing sustainable materials, and developing new product lines. 

Likewise, if the analysis reveals a trend of shrinking demand for a particular product or service, businesses can strategize to diversify their offerings or pivot to emerging market opportunities.

In the context of broader economic trends, such as recessionary periods, competitive analysis can also inform business resilience strategies. By studying how competitors are coping with such circumstances, a business can learn how others are managing costs, retaining customers, and maintaining operational efficiency.

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3. Effective Resource Allocation

If a competitive analysis shows a rival is gaining a market advantage by investing in cutting-edge research and development, its competitor might also allocate more resources to R&D. Similarly, if competitors are achieving success through robust digital marketing strategies, the company may funnel more resources towards underserved channels.

Conversely, a competitive analysis might reveal areas where competitors aren't investing. For instance, if competitors are neglecting customer service, a company might invest in its customer service capabilities to improve retention and increase word of mouth marketing.

Moreover, resource allocation isn’t exclusive to financial resources, but may also include human resources, technological assets, time, and managerial attention. If a competitive analysis reveals a rival excels with a highly skilled workforce, a company might rethink its human resources strategies; including recruitment, training, and retention policies.

4. Risk Mitigation

A detailed overview of the competitive landscape helps businesses identify threats and prepare for impacts on efficiency and market position. 

Competitive analysis can signal regulatory and financial risks, such as legal issues or an impending price war, prompting businesses to revise compliance or focus on cost management, revenue diversification, and value reinforcement. 

At the industry level, it can uncover risks like declining demand, new market entrants, or supply chain vulnerabilities, leading businesses to reassess risk management and develop contingency plans for sustained competitiveness.

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However, the core aspects of a competitive analysis include:

Step 1 - Identifying competitors

Step 2 - Gathering information on competitors

Step 3 - Auditing strengths, weaknesses, and characteristics of your brand

Step 4 - Assessing opportunities and threats

Step 5 - Documenting and communicating competitive intelligence to inform decisions

Customize the competitive analysis to best suit the individual business's needs. Here is a deeper look into the common steps to complete a competitive analysis:

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Step - 1 Define the Industry

Defining the industry at a high level is straightforward but may be too broad for marketing or sales. For instance, calling a company a "software company" is vague. 

A more precise definition like "email marketing software" instead of "marketing software" or "email marketing software for accountants" helps identify both direct and indirect competitors, as well as alternatives customers might choose without the company's product.

Step - 2 Identify and Research Competitors

The next step is to identify a list of key competitors, both direct and indirect. 

  • Direct competitors, the easiest to recognize, vie for business in the same market, often appearing in sales talks, competing for keywords, attending similar events, and ranking on industry sites.
  • Indirect competitors offer solutions for the same audience's select pain points but may not be a feature-by-feature match.
  • Adjacent business categories offer solutions for the same audience's pain points without direct competition. These can be adjacent business categories, like an all-in-one marketing solution competing with specific features, or alternative solutions, such as spreadsheets instead of software. 

Generally, a brand faces many competitors, but only a few are impactful to analyze. List the top 3-10, focusing mainly on direct competitors but also considering alternatives to shape the brand's positioning and messaging.

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Step - 3 Analyze the Competition’s Strengths and Weaknesses 

In this step, business leaders conduct in-depth research on the competition. 

The type of research depends on the industry, competitive landscape, and the organization's maturity. 

Typically, competitive research can be categorized into several distinct areas:

  • Company size, revenue, market share and funding

  • Product pricing and business model

  • Brand perception and share of voice

  • Marketing and sales messaging and campaigns

  • Product portfolio

  • Feature comparisons

Competitive analysis can be holistic or specific to a business section. 

For instance, an SEO team might analyze search engine performance, focusing on metrics such as share of market and website traffic, as part of a broader analysis. 

Different research areas require various methodologies and tools, such as websites and databases that reveal company size, revenue, funding, and market share. 

For nuanced information like feature comparisons, a consultant or analyst may be needed. In each research area, identify facts and determine if they are strengths or weaknesses for a competitor. 

For example, a well-funded competitor with a large market share may lack a crucial feature, constituting a key weakness.

Step - 4 Analyze Your Brand’s Strengths and Weaknesses

Business leaders can objectively assess their own strengths and weaknesses in relation to competitors. 

This analysis must be thorough, agreed upon by stakeholders, and aligned with competition and customer needs. 

Some strengths, like strong brand awareness or significant capital, are easily identified. 

Others may be more speculative, such as heavy investment in research and development, which might lead to innovation but remains unvalidated by the market.

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Step - 5 Conduct SWOT Analysis

After researching the brand and competition, use a SWOT Analysis to synthesize the findings, focusing on strengths, weaknesses, opportunities, and threats.

Strengths and weaknesses are internal to the brand, while opportunities and threats are external.

The SWOT analysis includes key competitors and alternatives but centers on the brand to identify market opportunities, threats, and gaps.

This example provides an overview for a content marketing consulting firm:

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  • Impressive case studies with reputable brands
  • Well-known founders with big networks in San Francisco and New York City
  • A predictable sales machine and high close rates
  • Above average profit margins
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  • Expensive offering compared to the competition
  • Little to no organic inbound marketing efforts, unpredictable lead generation
  • Lacks additional support on ancillary services like paid marketing
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  • Develop thought leadership marketing campaigns driven by founders
  • Repurpose founder talks to blog post and media like podcasts and video
  • Increase brand awareness through inbound marketing and channel partnerships
  • Create low tier offering to drive revenue from startups
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  • Artificial intelligence diluting value of content creation
  • Unpredictable lead generation could lead to dips in revenue and clientele in bad markets
  • New competitors with strong offerings could outcompete us on pricing
  • Saturation of existing target clients could lead to diminished revenue and expansion

Step - 6 Evaluate and Create Strategies

Creating a SWOT analysis generates ideas to seize opportunities and mitigate threats; while fresh, prioritize strategies for each.

Some opportunities may prompt resource reallocation, while others may need experimentation. Some threats may require immediate action, while others might need monitoring and planning.

The process of conducting a SWOT analysis will inevitably generate many different opportunities and threats; it’s important to prioritize them by their impact and the confidence a business has in them. 

A great way to triangulate the importance of an item is to see how much agreement there is on the team about the item’s inclusion. 

For instance, in the above example, if 90% of the team believes artificial intelligence is a top threat, and only 50% viewed new competition as a threat, it could be a signal to prioritize artificial intelligence in risk mitigation planning. There’s already a large degree of company alignment in this direction.

An additional layer of prioritization is to estimate the probability as well as the magnitude of an event. 

For example, in analyzing the above SWOT analysis, a business leader could estimate the upside of investing in a low tier offering if executed correctly, as well as the probability of that event occurring. The same estimation can be done for threats, but instead the business leader would estimate the downside risk. 

This is an exercise to estimate the “expected value” of a decision, and it helps businesses and teams identify the highest impact actions to take.

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Step - 7 Regular Evaluation and Re-evaluation

The world and market constantly evolve, with new competitors, changing consumer behavior, and external factors affecting buying patterns.

Thus, competitive analysis must be ongoing and should be done quarterly or yearly.

Regularly update it and use monitoring tools to track competitor and industry changes. Continuously gather feedback from customers and sales teams to stay ahead of trends and shifts in behavior. 

Look at a SWOT analysis as a set of hypotheses for a business to test through strategic bets. When investing in a given opportunity identified through SWOT analysis, make sure to measure actual results against the expected results of the opportunity. 

It’s not always possible to establish quantitative benchmarks for strengths, weaknesses, opportunities or threats, but the closer business leaders can get to benchmarking their assumptions, the better they can iterate on them in future SWOT analyses.

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