How to do competitor research for your small business
Your competitors are your best frenemies.
They can take away your business and impact your revenue. And we’re licensed to hate them. At the same time, they can teach you more about your market than anyone, whether they like it or not. And we love them for it.
Competitor analysis should be done once per year, or a few times a year in hot or shifting markets.
So, without further ado, let me give you a tour of your competitive landscape.
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Why competitor research is so important
Despite the popular opinion, for an experienced marketer, competition is a welcomed sight.
It confirms that a market exists for whatever product or service you’re selling. It can also be a wealth of information on our audience sentiment, pricing, positioning, even historical experiments.
Many believe that a lack of rivals guarantees a wide-open market that’s just sitting there, up for grabs. But the truth is quite the opposite.
Having zero competitors is usually not good news and the chances of it working out in your favor are probably one in a million.
In the best-case scenario, it’s indicating you’re entering a virgin market, which will take time to build. In this case, you better stock up on funds and be prepared to operate in red for some time before seeing any profit. On top of investing to keep your product or service afloat, you’ll also have to invest in creating awareness about your entire industry.
Worst-case scenario, it might mean that the market doesn’t exist or that the need for your service just isn’t there, and maybe that’s a permanent state. That would mean regardless of your investments, your product is doomed to fail.
If you’re just developing a product or service, lack of competition will also make asking for feedback harder, because people don’t have any mental anchor points to compare your product with existing experience.
Here’s an example:
Vine was a short-form video platform, similar to today’s TikTok or reels feature on Instagram. It launched in 2012 and later that year was acquired by Twitter. It was an amazing hit with a small audience, but it wasn’t sustainable. The market just wasn’t ready for it.
It had no monetization options, the audience wasn’t really short-form addicted at that time, influencers had far less influence than now, and even mobile internet wasn’t up to par with the platforms streaming demands. Not to mention their product map was a mess - there was no one else in the market to help them gauge the emerging market demands. If they decide to invest in the product just a tiny bit longer, Vine would probably be one of the major video-sharing platforms out there. But, they decided to cut their losses, and pull investment, completely shutting it down.
It was discontinued in 2016. TikTok launched in China the same year. The rest is history.
Either way, being aware of your competition should be on a yearly to-do list for everyone involved in the core processes of a business.
Word of caution: don’t go too crazy.
Obsessing over the competitors can keep you stuck in a perpetually reactive state, which is not scalable, nor sustainable. Final decisions should always be made based on market information, audience insight, and your own business goals in mind.
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Step-by-step competitor analysis
There is no one correct way to do it, but this is the simplest way to get the rich, yet organized data that you need to paint the big picture. It goes like this:
- Identify direct and indirect competitors
- Identify key points of comparison
- Start researching and documenting
- Summarize the information
- Find competitive advantage and disadvantage
- Create a plan of action
Yeah, it is that linear.
Step 1: Identify your direct and indirect competitors
I like to group competitors into two buckets: direct and indirect.
Direct competitors are those that speak to a largely overlapping audience. Their offers will mirror your key products or services. The key in identifying key competitors is understanding your audience’s primary purchase drivers (the key reasons for their decision) and seeing what are they choosing between. It can, but doesn’t have to be a 100% match. 70% overlap would still land them in the direct competitor bucket in my book.
Indirect competitors can also be considered alternatives to your offers. They might not have one specific product that matches your catalog perfectly, but they might be an alternative choice depending on many factors. A great example of this is Peloton, the at-home exercise bike manufacturer. They are incredibly popular in some circles, due to their content, community as well as payment plans for their equipment. Even though they are an at-home workout bike manufacturer, they are a strong alternative for all those exercise enthusiasts that might otherwise invest in more traditional home-gym equipment. They even compete with a lot of clubs offers as well!
Your best bet is to find your 3 main competitors, and a few secondary competitors of value, and focus your attention on them. The rest of the direct and indirect competitors can still be used as an inspiration, but for the sake of value, focusing on the top rivals will help you draw better conclusions than if you spread yourself too thin.
Step 2: Identify the key points of comparison
Now it’s time to decide how you want to benchmark your competition.
Pick the points of comparison that will inform you on the market. If you already have a service or a product, this will be slightly easier. But if you haven’t launched yet, picking the right points will take a bit of testing, and you might end up going back quite a bit to fill in the gaps.
Standard points of comparison:
- Branding (name, colors)
- Product (in case you’re competing with one of their many products)
- Market (global, local, town, neighborhood)
- Market presence (new, established, etc.)
- Audience (estimated targeted audience)
- Positioning (how the audience perceives them)
- Unique selling point (USP, or unique selling proposition)
In today’s buyers’ market, it’s also great to focus on things like:
- Online reviews (how many are there)
- Customer service (based on online reviews)
- Online availability
- Social media presence
For deeper marketing insight, you’ll also want to look at:
- Website standing (rank, SEO)
- Marketing strategies (organic, ads, social media, giveaways, flash-promos)
- Partner network
For online services and apps, you would also want to look at their reliability, availability, product roadmap, and technology. And for consumer goods, things like packaging size, packaging materials, and storage requirements will be very useful.
Now, that looks like a lot of things, but when you put it in a table, it’ll look something like this:
Here’s a link to this sheet so you can download it and use it for yourself.
Step 3: Start researching and documenting
There are two ways to do this part:
- Superficial research (using just the sheet above)
- In-depth research (adding a document where you capture wider info)
The first one is great if you’re e.g. redoing the research after already having an in-depth version done in the past, but if this is your first time analyzing competitors, I would strongly suggest going all in with version two.
It’s pretty simple:
- Create a document for each competitor (slide deck or document, both work well)
- Pick one competitor to research at a time
- Start collecting a wide range of information in the doc (dumping it in there is fine, doesn’t have to look pretty)
- Add plenty of screenshots (the info might not be available online forever)
- Write down any random thoughts on what you like or don’t like about them
I can’t stress enough how important screenshots can be. Imagine if you find a review that outlines everything a person hates about your competitor’s product. You can use the information to update your offer or find your USP, but the reality is: that review might not be there forever. It might be edited, removed, hidden. Grabbing a screenshot of what was said will make sure you preserve that detail forever.
Step 4: Summarize the information
Once you have the larger doc filled with all the goodies, create a summary section at the top. This will help when you want to refresh your memory or update the doc in the future.
Next, go back to the sheet and fill in the information in each cell. Points of comparison should all be in there now, and you might have uncovered new points you would like to add.
There will be plenty of educated guesses you’ll have to make, but this isn’t about being 100% accurate. It’s about having the best picture possible about your competitive landscape, so even assumptions help.
Step 5: Find the competitive advantage and disadvantage
Here comes the fun part.
If you have any marketing background or experience, you’ll recognize this is a simplified version of a SWOT analysis. SWOT stands for strengths, weaknesses, opportunities, and threats. It’s a four-square principle of organizing information.
And, yes, first you need to do one for your business if you haven’t already.
Here’s a crash course.
Our businesses SWOT analysis should contain:
- What are our key competencies?
- What is the biggest (potential) money-maker for our business?
- What are we most proud of?
- Is our business lacking anything, like resources, manpower, funding?
- What are we not proud of at the moment?
- Where do we see the need for improvement?
- Are there any market trends that would positively affect our business?
- Is there a need that we could fill that we’re not filling right now?
- Do our competitors have any weaknesses we can take advantage of?
- Could a new competitor enter our market?
- Is our business future-proof?
- How long can we operate our business in red?
- Is there something in our supply chain that could negatively impact our business?
Now, let’s do the same for the competitors:
- What are they doing well?
- Are they well-known for anything?
- Why do customers buy their product or service?
- What are they not doing well?
- Are their customers complaining about anything?
- What are they not offering that the market wants?
- Are they leaving any opportunity on the table for us?
- How is their offer affecting ours in a positive way?
- Any indication they could be more aggressive in the market?
- Are they widening their product range?
- Is there a chance they match our offer, annihilating our core advantage?
I like to do this in a sheet, which allows me to add a column for conclusions, so I can keep my thoughts organized. It would look something like this:
(The second tab of the sheet I shared earlier.)
Step 6: Create a plan of action
Now that you have all the information summarized and analyzed, it would be a shame to let that wealth of knowledge just sit there. But, the reality is, even though you now know what your competitors are doing, and where the opportunities are, you can’t address everything at the same time.
You can start with a big brain dump session, where you put all of your ideas on paper. If you have multiple people in your company, even if they’re not business savvy, it would be good for you to pull them in for this exercise.
For this part, expand on every opportunity and threat, ideating on how to address them in as much detail as possible. In traditional brainstorming, every idea is accepted, no matter how outlandish. Although fun, for this particular exercise, I would suggest dumping ideas that are obviously misaligned with your core values and capabilities, to save time.
Once you have dumped all of your ideas on the paper, based on your internal capabilities organize them into:
- Not attainable
Attainable ideas are the ones that you have both money and time to sustain, and you believe they will have the highest ROI (return on investment).
Possible ideas are the ones that require more research or require resources that you don’t have at the moment, and might not bring a high ROI, so for the time being they should not be prioritized.
Not attainable are those that require resources that you don’t have, and do not plan to acquire in the near future.
Now take your attainable ideas and prioritize them based on ROI or urgency, and break them into tasks.
If there are any obvious time-sensitive threats, you’ll want to start with them. But if the opportunities show you room for expansion that might turn out to be more lucrative than addressing the threat, you can choose to start there.
You should end up with a solid list of ideas and action items.
Step 7: Execute
Go, kick some buttocks. You can do this! 💜
🔥 Reminder: I’m creating a mini-course on this topic: you can register your interest 👉 here.