Learn how to Carry out a Aggressive Evaluation (template included)
Competitive analysis is the process of identifying and studying your competitors in order to get the information you need to gain a competitive advantage.
You need to conduct a competitive analysis as part of your market research. Only then can you develop an effective marketing strategy to steer the ship in the right direction.
How to conduct competitive analysis in 8 easy steps:
- Find your competitors
- Get background information
- Analyze competitors' products and services
- Familiarize yourself with their orientation and positioning
- Discover the sales channels of the competitors
- Immerse yourself in communication strategies
- Do some ghost shopping
- Behavior a NERD analysis
A competitor is any company that solves the same problem as you in your target market.
For example, Pepsi and Coke are competitors because they sell the same thing in the same market. However, not every similar company is a direct competitor, which is a common mistake people make.
Take restaurants and cafes, for example. Both are restaurants, but they don't compete with each other. Restaurants are for meals while cafes are for light bites or refreshments. It is similar with freelance and corporate solutions. The products may be similar, but the same solutions will not appeal to both populations.
Now that you understand this, your first step is to find 3 to 5 relevant competitors (anything else would be an exaggeration).
Here are three ways to do this:
a) Look at the keyword overlap
Everyone should know at least one competitor, and you can use this information to find others. Simply connect your competitor's domain to Ahrefs' Site Explorer and check the Competing domains Report. It will show other websites that rank for many of the same keywords as your well-known competitor.
For example, if you work for ConvertKit you might be looking for websites that compete with MailChimp.
Remember, not all of these domains are your business competitors. Some websites can monetize the same traffic with affiliate marketing or ads.
If you're not using Ahrefs, search for related ones on Google: Competitor.com.
This search operator finds websites related to a specific domain. It works well, but the downside is that it usually only finds a handful of related websites. In this case MailChimp, Aweber, Campaign Monitor and three others.
For the remainder of this article, I'll be using Mailchimp as an example of a competitor, as it's likely a brand you already know.
b) Look who is advertising
Finding companies that bid on industry keywords can be a little more reliable than finding organic traffic intersections. This is because direct competitors are more likely to emerge than blogs or other websites with different business models.
For example, look at the ads for "Email Marketing Software".
Both advertisers are direct competitors of ConvertKit or MailChimp as they sell email marketing software.
If you want to extend this approach, use the Ad history Report in Ahrefs Keyword Explorer to show historical search ad data for relevant keywords. For example, let's see that 307 domains have historically paid for ads with keywords like "email marketing app" and "email marketing software".
c) Look at the category lists
Whatever you're selling or doing, you can bet there is a website curating companies that do the same.
Do you have a software product? Check out the companies listed in the categories G2 or alternatives.
Do you own a local business? Check out Yelp and its alternatives.
Sell ketchup? There is also a list for this.
This method is quick and straightforward. However, companies listed in a relevant category are not always your competitors. You never know how the companies were listed.
Select 3-5 relevant competitors and add them to the template. You can do this by visiting their websites and making sure that they offer you similar products or services.
2. Get background information
Knowing how a competitor was founded and the story behind its growth puts things in context. It's good to know what to expect in terms of size, support, and finances.
Check the following data:
- founding year
- Are there any venture capital investors?
- Which companies did you acquire?
- Number of employees
- Number of customers
You can find answers to the first three data points on company overview websites such as Crunchbase or Yahoo Finance. The latter also includes income statements of publicly traded companies, where you can find last year's earnings.
If the competitor is a private company, you can still find the information. Just google it. C-level interviews often contain information on sales as well as insights into their strategy, challenges, most valuable segments and much more.
Finally, you can find the number of people they employ on LinkedIn.
All of this shows you what to expect in terms of resources and how much of your target market the competitor owns.
Mailchimp is clearly an industry giant steeped in tradition:
|Acquired companies?||5 companies (e-mail software, design / template tool, ecom CMS, ecom API Platform, business-oriented publisher)|
|Number of employees (LinkedIn)||1,190|
|Number of customers||1M+ (2019)|
But that doesn't mean you can't compete with them.
3. Analyze their products and services
To gain a competitive advantage, it is important to understand what your competitors are offering and how the market is responding. Of course, this doesn't mean that you should copy anything from them. Your product development should be based on the requirements of the market.
Here is what you need to know here:
Features and Solutions
Try out your competitors' products for yourself and write down their functions. There is no right or wrong way to go about this. Listing all of Mailchimp's features and solutions would take up an entire table. It is therefore better to write down a general overview.
In most cases this is easy to fill out. See what the products are being sold for and note if there are any discounts.
With some B2B You won't find a public pricing page in niches because it's often based on custom listings. You need to do some ghost shopping and ask their current or past customers for multiple use cases.
As a marketer, you are skeptical of reviews you read online. The review generation activities are heavily biased, but hey, this is marketing too.
This is why you want to check reviews that are in the middle. Five-star reviews can often be promoted by the company, and disgruntled customers tend to write one-star reviews in the heat of the moment. For this reason, it pays to mainly look at the 2-4 star reviews to get a clearer idea of what people think of your competitors' products or services.
Review platforms offer all kinds of handy filters in addition to review score. This is what the filter options look like G2::
Strengths and weaknesses
After you've completed the product overview, it's time to summarize it. Make a note of some strengths and weaknesses using the product information you've gathered so far.
I have the following for Mailchimp:
|Strengthen||It is likely capable of anything that you would expect from such a product.|
|weaknesses||More expensive than alternatives, probably too overwhelming for a beginner.|
4. Familiarize yourself with their orientation and positioning
Do you remember the example of cafes versus restaurants? Although they both sell food and beverages, they don't compete with each other because their focus and positioning are different.
This is an important point. You need to know who your competitors are selling to (target segment) and how they want people to perceive your product and brand (positioning). Only then can you position yourself to reach and attract the target segment in which you are most interested.
How you do that?
The first station is your competitor's homepage:
Just looking at the MailChimp homepage, we know that they offer marketing tools to SMEs. That is their main segment.
To dig deeper, you can read interviews with their C-suite where they often mention who they are serving. Product and pricing pages can also be helpful, as some companies name their pricing tiers based on target segments.
Ads also provide useful insight. They don't have a place for fluff, which makes them a great place to learn more about a company's positioning. First, take a look at the search ads. You can do this by clicking Show Report on the Paid Search tab in Site Explorer.
Like mass marketing channels TV Ads and billboards are another source of insight as their main job is to get the viewer to see the brand and associate it with specific assets. In the digital world, Facebook ads are your second best resource.
You can see the Facebook ads that a company runs when you visit their page. Just scroll to Page Transparency and click "Show All":
Then click on "Go to Ad Library":
Finally, choose a country or apply even more filters to go through the ad variants.
After following the steps above for MailChimp, it is clear that SMBs are their primary target segment. It is also interesting that they are now positioning themselves as an all-in-one marketing solution – not just an email marketing app. That provides leverage for my imaginary company.
5. Research your sales channels
In sales, your competitors deliver their products or services to customers or customers. It is the "place" in the 4 Ps of Marketing (Marketing Mix).
For some companies, distribution is straightforward. Maybe they all sell their products or services directly to the consumer (DTC) on their website, in retail stores, or door to door. This is usually the case with digital products and services.
For others, the distribution can be complex. Multiple wholesalers, retailers and large supply chains may be involved.
Fortunately, you don't have to go too deep here. All you need is an overview of how your competitors are selling their products or services to consumers.
How can you do that
First, take a look at their websites. Can you buy the product directly from there? If so, you are a direct consumer (DTC) Business. This is the case with MailChimp.
For some companies like MailChimp, it's pretty obvious that their website is their only sales channel. This is the case with most digital products.
For others, it's worth doing a quick Google search of their product or service to see if you can buy them from other retailers too. This can also tell you more about their positioning and market.
Take a cosmetic brand like Cowshed, for example.
The search results show that they are selling DTCYou can also get their products from retailers like John Lewis and LookFantastic.com. That tells you not only about their distribution, but also about their positioning. Both are high-end retailers so it's clear that they sell premium products.
6. Immerse yourself in communication strategies
Your main goal here is to find and list your competitors' particular assets, or "brand codes" that are associated with them. These can be:
- Brand colors
Or almost anything that they use consistently in their communication.
Mailchimp does a great job here. Your logo – a monkey on a yellow background – is an icon. The monkey named Freddie is also their official mascot and even has its own fan page. MailChimp consistently uses these special elements in its marketing, as you can see from this Facebook ad:
You win in marketing when people recognize your brand, even if you remove your logo. For this reason, you should create two to four different elements above your logo.
Our competitive analysis template has lines to record the channels dominated by each competitor and general communication deficiencies. Unless you are already in the game, it may take a while to get this information and have to use various tools.
Don't feel compelled to fill out all of this information at once; instead, update your competitive analysis with new and better information over time.
For example with SEOyou can quickly check your competitors' estimated organic search traffic in Site Explorer:
However, this does not tell the full story.
Taking another analysis of Mailchimp's organic traffic, I concluded that they have a really strong brand and that the vast majority of their organic traffic comes from branded keywords. If you look at the screenshot above, you can see the organic traffic estimate in the US is 2.5 M a month. However, after excluding most of the branded keywords, it drops to 125,000 per month.
It's also clear that Mailchimp appeals to a fairly broad audience. Hence, we should only consider traffic with content that is relevant to email marketing. The easiest way to do this is with filters in the Top sites Report. For example, we may exclude traffic from keywords that are not related to email marketing or only include URLs that contain the word "email".
However, don't feel rushed into entering all of this information now. The aim is to get a high-level overview. This means it analyzes organic and paid search traffic, organic and paid social media, display ads, YouTube, earned media, newsletters, podcast sponsorship, and any form of mass marketing TV or billboards and so on.
Your goal here is not to create a plan for each and every marketing channel, but what your competitors are doing to help you define an overall marketing strategy.
If you want to go deeper into that SEO Take a look at our SEO-focused competitive analysis.
7. Do some ghost shopping
The best way to evaluate someone's product and business is by becoming a customer. That's exactly what we're going to do here.
Review the whole buying process
Buy their product or service and use it properly. This could mean adding things to your online shopping cart, shopping at a brick and mortar store, ordering a service, or a combination of everything.
Was the process smooth? Have you encountered any problems or obstacles? Is there anything that you do particularly well?
What are their sales tactics?
Have they tried selling you more products or upgrading to something more expensive? How did they do that? Do you offer discounts? Are they trying to sell you more after becoming a customer?
Answers to these questions are invaluable for both marketing and sales teams.
How is your customer service?
I've worked in an industry where friendly and knowledgeable live support was a truly unique selling point. It contributed to customer satisfaction, customer loyalty, and even the conversion of undecided prospects.
So think about a few scenarios and test your competitors' customer service.
After using Mailchimp for many years, there is plenty of room for improvement here. Support is very limited and sometimes not available at all for free tiers and still rather limited even on paid plans. It is fair to say that below average support is the standard in larger organizations.
How is the onboarding process and customer loyalty?
This is irrelevant for some products. If you're buying a bottle of ketchup from a store, Heinz won't contact you to make sure you're using the product properly, send you recipe ideas, or give you discounts on future purchases.
But it's important for products like Mailchimp. What is the competitor doing to make sure customers keep coming back?
8. Conduct a NERD analysis
It's finally time to put all the data together. We're going to do a simple one NERD Analysis for it. To make sure we're on the same page, here's a definition of NERD Analysis:
ONE NERD The analysis provides a strategic overview of the strengths, weaknesses, threats and opportunities of your company.
Let's keep things simple and take a look at what I came up with for my imaginary email marketing software company:
|Only focus on email marketing -> simplicity for the end user||Not a known brand.||Follow up SMBs and bloggers by focusing on what is important to them when positioning the product.||Tracking customers who are already using other platforms could be an uphill battle. One thing takes time to get used to, and multiple products may be used at the same time.|
|Comparable product with competitors at lower cost.||Significantly lower marketing budget.||Discover the ability to increase email
Deliverability as one of the features.
|Live support available to everyone.||Competitors have a lack of integrations.||We have a more flexible team -> the opportunity to be the first on the market to identify potential upcoming regulatory changes such as GDPR.|
|More personalized communication.||Build great free high-demand tools.|
To make things even clearer, here is the formal explanation of what each column should contain:
Strengthen: Advantages of the business or product over competitors
weaknesses: Disadvantages of the business or product compared to competitors
opportunities: external factors that the company can use to its advantage
Threats: external factors that can cause problems for the company
ONE NERD With the analysis you can easily summarize all the information in an understandable format.
Competitive analysis is an important component in developing a great marketing strategy. However, it is not a one-time thing. I would recommend updating them once a year as you, your competitors, and the market will evolve over time.
The key is to put your insights into action. Because if you get your market research wrong, it will affect your marketing strategy as well as your tactics.
Do You Have Questions? Ping me on Twitter.