So, you just started your business and you’re yet to carry out a competition analysis in order to study your competitors? Fret not, this guide will show you a step-by-step process on how to do just that.
What is a competition analysis?
Competition analysis is a set of strategies used to identify your competitors as well as their products, services, marketing tactics, sales processes and their overall business operations in order to ascertain their strengths and weaknesses, so you can be one step ahead of them.
Carrying out a competition analysis to study your competitors can be an expensive feat, that is why I decided to create this article, highlighting the step-by-step process and tools needed to conduct your study for FREE!
Importance of studying your competitors
- It helps you learn your competitions’ failures and wins.
- It will help you understand what their products or services are, how they conduct their marketing, how they maintain their customers’ loyalty, their human resources (staff) skill, the prospect types that they target, and also study their executives etc.
- It will make you understand your competitive advantages.
- You will be able to understand market specifics. Where you hold the advantage(s) in the marketplace.
- With competition analysis, you can best target your efforts on the right market(on the market specifics), which should increase your sales yield and returns.
- You will be able to know who your competitors’ really are. This ensures that you don’t rely on guess work.
- With competition analysis, you can design your communications plan to maximize your advantages
- It will help you create business strategies, products and services that are better than that of your competitors.
Don’t outrightly copy your competitors in the process of learning from them. Learn to distinguish your brand from the rest. Be committed to study anything that will bring growth to your brand when applied.
Note: this article is a long and detailed one, so you might wanna bookmark it.
1. Determine who your competitors are
This is the first step in carrying out your competition analysis. Here, you’ll need to identify who your competitors are.
You shouldn’t try to determine every single competitor you’ve got as it would be extremely time consuming and irrelevant, rather you should try to find the most important ones.
Ideally, you should conduct some basic research to identify at least 3 of your competitors whom you would be carrying out your analysis on.
If you run a local business or a business in a small niche and don’t know your competitors, the first way to find them would be by performing a simple Google search… the businesses running ads for your search term are your competitors.
Let’s assume you run a web design agency based in Chicago. Head over to Google and search for ‘web design agency in Chicago’. As you can see below, these companies are running ads to appear in the top results, thus, they are Chicago-based web design agencies.
The second way to determine your competitors would be to look at businesses similar to yours on Google my Business. How do you go about this? Simple! All you have to do is search for your type of business on Google.
Let’s assume you run a restaurant, visit Google and search for ‘restaurants in New York’. In the screenshot below you’ll see the profile of restaurants located in New York, as well as their locations, pricing, ratings and their websites.
A third way to do this would be to visit Yelp and utilize their search filter, companies that popup in the search results would be your competitors… if you’re a startup, Crunchbase would be a good alternative.
PS: If you’re starting your business today, you should also study the big boys(the big companies). Competition analysis isn’t restricted to businesses the same size as yours… if you decide to start an eCommerce business today, carry out a competition analysis on Amazon also, because like it or not, they’re also your potential competitors.
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2. Study their social media presence
Almost every company these days partakes in social media outreach and you need to determine the social media presence and activities of your competitors, so you can ensure you’re in a better position.
Try to find out how your competitors utilize social media to promote their business. Do they place social sharing buttons within their posts, landing pages, homepage, product pages or footer of their site? Observe their site, so you could apply the same strategy to your own site.
Find out the social media platforms your competitors utilize and observe their engagement rates on these platforms.
In this step of your competition analysis when studying your competitor’s social media presence, you would want to note the following metrics
- Number of followers or fans
- Frequency of posting
- Engagement rates (how often customers like, comment, share, retweet and repin their posts)
- Types content they post on social media (original posts, images, videos, facts shared posts etc)
Having gathered the aforelisted data, it is imperative you grade it, compare it to yours and make moves to ensure you’re one step ahead of your competitors in terms of social media presence.
3. Determine their target market & customer base (demographics, interests and number)
When carrying out competition analysis, it is very important to determine your competitors target market as well as their overall customer base.
This step helps you better understand and know whom to create your products/services for. Once you’re able to grasp the appropriate target market for your business, your marketing efforts won’t be wasted… and it’ll help you yield a positive ROI on your customer acquisition strategy.
In this process, you would want to determine the location, age, interests, gender as well as the total number of your competitor’s customers, otherwise known as their target market.
How do you determine the aforementioned? Read below
Step 1: Visit the tool Ubersuggest and type in the name of your competitor as is shown below. For the sake of this example, let’s assume your competitor is Twitter
On the next screen, scroll down a bit and you’d see the location of their customers with the United States, Japan and UK being the top 3 locations.
With this step, you have deciphered the location of your competitor’s customers!
Step 2: Now, we will determine the interests of your competitor’s customers.
Head over to SimilarWeb, type in the name of your competitor in the search bar… in this case, Twitter, as is shown below
Scroll down, then click on the ‘Audience interests’ tab. Voila!… there you have it, the interests of your competitor’s customers, as you can see in the screenshot below
A word of advice… now that you’ve deciphered the interests of your competitors, you should use these interests for targeting when running your social media ads, this way every penny you spend on your campaigns won’t be wasted due to targeting the wrong audience.
Step 3: Here, we will pinpoint the total number of customers (users) your competitor has, as well as their age group and gender.
Visit Statista and type in Twitter in the search bar, then click the search button.
Click on the first search result as shown below.
On the next page, scroll down to the ‘User demographics’ tab.
Now, you will see ‘Twitter: distribution of global audiences 2020, by gender’ and ‘Twitter: distribution of global audiences 2020, by age group’… click on both (open them in New tabs)
As per the screenshots below, these are the Gender and Age groups of your competitor, whom in this case we’re assuming to be Twitter. Pretty easy, right?
With all the data you’ve obtained so far, running your marketing campaigns should be a breeze, as you now easily know whom to target.
4. Determine the number of employees they have (their workforce)
Ideally, you need to have an idea of how many employees your competitor has. This helps compare their labor force with the level of productivity the company has. For example, Reddit has only 400 employees but makes around $100 million in revenue… that’s positive productivity.
You can determine the number of employees a company has by utilizing Yahoo! Finance, with this you can also find out the executives of your competitors as well as it’s board of directors.
We’ll use Amazon as a case study. Head over to Yahoo! Finance and type in ‘Amazon’ in the search bar, then click on the first suggestion as is shown below
Click on the ‘Profile’ tab. Here, you’ll see the company’s info including it’s Address, Phone number as well as it’s number of employees
… if you scroll down a bit, you’ll be able to see it’s top executives alongside their salaries.
You can also determine the number of employees your competitor has by checking out their company’s page on LinkedIn
Note: Pinpointing the accurate number of employees of a private or small company can be extremely difficult, and at most times, impossible! That’s why I decided to use a publicly quoted company to show this example… it is for this reason ideal to also study a public company as your competitor when carrying out a competition analysis due to the fact that data for public companies are well publicized.
5. Find out their investors, funding amounts and funding rounds
Of course, it is imperative you know whom are investing in your competitors, as well as how much is being invested into them.
If there are certain VCs and angels in your industry who haven’t invested in your competitors, you should seize the opportunity to pitch those VCs into investing in your company.
This is a must, especially if your business is a startup.
To find out the investors and funding rounds of your competitors, you can use Crunchbase.
Assuming your competitor is Doctor On Demand. Head over to Crunchbase and type in ‘Doctor On Demand’ in the search bar… then click on the first search result
And just like magic you’ll see the total funding amount invested into the business as shown below
Click on the “Funding rounds” tab and you’ll see the total number of funding rounds of your competitor, which in this case is 6
In the ‘Funding Rounds’ tab, you’ll also see details of each funding round entalliling the number of investors, the amount of money raised, the lead investor(s) in each round as well as the date.
Scroll down to the ‘Investors’ tab to ascertain the total number of investors your competitor has as well as the names of all their investors
With this information, you should know the right VCs, angels and investors to approach and convince to invest in your startup.
Bonus tip: Not that it is needed, but in the ‘Founders’ tab, you can find the people who own the startup.
6. Estimate the revenue, profits and losses of your competitors
How much are your competitors making? Are they making profits or losses YoY(Year on Year)?
All these are things you need to find out. It will help you understand the profitability of your type of business.
You can find out the revenue and key financials of public companies by looking at their annual reports which are readily available online. However, this method isn’t ideal for everyone especially if you can’t read a balance sheet or income statement… but, if you’ve got a solid experience in accounting and business finance, you may follow this route.
The most simple way to pinpoint your competitors financials would be by using Yahoo! Finance.
Visit Yahoo! Finance and type in ‘Netflix‘ in the search bar, then click on the first suggestion as is shown below
Click on the ‘financials’ tab. Here, you’ll see the company’s financials including it’s revenue, profits and losses.
As you can see in the income statement, your competitor, which in this case is Netflix has a revenue of $21.4 billion, with an operating income of $3.1 billion.
With this you’ve been able to pinpoint how much money your competitor makes. Feel free to browse through it’s financials as much as you like
Note: Determining the revenue of private companies is very difficult —in fact, mostly impossible —, this is due to the fact that they’re not mandated to publicize their financials as opposed to public companies. So, in a scenario where your competitor is a private company, you might wanna ignore this step.
7. Determine the market share of your competitors
According to Investopedia, the market share of a company is it’s sales which is expressed as a percentage of an industry’s total revenues.
How do you determine a company’s market share?
It can be determined by dividing the total amount of revenue a company makes by it’s industry’s total revenues, over a fiscal period.
Previously, I explained how you can estimate the revenue of your competitors.
I will illustrate how to determine the market share of your competitors by using Wells Fargo as a case study.
Wells Fargo has a revenue of $85.06 billion and the US commercial banking industry has a total revenue of $682 billion. So, in order to determine the market share of your Wells Fargo, you will divide $82.06 billion by $682 billion and then multiply the result by 100
That is, $82.06 billion ÷ $682 billion = 0.13
0.13 × 100 = 13%
This means Wells Fargo has a 13% market share in the Commercial Banking industry in America.
In order to determine the revenue and statistics of industries, you can utilize IBISWorld, they provide industry reports and research.
You should use this market share to determine how competitive your competitors are, and also to estimate how big they are in relation to other players in your business’ industry.
9. Determine the marketing strategies of your competitors
Yes, you need to find out the strategies which your competitors use in marketing their products and services.
Are they using
- Social media marketing?
- Content Marketing?
- Search Engine Optimization?
- Search engine marketing?
- Email marketing?
You need to find answers to all these questions, also you should note what channels they use in carrying out these marketing strategies be it Facebook, YouTube, Google etcetera
You should also note
- What keywords your competitors buy on adwords
- What keywords they rank for in SEO
- The types content they post
- What they are advertising and who they’re advertising to
Step 1: You may use a tool to like Ubersuggest to find out what they’re ranking for in search engines
Scroll down to the ‘SEO KEYWORDS’ section. Here you will see what keywords they’re ranking for, what position they are on the search engine results and also the number of visits they’re getting for such keyword(s)
Step 2: To find out what they’re advertising and who they’re advertising to on social media, visit facebook and search for your competitor’s page, let’s use McDonald’s as a case study(that’s assuming you run a similar fast food business).
Search for McDonald’s on facebook, click on their page as shown in the screenshot below
Scroll down a bit and click on ‘page transparency’,
… after which you would click on ‘Go to Ad Library’ in the ‘Ads From This Page ‘ section as shown below
Voila! Now, this section would let you see what they’re advertising, the countries being targeted for marketing by McDonald’s as well as their marketing campaigns. This section ultimately shows where and who your target market is.
Click on a country to see their advertising campaigns for that location as shown in the screenshot below.
You could also filter the ads based on the platforms, impressions etc. Be sure to play around it till you get a full grasp of their marketing.
With this info you should know the market to target for your marketing campaigns as well as for the production of your goods/services. Also, should have an idea on what to advertise when carrying your marketing campaigns.
10. Determine their business model, products or services
You need to evaluate your competitors in order to determine their business model, and of course, you need to understand what a business model is and it’s types
How are they making money? How do they operate? These are things you also need to note. With his information, you’ll have an idea of what to implement in your business to maximize it’s ROI.
By carefully studying your competitor’s website(s) you should be able to pinpoint what services or products they offer. Heck, this shouldn’t be difficult for you since you’re also offering something similar.
Create a dummy email account, visit their website and message them, request a quote, heck, you could even place a call to them or purchase their product(s)… while doing all these, you should carefully observe the whole process and know how they operate.
I personally do this a lot when studying my competitors, it helps me understand and get a clear view of how they operate.
11. Determine the pricing of their products or services
This is pretty easy. You can find out the price of your competitor’s products/services by visiting their website and checking out their product pages or pricing section.
Once you’ve ascertained this, you should compare it with yours so you can ensure you’re on the right track in terms of your products/services’ pricing.
If you’re just starting out and finding it difficult to set a price, you should check out your competitors pricing, so you can have an idea of how much to set up as your price too.
12. Find out their strengths and weaknesses
Yes, during your competition analysis you should analyze your competitors’ strengths and weaknesses.
- Where they have an advantage over you
- Where you have an advantage over them
- What they’re excelling at
- What you could offer that they don’t
- What they’re weak at
- Opportunities that they haven’t tapped into
Finding out the aforementioned will help you get a bird’s eye view of your competitors strengths and weaknesses. But, it takes a lot of research and a considerable amount of time to be able to put all the pieces together.
Soonest, I will be releasing an article on how to perform a SWOT Analysis (analyzing the strengths, weaknesses, opportunities and threats of your brand), subscribe to our newsletter to get notified when I release it.
What is the ultimate purpose of studying your competitors? Simply put, it is for the sole purpose of being one step ahead of them.
Normally, it can be expensive to carry out a thorough analysis of your competitors but in this article I’ve provided an extensive guide on how to do it for free alongside highlighting the necessary tools needed, with examples as well. With all this information, I see no reason why you shouldn’t study your competitors now.
You should take this very seriously so you can best know how to run your business, know what to implement, know the kind of customers to target and of course, to know the kind of moves your competitors are making, so you can adjust accordingly.
Bookmark or save this page, so you can be going through it step by step as you’re analyzing your competitor(s).
I’m the cofounder of WealthOnPoint, and business is akin to me just as blood is to humans. Being an advocate of business literacy, I’m the go-to guy for matters concerning business, marketing & investments. My mission: I wanna take your business to higher heights, the question is; are you willing to let me?