Competitive Analysis: What It Is and How to Conduct One?

Competitor analysis is research that identifies and describes the strengths and weaknesses of all existing alternatives to a given product or service. It outlines how each player attracts and retains customers, their unique selling proposition (USP), and their pricing strategies.

Understanding the competitive landscape can help you identify market spaces that are underserved by existing players and that are good opportunities to target.

Why is Competitor Research Important?

A deep understanding of the existing alternatives is a solid foundation for:

• build your product positioning
• identify a customer segment in which you are in the best position to win
• Understand how to differentiate your business with a unique value proposition.
• How to build a defensible business through unfair advantages
• Create a competitive pricing strategy

For example, Airbnb started as an alternative to hotels that cannot accommodate peak demand during big events. To address that need, the company offers affordable stays in spare rooms on air mattresses provided by property owners. This offer might not be acceptable for a week-long family vacation, but it is just what you need when looking for a night's stay for a concert when all hotel rooms are sold out.

How Is Competitor Research Used in Businesses?

In a business setup, competitive analysis is done to inform the business strategy when starting a new product or business.

Analyzing your competitors will help you understand industry trends by revealing common patterns across market players. It will also help with prioritizing product development, focusing on features that will make the biggest difference for your business.

Pricing strategy is another aspect that is greatly impacted by the competitive landscape. This is not only limited to how much you charge but also for what, at what regularity, payment methods accepted, etc.

Content marketers also benefit from a deep understanding of the competitors’ positioning and channels in order to create a marketing strategy that is competitive and has the highest potential to win.

How to Conduct a Competitive Analysis: The Icanpreneur Way

Step 1: Gather your data

There is an abundance of market analysis and competitor comparisons, but they are overly generalized. Competitor analysis is useful for information on your business strategy in the context of the customer segment you focus on and the specific problem you want to address. In contrast, market analysis usually compares products under whole product categories, like “Agile Management Software.” The needs of a five-person startup team for agile management differ significantly from those of an enterprise company with 5,000 employees.

That’s why you need to gather your own data through conversations with representatives of your customer segment. This will uncover unexpected insights and might reveal competitors you didn’t think of and are not part of any market analysis (see below for the TurboTax example).

Customer problem interviews focus on exploring the past experience of your target audience in solving their problem. This type of research specifically focuses on identifying:

• What is the customer problem, and what words customers use to describe it
• How big is the problem and what is the impact for customers of not solving it in the best possible way
• What existing alternatives (read direct and indirect competitors) are used today, and where do they fall short
• What criteria do customers use to pick a solution to their problem, and what factors are dealbreakers for their buying decision

The Icanpreneur platform offers an interview script specifically tailored to your business idea that you can use to lead the conversation with your potential customers and ensure you have all bases covered.

Step 2: Identify Competitors

Based on your conversations, there should be emerging patterns with competitors. List all existing alternatives, even if they are not specifically targeting your customers or are not designed to solve the customer problem you are trying to solve.

Suppose you plan to launch a gardening service business, but your target market prefers to motivate their kids to mow the garden. In that case, that’s a really important insight for your business strategy. Maybe you can think about gardening training for kids.

Step 3: Identify strengths and weaknesses

Once you have listed all competitors, describe their strengths and weaknesses. The SWOT framework is a great tool for this.

Step 4: Understand their strategies

For those that you think are your biggest competitors, dig deeper and analyze their marketing and pricing strategies.

Step 5: Position your product or service on the landscape

Once you have a complete map of the competitive market, identify the niche you think is most underserved and are in the best position to win. If competitors focus on selling to other businesses, you can target the consumer segment. Choose two factors by which you can position yourself uniquely compared to your competitors. Those might be:

• Ease of use
• Customization vs opinionated approach
• Price
• Product vs Platform
• or specific features or functionalities of the product

Templates and Tools for a Competitive Analysis

Readily Available Market Analyses

Many market analysis companies publish their findings for given markets. The most popular companies are Gartner, CB Insights, and Forrester Research. They provide overviews of the competitive landscape, technology trends, and vendor positioning across almost every industry.

These analyses are overgeneralized, which is problematic in the context of starting a business. For a report to be useful, it needs to focus on a specific customer segment and customer problem. Otherwise, it is not scalable and will apply only to a small audience.

Make Your Own Research Using Icanpreneur

Nothing will beat creating your competitor analysis based on insights that you gathered from your potential customers. Why? Because the research will focus specifically on the problem that you want to solve and the type of customers you will be addressing.

Even small differences in how a question is asked and to what group of people can generate significantly different results. That’s why relying on data gathered by a 3rd party should always be used extremely cautiously.

Icanpreneur is a platform that can help entrepreneurs conduct their competitive research using customer interviews. The platform handles the full process of the research, from planning and preparing a customer-tailored interview script specific to your business idea to automatically analyzing and extracting findings and insights from your conversations. You can choose between different kinds of interviews, like win/loss interviews or problem discovery interviews, which are both a great source of information about competitors and their competitive advantages and weak spots.

Using Icanpreneur, you can be confident in the conclusion of your research as it will be based on what your potential customers tell you.

SWOT Template

The SWOT template has four quadrants—Strengths, Weaknesses, Opportunities, and Threats—which help add structure to a company's analysis. Strengths and weaknesses are internal factors that describe a business's key assets and weak spots. Opportunities and threats are external factors that can affect a company's performance positively or negatively. This template benefits from focusing on diverse factors providing a complete overview of your competitors.

SEO and Digital Marketing Tools

Suppose your business will have an online presence, especially if you rely on organic traffic as a traction channel. In that case, it’s important to assess the competitive landscape online.

Tools like Ahrefs and Semrush can give you an overview of the main websites ranking for the keywords you will be competing for and the amount of traffic. This will help you plan your go-to-market strategy.

Common mistakes

Focusing on direct competitors only

In many cases, the best existing alternative will not be your direct competitor but a product, service, or even a do-it-yourself approach that solves the customer problem, even though it’s not explicitly designed for that purpose.

One of the famous examples is TurboTax - a product that helps individuals fill in their taxes. Although many companies built similar products, they targeted businesses, not individuals. In the B2C segment, TurboTax's largest competitor was pen and paper. And this is the player they focused on beating.

Ignoring customer perception of competitors

Some product leaders spend most of their time comparing their products and competitors head-to-head by analyzing features, specifications, and other non-functional requirements. This is great, but it ignores one of the most important factors for competitive differentiation - the customer’s perception. You may have a product that beats all your competitors by far with features, price, and product specs, but the customer might still choose a different product because:

• They don’t know about your product.
• What you offer in addition is not appreciated or needed by them
• Competitors might position themselves better with company image and other non-product-related approaches

A textbox example is the battle between Zune by Microsoft and Apple's iPod for portable music players. Zune lost that battle even though it was the device with a better price, higher music quality, and unique features like wireless music sharing. The iPod won because consumers appreciated the slick design and intuitive user interface.

Too much thinking about competitors

You will always play a catch-up game if you only consider your competitors. Strong business leadership comes from understanding your own strengths and building a vision for your product that brings value to customers and differentiates you from competitors.