How to Conduct a Competitive Analysis for Your Online Business
I am sure you have heard the phrases, always be one step ahead of your competition and keep your competition closer.
How exactly do you accomplish that – especially if you are launching a new business or diversifying into a new market?
By analyzing your competition and monitoring them on an ongoing basis, you will get to know their behavior, enabling you to anticipate their actions and stay one step ahead.
This is known as competitive analysis.
What will you gain? You will develop your differentiators and discover what will give customers a reason to pick your products over everyone else’s.
Why is it Important to Research Competitors?
The research you gather about your competitors is often referred to as: “Competitive Research.”
It can be as simple as SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis or just knowing who is in the ring. However, to ensure sustainability of your business you will need to research further.
Competitive research is crucial to your success as a business because it informs you of trends and competitor marketing strategies. Allowing you to adapt accordingly.
To make sure you set your online business up for success, you’ll need to do a deep dive on the current competitive landscape.
How to Conduct Your Competitive Analysis
Although performing a competitive analysis isn’t rocket science, it does go beyond the few simple Google searches needed to identify your competitors.
Identify your competitors.
Whether you want to admit it or not, your competitors are out there and they’re likely just as hungry as you are.
Afterward, you’ll be able to:
- Capitalize on their weaknesses and strengths to help start your business,
- Have a better understanding of the landscape and learn how to best position your business for success, plus
- Identify, understand and keep tabs on your competition so you never have to worry about them sneaking up behind you.
This process is known as competitive intelligence gathering. Consider using some of Porter’s five forces to identify competitive substitutes.
Find Your Competitors
There are many ways to identify key competitors in your industry, but Google and Amazon will likely be where you begin your research.
Start with a simple search for your business name, product ideas and overarching business idea.
From there, explore your competitor’s digital footprint by looking into:
- Content and social media,
- News mentions,
- Support threads and reviews, and
- Niche organizations and online communities.
Your ultimate goal at this stage should be to cast a wide net and get a comprehensive view of the competitive landscape.
Categorize Your Competitors
As you find competitors, you’ll want to categorize them into various levels, from primary competitors to those you still need to keep on your radar — like secondary and tertiary competitors.
Here is an easy way to categorize sellers in your industry:
- Primary Competition: These are your direct competitors, which means they’re either targeting the same audience or have a similar product — or both.
- Secondary Competition: These competitors may offer a high- or low-end version of your product, or sell something similar to a completely different audience. If you’re selling Timex watches, a secondary competitor might be a Rolex retailer.
- Tertiary Competition: This category includes businesses that are tangentially related to yours, and really comes in handy when you’re looking to expand your product catalog. These could be related products and services that are trending, as well as businesses that may be beneficial to partner with further down the line. For instance, if you sell jewelry, a tertiary competitor may sell gems and stones.
As you conduct your research, be sure to keep things organized in an easily accessible spreadsheet or database.
When documenting your competitors begin by tracking the basics:
- Name of store,
- Mission statement,
- Product offering,
- Strengths and weaknesses of their business, and
- Category of competition.
Examine your competitor’s website & customer experience.
Once you’ve identified your competitors, you’ll want to analyze their websites.
To start, take a close look at the following items:
- How solid is their product photography? How do they display their products and help communicate details?
- How detailed are their product descriptions? What information do they include? What information is missing?
- Where are their calls to action throughout the online shopping experience? Are they obvious or do they get lost due to a poor color scheme or positioning?
- Are they trying to build an email list with a newsletter sign-up prompt? How prominent is it?
- Where are their social media icons positioned?
- Do they have a blog? How frequently do they post? What type of information do they tackle?
- Is their site optimized for mobile?
- What methods for contact do they offer?
- How long does it take them to respond to email, live chat and contact form submissions?
- Do they have an abandoned cart saver feature? If so, at what cadence do they send the emails and what messaging is included?
- What information is included in their marketing banners and callouts? This may help you start uncovering their competitive positioning within the market.
- How frequently are they running promotions? What benefits do those promotions provide to their customers and potential shoppers, as well as their business?
Again, these are just to get you started.
Each website will be different depending on the market they are trying to reach and the products or services they are selling.
The goal here is to not only get a handle on their strengths and weaknesses (which can also be done with a SWOT analysis), but to help you start thinking as a dynamic business owner.
Identify your competitor’s market positioning.
By identifying your competitor’s positioning strategy, you’ll start to get a feel for your market’s demands and expectations.
Take a look at their website and marketing messaging and ask the following:
- What are customers really buying from them? Are they going for the price? Experience?
- How are they differentiating their product from their competition? What features and benefits do they highlight the most in their marketing copy?
- In their opinion, what makes their product or service unique?
- Ask why customers are buying from them?
These questions will help you understand to whom your competitors are speaking and how they position themselves within the market, which will pay dividends as you work on how you’ll position yourself against or alongside them.
To gather as much information as possible, be sure to:
- Sign up for their newsletter: Get an understanding of their business and examples of communication, which say a lot about the competitive environment. If you’re interested in looking at their emails without signing up for a newsletter, consider a competitive email marketing monitor like MailCharts.
- Subscribe to and follow their blog: See what types of content they are covering and at what cadence.
- Follow them on social media: Get a feel for how they speak to and serve their customers.
- Purchase a product: Check out the product itself, but also note the time it takes to ship and how their packaging looks.
- Put an item in your cart and abandon the checkout process: Monitor whether or not they send an abandoned cart email series and note what language and structure they use for their emails.
Look at their pricing strategy.
Your pricing strategy is going to be one of the most important aspects of your online business — and potentially a competitive advantage.
There are several factors to consider when setting prices for your products.
A good place to start is to look at how your competitors have priced their products. You’ll learn what your target market is willing to pay and get an understanding of what prices might work well for your business. However, how your business and brand are perceived will ultimately determine your price point.
Be sure to look at their prices across a variety of channels. Your prices don’t necessarily have to be less than your competition, you can use marketing communications to price build.
Look at the information you gathered on market positioning and figure out what it is you’re actually selling to your customers.
Your target market may be willing to pay more for peace of mind, expedited shipping or just overall website experience.
Remember to consider all the research you’ve been completing around general startup and business costs as we’ve walked through in previous posts.
You must maintain profitable margins in order to run your business. You cannot compromise in this arena.
Problem solve for shipping.
As with pricing, at this point in time, you’ll just want to gather intel as to how your competition handles shipping, as well as how they communicate expectations.
Because shipping is a top reason for cart abandonment, having reasonable, competitive shipping costs is extremely important for your online store’s success.
If you can’t afford to set competitive shipping prices at the start, what little things can you offer or do differently to set yourself up for success? Some ideas include:
- Gift cards.
- Giveaways on social media.
- Tiered loyalty program.
- Offer exceptional customer support.
Check how well they are doing, look at their reviews and recommendations.
Honesty is the best medication – and the #1 testament to customer satisfaction.
Take the time to find as many reviews of your competitors as possible, including everything from product reviews on their website to business reviews on social media to comments left on their blog.
Get a temperature check from their audience as to how healthy and client-centric their business is and decide if it’s a strength or weakness you can capitalize on.
You may see an opportunity to let your customer service shine above the other players in your competitive environment.
If you find a lot of reviews on a product similar to one you’ll sell, it’s a good sign that people are interested in buying it.
If the reviews are from customers who aren’t happy with the service provided, the condition in which the product arrived, or the product quality, those could be ways to help differentiate your business.
Review social media.
With social media on the rise, it’s essential your business capitalizes on the opportunity to outshine your competitors on leading platforms — like Instagram and Facebook.
Looking at your competitors’ social media accounts has multiple benefits.
If they have many followers, and especially if they are actively engaged, it’s a good sign that there is a market for your products.
Plus, you’ll get a good idea of how customers feel about their business, and see what works well and what doesn’t for engaging with your own client base.
Of course, if a competitor does social really well, it also means that you’ll need to step up your game and come up with a new way of engaging your market — or possibly choose a different mix of customers all together.
If your competitors don’t have a decent following, it could indicate that the market is weak, your target market doesn’t use social media, or simply that there is room for your business to take the lead in engaging with customers.
Take a look at all of the social media channels you can think of — including Pinterest, Facebook, Instagram, Snapchat, Reddit and Twitter — and ask:
- What is their social media presence like overall?
- Which social media channels do they use the most?
- How do they speak with their client base?
- How often do they interact with their following?
- How frequently do they post something new?
- Which social media channels are they missing? Is there opportunity for you there?
- What are they posting?
- What percentage of the posts are about their business?
- What percentage is solely meant to increase engagement or gain followers?
Last but not least, check out some alternative social channels as well.
While digital communities are thriving, offline touchpoints also serve as great indicators of the engagement of a brand’s community. If one of your competitors is hosting a local event, attend and see firsthand what customers value and support.
Use these bonus items and tools for competitive analysis.
- Get the gritty details: Want to know how long your competitors have been in business? How about the date they registered their domain, their contact information, server statistics and more? Check out WHOis.net.
- See if they’re hiring: Find out what positions they’re hiring for, if any. This can indicate the health of the business, plus give you a feel for the company culture.
- Find out about funding: Are they seeking additional funding? This can tell you how well they’re doing and give you ideas on how to position yourself. Be sure to look on Crunchbase for their investment portfolio. Also, check out places like Indiegogo and Kickstarter.
- Stay updated: Google Alerts will send you email updates based on keywords. Setting up alerts for your competitors in addition to your own business will help you keep up with any news you need to know. Also set up alerts for industry terms to monitor new market developments that could affect your business.
Remember, regularly performing a competitive analysis doesn’t mean you need to watch your competitors like a hawk or let them keep you up at night, but you should keep tabs on how their businesses are changing and watch for new challengers in your space.
The goal for your business should be to always be one step ahead. These competitive analyses will serve as a key factor when you’re creating strategies to dominate the market.
With all this information, you can put together a competitive strategy that highlights your strengths — which generally align with weaknesses from your competition.
Now you’re one step closer to claiming market share and growing sales.
If you need support or further knowledge please feel free to reach out and connect for an initial free consultation.
July 29th, 2020