Separating your business from the competition can help it stand on its own in your industry. To stand out, it's important to study the competition, including what the competition does better than you or what it doesn't. A competitive analysis provides a written format for sharing via email or with physical copies. Knowing how to create a competitive analysis can help you better compare your own brand to other leading companies in your industry. In this article, we explain how to write a competitive analysis, why it's important to have one and provide helpful tips for a better analysis.
Related: What Is Perfect Competition?
What is a competitive analysis?
A competitive analysis is a comparison of your brand with the leading competitors in your industry. The analysis covers things such as target audience, price points and touch points. Comparing yourself with the competition can help you identify strengths and weaknesses in your own business or products and help you adjust accordingly.
Many businesses use competitive analyses before certain events or changes, including:
Product launches: A competitive analysis can help a business determine if there is any competition in the market for a specific product, how that competition meets customer needs and how the upcoming product may compare in terms of features and pricing.
Business restructuring: When a business restructures itself to become more efficient, a competitive analysis gives the business a better idea of where it might stand in the industry following the restructure. It also helps businesses understand the structure of the competition and how those specific business structures benefit or inhibit other companies.
Entering a new market: When a business enters a new market or a startup begins operating in a specific market, a competitive analysis can provide clarity about the state of the industry and the top three competitors in that space.
Pricing changes: Changing product or service prices can require a competitive analysis to ensure the company's new prices remain competitive while maintaining the bottom line.
Business plans: Business plans contain competitive analyses to show potential investors how your business stands or how it may stand compared to other major players in the future.
Why is it important to complete a competitive analysis?
Writing a competitive analysis is an important step for a business in any phase of its development. The competition helps form the backbone of your business' industry. Knowing about your competition's performance, how it serves customers and what techniques it uses via a competitive analysis can give you perspective on your own place in the industry.
Other businesses that are direct competitors may present a challenge for your business. Since they're actively working to ensure customers choose their brands over yours, it's crucial to understand how they're operating to prevent an overlap of services. A written competitive analysis is a thorough way of analyzing the competition and allows for better circulation of the information. Many investors require a competitive analysis in your business plan to better understand how your business plans to deliver value to the industry.
How to write a competitive analysis
Writing a good competitive analysis means performing extensive research and following a strict process to ensure accuracy and professionalism. Here's how to write a competitive analysis for any business:
1. Perform research
Gather research for your competitive analysis. Proper research provides accurate information that supports the credibility of your competitive analysis. Oftentimes, competition research includes information on the following terms:
Competitor prices: During your research, it's important to make a thorough comparison of the competition's prices for products or services similar to yours. Research why the competition prices their items the way they do. In addition, analyze pricing changes and what customers may think of the competition's prices.
Market growth: Perform research on the competition's grown in the market since its inception. Identify key weak points or downtime, share prices and gaps your own brand can take advantage of.
Marketing efforts: Determine how the competition markets its products and where the traffic comes from. Research competitive keywords, web traffic numbers and ad campaigns to determine where to advertise to reach the same customers.
Positives and negatives: Determine the competition's most positive aspects including pricing, product or service quality and customer service. You can also look at the negative aspects of the company to find gaps where your business can thrive. You can use the strengths, weaknesses, opportunities and threats (SWOT) format to perform this step. It also works for a self-analysis.
2. Create a customer persona
Your customers look, act and make purchasing decisions in specific ways. It's important to understand not only who your customers are, but also how they make decisions and which platforms they use to communicate. The competition likely has data on these items already, which you can acquire during your research phase.
Create a customer persona for your own business. This requires a thorough analysis of your products or services. Determine who's buying yours and the competitions' products, where they're buying them and what marketing channels are the most effective at driving customer traffic.
3. Perform a SWOT analysis
A SWOT analysis is an important part of the writing and research process. Perform this type of analysis to summarize the company's fundamental strengths and weaknesses compared to the competition. It also looks at market opportunities for company growth and emerging or present threats for the company or industry itself.
4. Identify the competition's advantages
Your competitive analysis shows potential investors what advantages the competition has on your brand. This can include production capacity, liquidity and capital and current investors. Identify and detail your competition's advantages to provide an honest and transparent analysis.
5. Formulate a growth plan
A competitive analysis includes a growth plan for your business so potential investors know how you plan to leverage your advantages to increase sales and business growth. Create a growth plan and include information on things such as upcoming developments, new products and marketing plans.
Tips for writing a better analysis
Here are some extra tips for writing a better, more professional analysis:
Use a template for professionalism and organization. Using a writing template can help first-time analysis writers create a professional competitive analysis. It also helps keep the presentation consistent and professional throughout by standardizing fonts and spacing.
Implement visual aids. Use visual aids such as graphs, charts and pictures. Doing this helps increase the visibility of important points and helps support the facts in your competitive analysis.
**Proofread your competitive analysis.** Before completing your analysis, review it and make changes to any spelling or grammar errors, as well as any mistakes made in your visual aids. Proofreading can help you present a more professional analysis.