What we’re talking about
A direct competitor is a business that offers the same product or service as you, to the same target group of people. This is about first identifying who your competitors are, and then the essential info when it comes to their product or service, brand, sales and marketing strategies, customer experience, and so on. Ultimately, the aim is to analyze their strengths and weaknesses and capitalize on wherever it is you stand out, or see which elements of their operation you can riff off and integrate into your own. This process might come early on before you’ve even launched your business, but it’s something that should really be done on an ongoing basis as new competitors come on the scene and businesses grow.
Why it’s important
Competitor analysis can help you measure your own growth; if you want to stand out in the market, you need to know where you sit currently, what you’re up against and what might be waiting in the wings. By identifying your competitors’ weaknesses, you can find gaps in the market, positioning yourself to customers as a solution to those same problems. By zooming in on their strengths, you can make sure you’re keeping up with how your sector is progressing and remain competitive. Although you shouldn’t be outright copying anybody, there’s nothing wrong with taking inspiration from others – it can help shape product, strategy, marketing or other facets of your business.
According to business analyst CB Insights, getting outcompeted is the chief reason for failure in 19% of startups. And with a recent survey from market intelligence platform Crayon suggesting that 60% of small businesses saw revenue jump as a result of investing in competitive intelligence, this isn’t an area you can afford to neglect.
Things to note
Frame it as your customers’ ‘jobs-to-be-done’. A useful way to think about direct competition is via the ‘jobs-to-be-done’ theory: that customers don’t choose products or services, they choose solutions to jobs they need to get done, or needs they want to fulfill. A direct competitor is therefore a business that does the same job as you in a similar way. Consider the multiple jobs that you and your competitors jointly fulfill – and note how quickly, accurately and inexpensively you do this, as well as how clear this is made in marketing materials.
Do it often. Businesses change; industries change; consumer needs change. Once you’ve established your business, you’ll need to figure out how competitive the space you’re operating in is (or how likely competition is to derail your business), and perform research accordingly. It’s probable that this will be quarterly or yearly. Likewise, competitive analysis is useful when you’re making big decisions – such as designing new products or services, or launching marketing campaigns.
Don’t become obsessed. At the same time, don’t agonize over it. The quality of your product and the needs it meets should still take center stage. This research should be a factor, rather than the critical driver, in your decisions. You’ll lose the soul of your business if you spend all your time obsessing over what others are doing – and if you simply try to imitate, beyond the legal ramifications, it’s unlikely it’ll ever measure up to the original.
How to research your direct competitors
1.Get organized. Start with a clear view on how detailed you need to get. Set some end goals for the research process (eg, be confident that your product won’t be priced out), and then design the system you’re going to use to achieve these goals. This could be as simple as a spreadsheet with the appropriate columns.
2. Understand your own profile. To identify your competitors and highlight the relevant info, understand your business to a tee with a simple SWOT (strengths, weaknesses, opportunities, threats) analysis. Ask the same questions of yourself that you would of your competitors.
3. Identify your competition. This will be partly intuition, but don’t just go with your gut. Ask your customers for the other options that came up before they chose you; search for keywords that outline what you do online and on social media; scour media companies that talk about your industry. Depending on how crowded your market is, draw up a list of five to 10 competitors.
4. Look for the company basics. Get clear on the structural fundamentals – including years in operation, founder info, number of employees and the different roles, fundraising info (if applicable) and company culture. You can use some of this information to benchmark your growth; some will show you where you could look for investment, and how you can attract the most talented employees.
5. Look into their product or service. Now you understand the cogs turning behind the businesses, research what they’re putting out there. Take a deep dive into their product or service suite – noting stuff like product features, pricing strategy, manufacturing info, distribution plan, and their product or service’s target user. Think about what their product strengths and weaknesses are.
6. Look into how they market their brand. Move beyond product to their outward-facing brand presence. That might start with physical or digital advertising campaigns they’re running; their media presence in general; or a social-media deep dive. For socials, consider the type of content they put out, the engagement they get and who their audience is. Tools like BuzzSumo are useful for seeing what content is performing well; you can also follow all your competitors’ accounts on platforms like Hootesuite.
7. Think about customer perspective. Act the customer and test your competitors’ user experience. Take the customer journey: from searching for the business online all the way through to the buying process (don’t actually buy it, though). If it’s a physical space, head in as a customer and see what it’s like. Beyond your personal experience, check the opinions of their customers by visiting the relevant review sites and looking for common themes in comments on their social channels.
8. Review strengths and weaknesses. Time to analyze your findings. Draw up some clear strengths, weaknesses and areas of distinction for each of your competitors. You’re looking to get a clear picture of what you offer that your competitors don’t and anything significant they’re doing that you’re not. That info should help you identify your opportunities and threats. Remember: you’re looking to identify a unique selling point (USP) for your business. If one doesn’t appear from this process, you’ll need to move quickly, based on your research, and make strategic decisions so it does.
• The core process of direct competitor research is to identify the right businesses, research them in a structured way and then analyze your findings.
• The aim is to come away with a clear view of the lay of the land, and what your own USP is.
• Competitive analysis shouldn’t shape the soul of your company – but it can expose gaps in the market and internal vulnerabilities.
Perspective. This piece from Inc has a bunch of useful perspectives and tips from business owners.
Example. Another one from Inc, this piece details how food subscription service HelloFresh differentiated itself in a saturated market.
Tool. Tide has a modifiable spreadsheet of a competitor analysis matrix, and The Telegraph has a solid list of research and analysis tools you can employ when it comes to marketing analysis.