Competitor Analysis Framework

In this article, we outline a brief competitor analysis framework that can be adopted by tech startups. Our competitor analysis framework is five steps:

• Step 1: Identify competitors

• Step 2: Describe top competitor products

• Step 3: Describe top competitor marketing

• Step 4: Identify competitor strengths and weaknesses

• Step 5: Conclusions and next steps

Step 1: Identify competitors

Winning customers and capturing market share isn't done by accident. But by following a meticulous competitor analysis framework. This starts with identifying who your competitors are.

There are two types of competitors:

Direct: Being able to name your direct competition is important as these are companies that you will be competing with for customers.

Indirect: An indirect competitor sells similar products while targeting a different customer base, or one that offers different products and services but shares a customer base.

Identifying your competition is best achieved through in house research. To make sure the process provides your startup with the highest quality and most useful information, you mustn’t rush this step.

1. Direct competition – If you’re already operational, who are the companies you regularly compete with? Who are the names that crop up in customer conversations?
   

2. Use relevant terms in a search engine to help you visualise the businesses in your marketplace.
   

3. Similarly, you may want to look at key individuals in your industry or market segment. LinkedIn and other professional networks can be invaluable here.

Now you’ve got your list of competitors… rank them.

You don’t want to waste valuable hours and resources researching companies that aren’t on your level. Rank your competition based on how much market share they have, how strong their offering is and what their online presence is like.

Step 2: Describe top competitors (product offering)

Why? Having completed step 1, you now know who your competitors are, and you’ve ranked them in terms of just how much competition they pose to you. Now it’s time to delve into the details and understand the products/services that these companies offer.

This information should be collected without bias or assumption. It feeds into a bigger competitor analysis framework that allows you to draw conclusions later on.

Describing the product offering is a short phrase that can mean a lot of different things. At this stage, you want to collect information on the products and services that are relevant to your business.

There are many ways to get this information. Here are a few ideas:

Google search them
Simple as that. It’s likely that products/services will be marketed online, so take this information straight from their promotional materials.

Contact them
Don’t be afraid to contact them directly and ask them to describe what they offer. This doesn’t have to be clandestine, reach out to them, explain that you work in the industry and you’d like to understand more about the services they offer.

Customer base
What do your customers say about them? Customers in your network may have come across these companies before, or you may have lost out to them in a bidding process. Ask for feedback.

Obtain the product/service
Buy it. If your competitors manufacture something tangible, buy one. If it’s an app, download it.

Step 3: Describe top competitors (marketing and marketplace position)

Marketing is everything done by a business to promote its products/services. Marketing includes all forms of advertising (both online and offline) and even includes marketing done on a company's behalf by a third party.

Marketing can also include such things as loyalty schemes which are designed to increase customer retention.

To be able to describe the marketing offered by a competitor you need to answer the following questions:

• How are they targeting their audience?

• Who are they targeting?

• How successful are they?

Once these are answered you should have a basic understanding of the marketing carried out by your competitor.

Next comes “marketplace position” which is where a company positions itself in the marketplace to help establish its brand, its products/services and to connect with its customers.

Companies talk about the four P’s when it comes to positioning.

• Promotion

• Price

• Place

• Product

These four things combine to help position a company.

The position of a competitor within its marketplace is important and it’s this position that in some way decides how much of a competitor a company is.

You should be able to review the online and offline presence of each competitor and describe their marketplace position. If it isn’t obvious, work through the four P’s above and this will give you a broad picture of how they are presenting themselves.

Step 4: Identify competitor strengths and weaknesses

Following the previous 3 steps should have resulted in a list of competitors (ranked). That'll give you an understanding of these companies' products/services, as well as a description of their marketing, target consumers and how they position themselves (their brand) in the marketplace.

In Step 4, it’s time to perform some analysis. You need to assess this information in terms of what these competitors are doing well, and what they’re not doing so well.

For strengths, the aim is to specifically identify what the competitors are excelling at.

When we talk about weaknesses the aim is to identify what competitors could be doing better.

The aspects of a business that can be ‘strong’ or ‘weak’ are numerous. It could literally be anything from the location of its head office to the logistics company it outsources its packing to.

Step 5: Conclusions, opportunities and threats

The hard work has been done. Steps 1-4 were all about research, data collection and analysis. Based on this you can now make some strategic decisions.

Your review of your competitors has given you a good understanding of the marketplace. How they operate and what makes them successful. At this stage, you can review your startup business model and decide whether you’re differentiated in a meaningful way, or perhaps its time to take a different direction to stand out.

By systematically reviewing your competitors in this way you can highlight any opportunities in the market that may have been neglected by the competition. It may be that you can take advantage of these opportunities, as long as they’re not too niche and give you the ability to scale them up as your startup grows.

By following this competitor analysis framework you’ve essentially performed a benchmarking exercise, and you’re now able to assess how you fit into the market. You can see how your strengths and weaknesses stack up against those of your competition.

Another important aspect of this competitor analysis framework is it highlights immediate and future threats to your business. This is important - if you can see your competition coming, you can develop and adapt your startup to avoid risks. Turning your weaknesses into strengths.

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