Guide 10 min read
1. Why carry out competitor research?
If you’re thinking of setting up your own business, then competitor research is essential for spotting gaps in the market, developing your idea, deciding on a business model, and understanding competitor behaviour.
Once you have your overall business concept firmed up, it’s vital for positioning your brand, sense-checking the best way to deliver your offering, and working out the best way to market and promote your offering.
After you’re up and running, it’s worth regularly monitoring your key competitors and doing a proper review every six months or so to help you respond to any new threats and seek out new opportunities.
It’s easy to burn hours of time on competitor analysis so this structure should help keep you focused on what to look for and where, and pitfalls to avoid.
2. Who are your competitors?
Direct and indirect competitors
The obvious place to start is to identify your direct and indirect competitors or, if you’ve already done that previously, to check if any new competitors have launched.
- Direct competitors - provide the same product or service as you, probably in a similar way - and your customers may directly compare you before making a decision, e.g. two sit-down restaurants or two gyms in the same area.
- Indirect competitors - provide something different, but, from a customer perspective, it fulfills the same need. For example, a take-away is an indirect competitor for a restaurant - it has a different offering and experience, but both provide the customer’s need for dinner. Or an online workout subscription service could be an indirect competitor for a personal trainer. It is useful to be aware of these indirect competitors and keep an eye on activity, but usually it is most useful to do deeper research into your direct competitors.
Identifying your competitors
It's important to know who you’re competing with. Create a list of the direct competitors that you already know about. Next, use the following techniques to find other competitors you might not have heard about:
- Search for your known competitors on Google and then see what other businesses appear in the sponsored results, search results and even the related searches at the foot of your search results.
- Search in Google for keywords relating to your product or service and see which companies appear in the search results, sponsored results and shopping if applicable.
- If your business is local, search for your business type in Google Maps.
- Run searches for related keywords or known competitors on social platforms including Facebook, Instagram, TikTok, LinkedIn, etc, to see who appears.
- Social groups and forums can be a great source of information - look in Facebook groups, or scan community forums such as Quora or Reddit for keywords or problems you solve. Here you’ll often see requests like ‘Can anyone recommend...’ or ‘how do I..’ and the names of products, services or businesses will often be mentioned in the answers.
Narrow it down to no more than 10 to 15 competitors to look into further at this stage. In doing this, pick about five that are closest to what you offer, and then a selection of competitors of different sizes and locations, and with various combinations of products and approaches.
What if you can’t find any direct competitors?
If you can’t find direct competitors, look at the indirect competitors that customers are using to solve the problem that your offering also solves, and also consider looking at companies similar to you in other sectors (e.g. those that also target your audience, those with a similar brand, or similar product types).
If you’re just starting out, having no direct competitors could mean you have spotted a great gap in the market and have a wide-open market and an innovative offering.
However, on the other hand, it means you may need a large advertising budget to both raise awareness of your offering and to show customers that they have a need for what you deliver, before you can persuade them to buy. Think through carefully if this is something you can achieve and how you will achieve it.
3. How do competitors promote themselves?
Once you have a list of your closest competitors, one of the first things you want to look at is how they present themselves online and how much effort they put into their marketing.
What is their digital footprint?
First, assess their digital footprint. Determine whether they have a website, social pages for their business, Google My Business profile, an app, an Amazon store, etc.
Have a look through each to see how they present themselves online and how they display their products. This can help you:
- Get an idea of how they have positioned their brand and what they promote as their USPs (Unique Selling Propositions) which can help you develop your own value propositions to differentiate your offering.
- See what type of content their customers engage with - you can get an idea of this by looking on their social platforms and having a look at which posts get the most comments and likes.
How are competitors attracting customers and persuading them to buy?
You can gain lots of ideas for your own marketing by looking at how competitors promote themselves and try to persuade customers to buy. Look to see whether they are running:
- digital ads (like sponsored search, display ads, Facebook ads, etc),
- email marketing (do they have a sign up on their site?)
- SEO (how do they appear in search results)
- TV or radio ads
- press ads or promotional coverage
- radio
- outdoor ads etc.
This can help you plan your advertising strategy. You also want to look at what type of messaging they use to sell themselves in these ads.
It can be hard to see all of a company's promotional activity, however there are some tools and techniques which can help.
- Review their digital ads: Many large platforms have created ad libraries to improve transparency around digital ads. These libraries are searchable databases of ads that have been running on that platform. They allow you to search for specific brands or companies and view all the ads they have run on those platforms. This can be useful to allow you to better understand what type of ads competitors are running and what messaging they lead with. (However do not copy a competitor's ad content or messaging). See Google Ads Transparency Center, Meta Ad Library and TikTok Commercial Content Library
- Look at SEO (organic search) and PPC activity: Tools such as Spyfu let you do basic searches on competitors for free and give a rough idea of their monthly SEO clicks, the balance of organic compared with paid traffic and an estimated monthly PPC budget. It also identifies their competitors for the keywords for organic and paid terms, so it can help you to identify competitors you might not have thought of. You can also see examples of some of their PPC ads. Although you need to set up an account for more detailed data, it’s still useful for an initial review.
- Follow them on social media: It’s very straightforward to like and follow competitors on their platforms such as Instagram, Facebook, TikTok and LinkedIn. This can allow you to see what content they share and how people interact with that content.
- See how they use email marketing: Simply sign up as a subscriber for their newsletter updates.
- Search in ‘news’: Run a search for your competitor in Google’s ‘News’ tab to see if they have been mentioned on known news sites, which may give you an idea of PR activity.
4. How do they deliver their product or service?
Looking at your competitors’ overall business delivery can help you to determine how to deliver your offering if you’re just starting up, or judge how your processes compare. There are various elements to look at.
- How they help customers select the right product or service - what information do they provide? How do they use descriptions, imagery, video, case studies, calls to action, testimonials, etc?
- Their transaction process - how do they take an order and payment.
- Premises - if they have physical premises, how are these laid out, what do they offer, etc?
- Packaging - how are their products packaged? Are there product groupings etc?
- Service provision - how do they provide the goods and services to the customer whether it’s a physical or digital product, including physical delivery if relevant.
- Feedback - what sort of follow up do they do to gather feedback and cross sell?
Sometimes the best way to do this is to become a customer yourself to see first-hand what the experience is like.
Also look out for what digital tools they use such as the platform their website is built on, whether they use online booking or ticketing, how payments are processed or what tools are used for satisfaction surveys. If you find the process is smooth, this can help you shortlist digital platforms to try yourself which will save you time looking through every option.
5. How do competitors’ prices compare?
A very important part of your analysis is noting the range of prices for similar products and services to yours, to get a feel for what customers will expect to pay. Take note if competitors are in a race to the bottom on price, as this could be a market where it will be hard to make a profit as a new entrant without scale on your side.
Look out for different ways prices are presented. For example, if selling online, a competitor might seem cheaper at first glance, but maybe there’s no free delivery and return postage is chargeable.
If you have been running your business for a while, keep an eye on competitor pricing and discounts, as their strategy could impact your own sales.
6. What do competitors do well or badly?
When looking at a competitor’s glossy website it’s easy to assume everything is perfect. However, few businesses get everything 100% right for their customers.
It’s useful to investigate this as it might help you approach your business differently to avoid those problems.
For example, if a competitor’s customers:
- complain that no one responds - then you make sure you have the right resource in place for customer service
- seem to be misunderstanding what comes with a product or service - then you can use this insight to write better descriptions on your website
- mention an issue with quality - then maybe that’s an item you don’t stock, or a service you provide in a different way
- are often complaining about a specific feature or mentioning that they wish there were additional features - then this is something that you could develop for your product or service.
Review sites are ideal to trawl for insight on this, such as Trustpilot or Feefo or even just Google Reviews, (which appear in the panel on the right-hand side when you search for a business on Google). Glassdoor can be useful to see what their current and former employees say about them.
Also look on a competitor’s social channels to see if any customers have raised concerns there.
At the same time as looking at what customers say, take note of how quickly the competitor responds to complaints, queries or compliments, and what they say, as there could be learnings for your business in those too.
But always remember review sites can’t be completely trusted, and some reviews need to be taken with a pinch of salt.
7. Avoiding the pitfalls
Although it’s always sensible to do competitor analysis, be aware of some easy mistakes:
- Obsessively researching every possible competitor. It’s easy to take research to the point you get stuck in ‘analysis paralysis’ and never get round to setting up your business or making business changes.
- Allowing imposter syndrome or a perfectionist mindset to take hold. Obviously long established competitors will probably look much glossier than you will on launch day, but don’t let that lead to you doubting your own ability and skills. Remember when those competitors launched they would have been nothing like they are now, but that hasn’t stopped them progressing.
- Assuming that everything a competitor does actually works well. When you notice something about a competitor, treat it as an observation of how they’re doing something. Many businesses do things that aren’t always ideal or profitable, but due to other pressures they never get round to changing. Even if it is right for them, it might not be right for you in your circumstances. So, remember, if you do something similar, it might be sensible to test it in a small way in your business to see if it is right for you.
If you feel yourself beginning to fall into one of these traps, shift focus, and think of everything from a customer perspective instead. Ultimately it’s what your future customers want and need that should be at the centre of everything.
8. Take inspiration, not instruction
Competitor research is for insight into your own business, and inspiration on what you could do. Never directly copy a competitor’s approach, products, ads, content, etc. This is bad business practice and can lead to customer backlash and even legal issues.
Competitor research lets you assess your own organisation and your own strategy. Take insight where you can but always make your products and services and marketing activity unique to your own goals, your customers needs and your brand.
Take these insights into your business strategy and marketing plan.