In the mind of an inexperienced business leader, competitors appear like a threat. They are the people looking to steal your customers and throw you out of business. But from the viewpoint of an entrepreneur, competitors are assets to your business. They set the trend, give you insights into the market, and help your business grow.
If you think like an entrepreneur, you’ll understand why it’s important for your business to carry out a competitive market analysis. You need to analyze your competitors to find out the marketing methods they’re using to grow their businesses and identify important market trends. If you deeply understand your competitors, you’ll be better equipped with strategic insights to improve your marketing, grow your customer base, and increase your market share.
But how do you carry out an effective competitor analysis?
A competitor analysis framework is a tool or a system that businesses use to gather vital information about their competitors. They gather information such as marketing strategies, sales efforts, product and service offerings, etc., then organize it in a way that’s easy for the business to digest.
The framework provides a visual structure that helps the business come up with a better marketing strategy. It provides an in-depth overview and understanding of your competitors to help you predict where the market is going and prepare your business.
The framework may also look at other factors likely to affect the business, such as consumer behavior, global market trends, and politics. So, when you’re ready to start looking at your competitors and growing your business, you’ll need to employ the right competitor analysis framework.
9 Types of Competitor Analysis Frameworks to Start Using
There’s no one approach when it comes to competitor mapping. Every industry is different, and businesses must employ what best suits them. The types may also vary by the type of campaign, market trends, and the competitor types you’re targeting.
That said, here are the different types of competitor analysis frameworks that are likely to work for your business.
1. Strategic Group Analysis
Your business will deal with different kinds of competitors at all levels using different marketing strategies. To make the work easier for your team, you’ll need to start by organizing your competitors into groups according to their market share, pricing strategies, product offerings, or marketing strategies.
Understand where your business falls in these groups and determine whether adopting their actions can benefit your business. Strategic group analysis works well for businesses that are looking to;
Review their sales and marketing efforts
Analyze their target market
Compare their profit margins to those of competitors.
For example, if you’re in the hospitality industry, you might want to look at the services your competitors use to lure their customers. For example, are they offering to pick up and drop off their customers at the airport? What gains is this strategy bringing to their business, and can it also work for you?
2. SWOT Analysis
The word SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This method is mostly used to evaluate the businesses’ internal strengths and weaknesses as well as their external opportunities and strengths. You can also use it to identify the strengths, weaknesses, opportunities, and threats that your competitors have.
These metrics tell you the following about your competitors:
Strengths: The strengths refer to what gives your competitors a competitive advantage over yours. They can be reliable customer service, effective marketing, or dedicated staff. Competitor strengths can pose a risk to your business or might point you to some insights for improvement.
Weaknesses: These are the competitors' weaknesses that can give your business an advantage. This could be employee turnover, a small budget, or negative consumer reviews.
Opportunities: Opportunities that your competitors have to grow, expand, and increase their customers can be a threat to your business. A good example can be a new technology that can grow their customers.
Threats: Threats are external factors that pose a challenge to your competitors and can affect your business as well. They can also challenge your competitor's position in the market, giving you an advantage.
SWOT analysis is a good framework that can help you study the strengths and opportunities of your competitors and adopt in your business. The weaknesses and threats give you a chance to get ahead.
3. Porter’s Five Forces
Michael Porter, the professor behind this framework, believes that there are five forces affecting businesses. They include:
Competition/rivalry: These are the competitors that your business has and how their existence affects you.
Buyer power: These are the number of buyers your business has and how they affect different things, such as pricing.
Supplier power: These are your clients and how they affect your pricing.
Substitutes: Is there another product that your customers might prefer over yours, even when they have the same qualities? What is the pricing of those substitute products?
New entrants: As more and more people enter the industry, they may affect your business as well. Is it easy for them to lose the market?
Porter’s Five Forces work well for businesses that are starting or looking forward to starting a new marketing strategy. It gives a better understanding of the industry’s competitive structure. For example, if your product has substitutes, you can find a way to make yours stand out.
4. Growth Share Matrix
Growth-Share Matrix is like an assessment tool that helps you determine your business's competitiveness based on different metrics. They can then decide which categories to give high priority to and which ones to ditch. This framework works well for companies with large product portfolios. The metrics used here are:
Stars: These are products or services that command a large market share and growth. Businesses should invest more in these.
Question marks: These are products with high growth but low market share. Your business needs to monitor these products and decide whether to invest more in them or ditch them.
Cash cows: These products have limited growth potential but command a high market share.
Pets: These have low growth and low market share but are important. Your business can decide to rebrand or ditch.
Using this framework for competitor market analysis helps businesses decide which competitors are worth focusing their attention and investment on. They’ll understand which ones are helping them grow and expand their market shares and make informed decisions.
5. Perceptual Mapping
The perceptual mapping framework is also known as positioning mapping. It helps your business understand how customers perceive it in relation to competitors. It compares your brand versus your competitor in a graph using two factors. Often, businesses choose to determine the positioning or perception of the quantity and price of a product.
What’s the price of your product versus its quantity? What is the price and quantity of the same product or service from your competitor? With your answer, you can identify gaps and market trends and make adjustments where necessary.
For example, if you’re offering a high-quality product at a lower price than your competitors, you can consider increasing the price.
6. PEST Analysis
PEST analysis is another industrial competitor model that looks at the external factors likely to affect your business. These include political, economic, social, and technological factors. These factors are valuable indicators that show where your business stands amidst the competition.
Here are different ways the factors that form the PEST analysis influence your business.
Political: These stand for policies and regulations within or outside the business that affects how it operates.
Economical: Economic factors such as inflation, interest, and exchange rates affect the business’s incoming and outgoing finances.
Social: These are various human behaviors, such as population growth and other demographics, that influence their purchase powers.
Technological: Advancements in technologies and systems can be a threat or an opportunity for your business.
The PEST analysis shows how your brand and competitors face various challenges and advantages brought about by society. You can also collect data from your competitors and determine how they handle the challenges presented in the PEST analysis.
7. Business Model Canvas
Some things that appear basic might affect your business in ways you can never imagine. These factors may appear basic, but they play a crucial role in the sales and marketing departments of your business. By looking at these influential areas, you’ll be able to learn more about your brand and improve your sales and marketing.
The nine areas to target with your business canvas model include:
Key brand activities
Check how these factors affect your business, then move on to check the impact they have on your competitors. You can then analyze the similarities and differences and take the necessary steps.
8. Customer Journey
A customer journey map shows how a customer interacts with your brand from when they first discover it up to the point where they take the desired action. This framework also looks at the channels a customer uses to reach your brand. These channels might include social media, email marketing, or face-to-face interactions.
With the customer journey framework, you can also find other metrics, such as the number of followers, phone calls, or email replies. You can also use the framework also to check how your competitors interact with their customers and how responsive they are to inquiries. With the insight from the customer journey, you can identify opportunities to help improve your brand.
9. 7P’s Marketing Model
7Ps, also known as marketing mix, show the products that a business is selling and how they’re doing it. You can use this model for your own brand or to analyze your competitors.
The 7Ps stand for:
If you’re a business selling products, you can use the 7Ps to analyze, create, and revamp your marketing strategies. By understanding your competitor’s 7Ps, you can develop your own value proposition.
Advantages of Using a Competitor Analysis Framework
Find trends, patterns, and shifts: Understanding what’s happening in the industry is crucial to developing your business.
Discover gaps you weren’t aware of: The frameworks will help you understand the marketing gaps your team is missing. You can discover a new idea, product, or sales strategy.
Create an effective marketing roadmap strategy: Knowing what works and what doesn’t work for your competitors helps you develop a more effective marketing roadmap strategy for your business.
Build specific and measurable goals: From the competitor data, your business can come up with specific and measurable goals that are sure to bring results.
Avoid mistakes: The frameworks also help you learn the mistakes that your competitors make along the way. You can learn from their mistakes and avoid making the same in your business.
Easily review data: These frameworks work with visual tools such as maps, graphs, charts, etc., which make it easy to review and analyze data. You can easily discuss them with your marketing team or investors if they’re presented in a visually appealing manner.
Boost Your Analysis Skills
Competitor analysis frameworks are must-have tools for any business to achieve growth and gain competitive advantage. The above frameworks can work for companies of different sizes, working with different competitor types and across diverse industries. Understand which ones can blend well with your marketing strategy and start using them to check out what your competitors are doing and how they’re doing it.
The right competitors mapping will help your business collect the right data and use it to create measurable goals. You can use the frameworks to identify trends, shifts, and patterns in the market. You can also use them to identify gaps that you might be missing, as well as avoid mistakes that can be detrimental to your business.
So, are you ready to come up with a strategy framework for analyzing competition? Check out how the following Maven’s Product Management-related courses can help you out.
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How do competitive analysis frameworks differ from other types of market analysis?
Unlike other market analyses, competitor analysis frameworks seek to gain a deeper understanding of competitor strategies. Your business can adopt the best strategies that other businesses are using and take advantage of the weak points to grow your own brand.
What are the main components of a competitive analysis framework?
The competitor analysis framework involves different components. They include researching competitors, product offerings, marketing strategies, customer service approaches, and pricing models. These are all the components that your business needs to get right to thrive.