Competitive Analysis And How It Can Boost The Success Of Your Online Business

Over the past several years, eCommerce has reached unprecedented growth. In 2020, there were more than 20 million eCommerce sites worldwide – a number that is steadily increasing. However, not all of these websites are performing equally. In fact, the majority fail within the first few years and only less than 1M make more than $1,000 annually. 

Not only is the competition among online shops fierce, but the expectations of customers are continuously growing. Innovative products, excellent customer service, user-friendly designs are only some of the aspects that users look for in an online shop. Moreover, even a small mishap can cause shoppers to leave a website for good. In a striking study, 21% of US online shoppers abandoned an order only because the checkout process was too long. 

In such a saturated, demanding market, constantly improving and differentiating your online business has become a must. This is where competitive analysis comes in. Understanding what works and does not work for your competitors is a cheap and effective way to improve your own business with minimal risk. Keep reading to learn more about what competitive analysis is, how it can help your business, and what steps you can take to conduct one.

What Is Competitive Analysis?

As the name suggests, competitive analysis involves collecting key information about your competitors and using it to improve your product or service. Your research may look into topics like competitors’ strengths, weaknesses, marketing strategies, social media presence, product selection, and various metrics of success. The results of the analysis are usually summarized in a chart or diagram. This allows you to compare the characteristics of your competitors in a visual way and identify trends and dependencies. Using all derived insights, you are able to then come up with strategies to improve your business and differentiate it from the competition.

Why Is Competitive Analysis Important? 

Competitive analysis has multiple benefits: 

  • By analyzing your competitors you can identify ways to differentiate your product and service from the rest of the market for a unique and memorable user experience.
  • Knowing the weaknesses of your competitors allows you to capitalize on them.
  • Looking at the strengths of your competitors provides inspiration for effective customer experience and business models.
  • A competitive analysis highlights gaps in the market, providing you with new business opportunities. Perhaps there are relevant population segments that have not been targeted or a need for a product that has not been yet met.
  • The process allows you to better understand your customers, their likes and dislikes, what works and what does not work for them. This way you can focus your energy and resources on the features and services with the biggest impact.

How to Perform A Competitive Analysis?

Competitive analysis is best performed as one of the first steps when developing a new website, before a redesign, as well as annually as part of refining the business goals and strategies. In the following lines, we will go over the most common steps you can take to perform your own competitive analysis:

Step 1: Pick The Right Competitors To Analyze

Basing your analysis off the right competitors is the first step in obtaining high-quality insights about improving your business. If you pick the wrong businesses to analyze or fail to cover all relevant categories, your results might do more harm than good. In fact, the only thing worse than no research is bad research. For example, inaccurate findings can initiate the development of costly redesigns that don’t improve or even harm your business. Here is how you can ensure your analysis is based on the right competitors:

Pick A Variety Of Competitor Groups

To make your analysis as comprehensive as possible it is important to include all relevant competitor categories. One framework that we at DodoWeb like to use divides competitors into the following groups: 

Direct competitors: They solve the same problem for the same customers in the same way. For example, Yahoo and Gmail are direct competitors in providing email service to users. 

Different solution competitors: They solve the same problem for the same customers but in a different way. Both Gmail and Whatsapp allow users to communicate electronically, but one relies on email, while the other on a chat service. Their solutions are therefore different.

Different customer competitors: In some cases, the problem and solution are the same, but the customers are not.  For example, many companies that operate with Microsoft Office choose to use Outlook as their primary email service. This makes Outlook a different customer competitor for Gmail, because it focuses on a very narrow segment of customers.

Ideally, you would want to analyze representatives from all three categories. While direct competitors might look like the most relevant to consider, competitors from the other two groups can be equally dangerous to your business. After all, one has access to your customers and the other is already familiar with the solution. This makes it easy for them to move into your niche and turn into direct competition  – a risk you would want to be prepared for.

Pick The Right Competitors From Each Group

Once you have identified your competitor categories, it’s time to pick the best representatives to analyze. A common way to do that is by coming up with one or more criteria and choosing only competitors that fit those criteria. For example, if you are analyzing online clothing stores, you might want to only look at those that have 5 stars in Google reviews or those that appear on the first page of Google searches. Another good approach is to look at multiple subgroups and compare their characteristics. For example, you can look at both high-performing and low-performing stores and try to determine through your analysis what may have caused the difference in performance.

Step 2: Collect Information

Now that you have a list of competitors for your analysis, it is time for the real work – collecting more information about them. Start by brainstorming what categories of information about your competitors would best help you make improvements to your business such as strengths and weakness, user experience, marketing, etc. As you research your chosen competitors, take notes about each theme.

Below are some common themes you can collect information under:

Strengths & Weaknesses

Your competitors’ strengths and weaknesses give you insight into which approaches work and which aspects of the service are likely to cause user frustration. 

One way to learn about the strengths and weaknesses of your competitors is by looking at online reviews. For example, if you find that users are constantly requesting a loyalty program, you might consider offering one yourself to meet that need. Similarly, many users praising the simplicity of the checkout process might tell you that this is an important factor for user satisfaction. Thus, you need to focus on making your checkout process as simple and as straightforward as possible. Don’t underestimate the value of employee reviews either. They can give you key information about the strengths and weaknesses of internal company processes and culture.

User Experience

In an earlier post, we talked about the importance of user experience. According to research, an intuitive design can increase conversion by 400%. Looking at the usability of your competitors’ websites can give you valuable information about effective and ineffective design decisions. As part of your evaluation, go through the buying process of your competitors’ websites  just as a customer would. Don’t forget to take notes on what you like and what makes you frustrated. This will give you ideas about improving your own website and which design choices you might want to avoid.

Target Customers

When analyzing each of your competitors, try to determine what type of customers they are targeting. A good source of this information is usually the company’s website. Some websites even have a complete section with past clients. For further detail on the target population you can look at the profiles of social media followers and users who have given reviews online. Knowing the target audience of your competitors can be helpful in illuminating market segments that may have remained unexplored.

Marketing Strategy

It is important to analyze the marketing strategies of your competitors, so you can identify which of them are effective and which are not. 

A good first step in your analysis is to look at the online social media presence of your competitors. Key information to focus on includes:

  • The channels they are using
  • How each channel is performing in terms of followers and engagement
  • How often the competitors post and what content they pick
  • How their posts are performing
  • Which types of content are performing the best
  • What users are saying about the company on social media

You can also use tools like Social Mention for additional information on how well your competitors are performing on social media, what hashtags they are using, and which their top users are.

Examples of insights you can gain from the social media analysis of your competitors include the best-performing type of content, an effective post frequency, as well as any untapped social media channels. 

There are many other marketing aspects you can choose to analyze such as the company branding, advertising materials, sales tactics, and customer acquisition channels.

Product 

Another aspect that is important to analyze is your competitors’ product selection. When looking at your competitors’ websites, write down:

  • The features and categories of their product/s
  • The value of each product feature for their customers
  • What makes their product/s unique
  • Product pricing
  • Best sellers

It is important to look at user reviews to find which aspects of the product  users like best and which are not effective. This will give you insight into the product strengths and weaknesses. Pay special attention to user suggestions for features, products, or services, as addressing those needs could help you differentiate yourself from the competition.

Step 3. Competitive Analysis

Now that you have organized the information about your competitors into your main themes, it is time to analyze it. Try to look for trends that can inform your business strategy. For example, you may notice that none of your competitors has a newsletter or a blog. This is a useful observation because it gives you an idea for an untapped marketing channel. Here is a list of questions you might ask yourself during the analysis:

  • What makes your product/service unique and how can you highlight this uniqueness?
  • How can you differentiate yourself from each competitor?
  • What competitor weaknesses can you capitalize on?
  • How can you compensate for your competitors’ strengths?
  • What can you learn from your competitors’ mistakes?
  • What are your competitors doing well? What can you learn from their effective strategies?
  • What customer needs or segments are your competitors neglecting?

Competitive research is an essential part to starting and maintaining an online business. Done well, it can increase the satisfaction of your customers and help you outperform the competition. 

We hope that the strategies outlined in this article will assist you in completing your own competitive analysis. If you need any help in the process, don’t hesitate to contact us!


Gabriela Kostova is a UX Designer and Front-End Developer at DodoWeb. She has a background in Cognitive Psychology, Information Design, and Usability.

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