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Home arrow Site Optimization arrow Online Competitive Analysis Tested
Online Competitive Analysis Tested
Wednesday, 05 January 2005
Synopsis

Topic: Online Competitive Analysis — How analyzing your competitors can identify your strengths and weaknesses and strengthen your bottom line

We recently released the audio recording of our clinic on this topic. You can listen to a recording of this clinic here:

Windows Media Audio:
http://meclabs.com/cgi-bin/pl/pl.cgi?ctw

RealMedia:
http://meclabs.com/cgi-bin/pl/pl.cgi?ctr

This research brief will answer the following questions:

  1. What is competitive analysis?
  2. What are the benefits of conducting a competitive analysis?
  3. What is the best way to conduct an online competitive analysis?
    (16-point worksheet and 12 additional key techniques)
Findings

1. What is competitive analysis?

A competitive analysis is a formal evaluation in which you review the businesses of one or more companies that compete, directly or indirectly, with your own.

Online, competitors have access to each other's company information and marketing materials that they might not be able to gather as easily in the offline world. This allows for even greater opportunities to benefit from competitive analysis data.

But how can companies improve by analyzing their competitors? And what is the best way to implement a thorough competitive analysis?

2. What are the benefits of conducting a competitive analysis?

The benefits of conducting a competitive analysis include:

  1. You will identify WHO you are competing against. You will be able to assess the threat levels presented by other companies in your market.
  2. You will identify your own weaknesses. Companies who do not pay attention to their competitors may not understand just what they are doing wrong because they have no frame of reference. Studying your competitors offers you a perfect opportunity to find out how you can better serve your customers.
  3. Once you've identified those weaknesses, you'll be able to improve your business in a number of ways. The order in which those improvements should be implemented will often be dictated by the analyses of your competitors. For example, if all of the other companies sharing your target market have a certain feature considered essential to that market, this will be one of the first things you will want to remedy.
  4. You will also identify your strengths. By comparing your own online presence to those of your direct competitors, you will discover what sets your business apart from theirs. These qualities can then be emphasized in your marketing efforts.
  5. Additionally, you will be able to identify or confirm your Unique Value Proposition (UVP). Your UVP is the single most important element of your business that sets you apart from your competitors. Do you have the largest catalog of products? The lowest prices? The (quantifiably) best customer service? Competitive analysis will help you develop your UVP and test the validity of the claims you make about your business.
  6. You will be able to determine what factors drive success in your market space. These may vary greatly from market to market, and may not be what you originally expected.
  7. You will identify what specific actions you need to take in order to improve your competitive position.

3. What is the best way to conduct an online competitive analysis? (16-point worksheet and 12 additional key techniques)

To aid in the process of conducting competitive analyses for factors related specifically to site design, we have developed the following worksheet.

Site Design Analysis Template
# Diagnostic Points Notes
1 Is the site focused around one clear objective? __ / 5  
2 Has a clear problem/solution process been communicated? __ / 5  
3 Does the homepage have a strong enough “hook”? __ / 5  
4 Is there sufficient incentive for every action that prospects are asked to take? __ / 5  
5 Are successive degrees of involvement offered? __ / 5  
6 Have credibility indicators been used effectively? __ / 5  
7 Does the tone of the site’s sales copy imply integrity and accuracy? __ / 5  
8 Are too many options being presented? __ / 5 Low score = too many options
9 How much information are prospects expected to “absorb” in one screen? __ / 5 Low score = too much info
10 Is the information on the page being grouped effectively? __ / 5  
11 Is the flow of information natural and intuitive? __ / 5  
12 Is the prospect’s attention being focused on the right elements, in the right order? __ / 5  
13 Has each element of the page been successfully “weighted”? __ / 5  
14 Are there too many “clicks” between the purchase decision and the product delivery? __ / 5 Low score = too many clicks
15 Is the site configured for the slowest connections and minimum screen resolutions? __ / 5  
16 Have the site graphics achieved optimal compression? __ / 5  
Total __ / 80
Percentage Score  

Check boxWhat You Need To UNDERSTAND: These 16 characteristics are scored 0-5 for each of your competitors. These 16 questions address what we call the "baseline performance criteria" that every quality website should possess.

To illustrate how this might be used, we have included a completed worksheet taken from an actual competitive analysis conducted for one of our partner sites.

Site Design Analysis Example
# Diagnostic Points Notes
1 Is the site focused around one clear objective? 4 / 5  
2 Has a clear problem/solution process been communicated? 4 / 5  
3 Does the homepage have a strong enough “hook”? 3 / 5  
4 Is there sufficient incentive for every action that prospects are asked to take? 3 / 5  
5 Are successive degrees of involvement offered? 3 / 5  
6 Have credibility indicators been used effectively? 0 / 5  
7 Does the tone of the site’s sales copy imply integrity and accuracy? 3 / 5  
8 Are too many options being presented? 2 / 5 Low score = too many options
9 How much information are prospects expected to “absorb” in one screen? 3 / 5 Low score = too much info
10 Is the information on the page being grouped effectively? 3 / 5  
11 Is the flow of information natural and intuitive? 3 / 5  
12 Is the prospect’s attention being focused on the right elements, in the right order? 3 / 5  
13 Has each element of the page been successfully “weighted”? 2 / 5  
14 Are there too many “clicks” between the purchase decision and the product delivery? 4 / 5 Low score = too many clicks
15 Is the site configured for the slowest connections and minimum screen resolutions? 3 / 5  
16 Have the site graphics achieved optimal compression? 3 / 5  
Total 46 / 80
Percentage Score 57.5%

Check boxWhat You Need To UNDERSTAND: The site that was scored on the worksheet above received a rating of 46 out of 80 points (57.5%). This chart would then be compared to the others in the analysis, as well as the chart completed for your own company.

In addition to the worksheet above, you should consider the following guidelines when conducting competitive analyses.

  1. Utilize a multitude of resources to identify your competitors. Who else is bidding on your PPC terms? What sites come up as natural search results for your terms? Check trade association memberships and business registries. Use your referrer data to identify what sites your visitors are coming from. Don't overlook word-of-mouth information from your customers and investors.

    These sources should yield a number of direct and indirect competitors. Narrow the scope of your analysis if necessary, but the most effective competitive analysis will compare at least three to five leading companies in your market.

  2. Identify key success factors (KSFs) for your industry and rate yourself and others on each of them. One useful tool is the "strategic group map", which is part of a supporting Word document available for download:

    http://www.meclabs.com/CompetitiveAnalysisSupplement.doc

  3. Identify the competitive strengths of each company in the analysis, including your own. What makes each company unique? Do they own patents or copyrights that give them a competitive edge? Is there a dominant company with market share at or near "critical mass" level?
  4. Identify the revenue models of your competitors. How do your competitors make money? Are you overlooking potential sources of revenue?
  5. Do your competitors utilize partnerships, outsourcing, or other strategic relationships? Could your own company benefit from such relationships?
  6. KEY POINT: In the course of your analyses, make note of unique or creative elements or approaches your competitors may use. Often, the greatest insights will come from where your competitors depart from convention.
  7. Utilize search engines to discover the sources of your competitors' incoming links. These sites may be potential link partners for you as well. For more on linking strategies, see our research brief on that topic:

    http://meclabs.com/cgi-bin/pl/pl.cgi?mls

  8. If practical, make purchases from your competitors. How is their customer service? Are they utilizing drop-shipping or other forms of outsourcing? What can you learn from watching how they do business?
  9. Monitor your competitors over time. Sign up for their email lists and analyze their marketing messages. How strong are your competitors' brands?
  10. Analyze your competitors' Google, Overture, and other PPC ads. Knowing the best keywords for your market, it shouldn't be hard to locate your competitors' ads. These may give you ideas about how to modify your own campaigns.
  11. Analyze your competitors' ratings and rankings on a number of platforms, including Google PageRank, Alexa, BizRate, comparison engines, and incoming links from other websites. The following spreadsheet may be useful in helping you track this analysis:

    http://www.meclabs.com/CompetitiveAnalysis.xls

    Once you have compiled this data, you should be able to use it to gauge the effectiveness of your competitors' marketing efforts compared to your own.

  12. Depending on entry and exit barriers for your industry, your competitive environment will change over time. Competitors will enter and leave and the most resilient among them will learn and evolve. Continue to analyze your competitors as time progresses. Consider performing a competitive analysis update on an annual or semi-annual basis.

No company exists in a vacuum online. If you ignore your competition, you will lose the opportunity to discover your own strengths and weaknesses. Effective competitive analysis gives you the information you need to "remove the blinders" and see your company as your customers and investors do, and to tune your marketing and business strategies for success.

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Notes

RELATED MEC REPORTS:

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Literature Review

As part of our research on this topic, we have prepared a review of the best Internet resources on this topic.

Rating System

These sites were rated for usefulness and clarity, but alas, the rating is purely subjective.

* = Decent | ** = Good | *** = Excellent | **** = Indispensable

Websites:

SBA – Marketing: Competitive Analysis ***
http://www.sba.gov/starting_business/marketing/analysis.html

Effective Competitive Analysis ***
http://meclabs.com/cgi-bin/pl/pl.cgi?see

Seven Steps to Effective Competitor Benchmarking ***
http://www.aurorawdc.com/benchmarking.htm

Entrepreneur.com – Competitive Analysis ***
http://www.entrepreneur.com/article/0,4621,270372,00.html

Competitive Myopia ***
http://meclabs.com/cgi-bin/pl/pl.cgi?scm

Secure Your Competitive Advantage **
http://clickz.com/experts/em_mkt/em_mkt/article.php/1563831

Competitive Analysis **
http://www.mapnp.org/library/mrktng/cmpetitr/cmpetitr.htm

Overview of Competitive Intelligence **
http://www.brint.com/papers/ciover.htm

Competitor Analysis – A Brief Guide **
http://dspace.dial.pipex.com/aware/competitor-analysis.shtml

Competitor and Issues Analysis **
http://www.onlinewbc.gov/docs/market/mk_mplan_competitor.html

Writing The Competitive Analysis Section Of The Business Plan **
http://meclabs.com/cgi-bin/pl/pl.cgi?sbp

Virtual Business Plan: Competitive Analysis **
http://www.bizplanit.com/vplan/competition.html

Do You Know Your Competitors? **
http://www.powerhomebiz.com/vol2/competitor.htm

Overcome the Competition **
http://www.powerhomebiz.com/vol2/competition.htm

Building a Competitor Profile **
http://www.powerhomebiz.com/vol4/competia.htm

Competitive Intelligence on a Small Budget **
http://www.powerhomebiz.com/vol15/competitive.htm

Competitive Analysis: Beware of Becoming a Glorified Librarian **
http://www.powerhomebiz.com/vol36/librarian.htm

How to Prosper Because of Your Competition **
http://www.powerhomebiz.com/vol131/competition.htm

Measuring Up to the Competition **
http://onlinebusiness.about.com/cs/startingup/a/compete.htm

Marketing Tutorial – Comparative Analysis **
http://meclabs.com/cgi-bin/pl/pl.cgi?swl

Online Marketing Tools: Competitive Analysis Summary **
http://www.searchengineguide.com/lander/2002/0511_el1.html

Analyzing Your Online Competition **
http://meclabs.com/cgi-bin/pl/pl.cgi?soc

Books:

Strategic and Competitive Analysis: Methods and Techniques for
Analyzing Business Competition **
http://www.amazon.com/exec/obidos/tg/detail/-/0130888524/

Early Warning: Using Competitive Intelligence to Anticipate Market Shifts,
Control Risk, and Create Powerful Strategies **
http://www.amazon.com/exec/obidos/tg/detail/-/0814407862/

Proven Strategies in Competitive Intelligence: Lessons
from the Trenches **
http://www.amazon.com/exec/obidos/tg/detail/-/0471401781/

The New Competitor Intelligence: The Complete Resource for Finding, Analyzing, and Using Information about Your Competitors **
http://www.amazon.com/exec/obidos/tg/detail/-/0471585092/

Company Analysis: Determining Strategic Capability **
http://www.amazon.com/exec/obidos/tg/detail/-/0471494542/

Competitive Intelligence: How to Gather, Analyze, and Use Information to Move Your Business to the Top **
http://www.amazon.com/exec/obidos/tg/detail/-/0684844044/

The Warroom Guide to Competitive Intelligence **
http://www.amazon.com/exec/obidos/tg/detail/-/007058057X/

About This Brief

Credits:

  1. Editor — Flint McGlaughlin
  2. Writer — Brian Alt
  3. Contributors — Jeremy Brookins
    Jimmy Ellis
    Bob Kemper
  4. HTML Designer — Cliff Rainer

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