Conducting an effective competitor audit

To build a successful business, you’ll want to know who your competitors are and how you can stand out. One way to approach this is to undertake competitive research or perform a competitor audit.

Competitive research is where you analyze your competitor’s strengths, weaknesses, and strategies. Analyzing the businesses you're up against lets you see where you can direct attention and sales away from them and toward your business.

You'll be looking at what they are doing right or wrong and how you can improve their offering to entice customers to your business. Let’s learn more about competitor audits.

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A competitor audit or analysis is ideal for changing a product or finding ways to set your business apart, grow sales, and remain viable. 

Competitive audits give you insight into what other businesses in your line are doing and help you analyze your business and its place in that market.  

At a glance, you can see your strengths and weakness and your competition’s. It also highlights opportunities and threats, allowing you to prepare for change. 

To conduct an in-depth competitor audit, follow these five steps in order. It’s also essential to take a thorough approach: The data quality, quantity, and detail will give you more insight to benefit your company. 

These steps are:

Define the purpose

Determining what you want to achieve sets the project's scope, removing the chance of scope creep and working outside your intended purpose. 

You will need goals of what you want to gather, such as identifying user loyalty or discovering the pros and cons of a service or product.

It’s also critical to be objective when comparing your business with your competitors. Bias can get in the way of valuable data. Being over-positive with your product and not acknowledging the value a competitor brings can invalidate your project’s time and effort.

Choose direct and indirect competitors 

When you make a list of your competitors to research and analyze, you need direct and indirect competition. 

Direct competitors offer the same value to potential customers as you do. If you operate a vintage jewelry store, so does your direct competitor.

Indirect competitors offer a similar proposition to different customers or have an extra product to offer the same customers. An indirect competitor may run a vintage clothing store and offer vintage jewelry. 

It’s best to pick 2–3 direct and 1–2 indirect competitors for your audit.

Find competitors

When choosing your competition, look at surveys or market research interviews. Respondents may bring up relevant services or products they use that you don’t offer. 

They can also come from related keywords or show as a "sponsored ad" when you Google your service or product.

Create a matrix

Once you get the list of direct and indirect competitors to analyze, create a matrix. You can use a simple spreadsheet to hold the data. 

Some of the tabs can include: 

• The company name

• Value proposition

• Target audience or customer (demographics)

• SWOT (strengths, weaknesses, opportunities, and threats)

• Key differences (what they do better or worse than you)

• Their reviews

• Any unique features they have

Put all the data in the matrix and see how they stack up against each other.

Write a summary and action points to share

When you complete your matrix, summarize everything you found. You want the summary to directly reflect the goals you set in the beginning. 

Now you can use the information to move forward with new opportunities and decisions on marketing, communication, sales, and branding. Remember to share these action points with the management team to see if they can spot any gaps or insight you missed.

Competitive audits are vital to understanding your competition, where you fit in the market, and how to use your competitive elements to your advantage. It’s a foundational tactic that offers insight and helps your brand. 

As trends and markets evolve, staying on top of developments in your community and further afield helps you focus on your company's approach.

Timing depends on your business strategy, but you can do monthly, quarterly, or annual audits. 

An annual audit lets you see broad trends and gives you a large window of information.

Monthly or quarterly audits are better for businesses that undergo a lot of change and need up-to-date information on how those changes affect business. 

If your business relies on riding short-lived trends, you should conduct a competitor audit more often than those in a more stable industry.

Companies can make a few mistakes when conducting a competitive audit analysis:

• Not knowing their competitors 

• Not choosing enough competitors to get a thorough overview of the market

• Not doing enough research to stay up on industry trends 

• Failing to monitor the internet for competitor moves

• Stopping after one competitor audit and failing to update or spot-check data 

• Only sharing with a few people, diluting the value of the research. 

Avoiding these practices will give you the full benefit of competitor audits.

Actionable steps in a competitor audit include: 

• Identifying your competition and your market

• Gathering information about your competitor

• Analyzing the strengths and weaknesses of their business

• Determining your competitive advantage

All of these steps ensure that you gain benefits from the analysis.

After analysis, actionable steps may include: 

• Rebranding a business 

• Brainstorming different products to stand out from the crowd

• Creating new areas that would push your business forward, such as ebooks or webinars

Taking the data and putting it in perspective allows you to see where you are lagging or thriving.

Competitor analysis templates

You can compare and contrast two competitors’ strengths and weaknesses By doing an in-depth competitor audit. This shows you where the gaps are in the market and where your business’s product or service fails or rises to the top.

\You can classify competitors in one of three ways: Direct competitors, indirect competitors, or replacement competitors. 

Direct competitors provide the same or similar service to yours and market to your customer base. 

Indirect competitors provide the same or similar service to yours, but it’s not their primary focus or revenue source. 

Replacement competition or disruptives have different products and services but can "replace" your service.

An in-depth competitor audit should look at your competition’s: 

• Market share

• Marketing

• Pricing

• Strengths and weaknesses

• Differentiators

• Features of your competition’s products and services

• Management and employee expertise

• Geography

• Distribution channels

• Culture

• Reviews

Customer segmentation analysis is where you look at specific customer segments to gain insights. This research identifies ideal marketing campaigns and products for a particular demographic. It can also help you see the value of specific segments' purchasing habits by their average order, buying frequency, and loyalty.

You can use the data from the analysis to rebrand your business, expand, and tweak your product and service offerings to build a closer relationship with your customers.   

You can also design more effective, unique promotions exclusive to your business. While these data analyses may take a while, the benefits you can gain are worth it.