How to run an effective competitive analysis

In design and business, staying one step ahead of the competition is not just an advantage—it's a necessity. Say you're creating a website to help a small business client capture market share. You have questions: Who's the target audience, what are industry trends, which customer needs aren't met yet, and what marketing efforts and business strategy have competitors tried?

Get the answers you need to succeed with a competitive analysis—a powerful tool that helps you scan the competitive landscape, and spot potential for growth on the horizon.

Read on to find out:

• What is a competitive analysis—and when to use one
• Three benefits of competitive analyses
• How to run a competitive analysis in four steps, using FigJam's competitor analysis template

What is competitive analysis?

A well-run competitive analysis reveals who your competitors are, what strategies they're employing, and how audiences are reacting to them. This framework helps you collect competitive data and analyze competitors—their product offerings, sales methods, marketing strategies, target demographics, key metrics, and customer perceptions.

Pro tip: use a simple competitive analysis template to lighten the research load and surface competitive insights faster. Even before you’ve finished your analysis, you may spot market gaps for new products and uncover strategies that will give you a competitive advantage.

3 benefits of competitive analysis

As you gather competitive intelligence, you’ll uncover opportunities to improve product and design and grow your business. Digging through competitors' websites, social media channels, and competitors' customer feedback can help you to:

• Spot competitors. Look for new competitors expanding into your business and startups to watch, beyond known industry leaders. Once you've assessed your competitive landscape , you can examine Strengths, Weaknesses, Opportunities, and Threats with a SWOT analysis.
• Capture your unique value proposition. What distinguishes your brand or product from your competitors? Capture it using FigJam’s value proposition map.This statement may serve as your north star for brand design and product development.
• Inform your strategy. Use your competitive analysis findings to fine-tune your strategic management process.

How to complete a competitive analysis in 4 steps

Competitive analysis can involve deep market research, but you can cover the basics in just four steps.

Step 1: Identify your market.

Explore products or services that are similar to yours, and research companies competing for customers in your target market. Tools like Google Trends can help you spot companies with the most traction in your industry.

Step 2: Collect data on competitors.

Analysis tools can help you gather information on direct and indirect competitors. Direct competitors are businesses offering similar products or services to your target customers. Indirect competitors include companies that sell similar products to different customers, or different products to the same customer base.

Finding in-depth info on competitive products is easier than you might think. Scan competitors' company websites, LinkedIn and other social media channels, press releases, media coverage, blog posts, backlinks, FAQs, and other types of content. To gain insights on competitors’ customer satisfaction, check customer reviews and feedback on ecommerce sites and competitors’ websites. Data sheets and product specs from competitive sales teams may also provide valuable insights.

Step 3: Analyze competitive data.

Assess competitive data to identify competitors' strengths and weaknesses. As you scan the competitive landscape, look for answers to these questions:

• Who is leading the market with their product offerings, marketing tactics, or messaging?
• What strategies are market leaders using successfully for brand awareness, product differentiation, or reaching new markets?
• Where can you spot gaps in the market, or opportunities competitors are missing with their product features, pricing strategies, or social media strategy?

Step 4: Apply insights to a strategic plan.

Once you know what competitors are up to, you can explore opportunities for competitive advantage – the ability to produce goods or services at a lower cost than your competitors. Can you access cheaper resources or make products more efficiently than competitors? Your findings can kickstart your next strategic planning session.

Your analysis might also reveal opportunities for product differentiation. Can you win over potential customers with new product features or a better purchasing experience? Use your insights to inform a plan of action to boost products and services with four actions: eliminate, reduce, raise and create.

3 pro tips for effective competitive analysis

Sharpening your competitive analysis framework doesn't require an MBA. Add depth and focus to your review by applying three key concepts:

1. Estimate market share. Market share is the percentage of sales in an industry held by a company. To improve and gain an edge, find out how much of the market your company and competitors have.
2. Apply Porter's 5 Forces. Another way to assess a market's strengths and weaknesses is with Porter’s 5 Forces, a framework that examines five factors: suppliers, buyers, substitutes, new entrants, and rivals.
3. Do benchmarking. Benchmarking shows how a business is doing compared to other companies in the same industry. A benchmark comparison might reveal room for growth in quality, efficiency, and cost.

Jumpstart your competitive analysis with FigJam

Invite your team to collect and compare rival product offerings and brands with FigJam's drag-and-drop competitor analysis template. Once you spot gaps in the marketplace with your SWOT analysis, host a brainstorming session to capture opportunities. Customize your analysis with elements from your Figma brand library to produce a presentation-ready action plan. For more inspiration, check out competitive analysis examples contributed by Figma’s design community.

Ready to sharpen your competitive edge?