In brief: A useful competitive analysis does more than list rival strengths and weaknesses. Define the decision you need to make, compare a focused set of direct competitors, substitutes and benchmarks, separate evidence from assumptions and turn the findings into a small number of actions with owners and review dates.
What is a competitive analysis?
A competitive analysis is a structured comparison of the businesses and alternatives competing for the same customer decision. It helps an SME understand how customers may compare offers, where the market appears crowded, which claims need evidence and where a different approach could be valuable.
The purpose is not to copy another business or produce a large research document. It is to improve a decision about positioning, pricing logic, service design, channels, investment or risk.
A competitor analysis and a competitive analysis are often used to mean the same thing. The useful distinction is scope: analysing individual competitors is one part of understanding the wider competitive environment, which also includes substitutes, customer habits, new entrants and changes in how the problem is solved.
Start with the decision, not the competitor list
Before collecting information, write down the decision the analysis should support. Examples include:
- Which customer segment should receive the next offer?
- Is the proposed service sufficiently different to justify investment?
- What should a sales conversation explain more clearly?
- Which part of the customer experience should be improved first?
- Is expansion into a new location or channel commercially credible?
- Which competitor claim needs to be tested with customers?
Define the scope, owner and review date. A narrow analysis linked to a real decision is usually more useful than a large file that nobody acts on.
Which competitors should an SME analyse?
Direct competitors
These businesses offer a similar product or service to a similar customer group. Include the competitors most likely to appear on a customer shortlist, not every company in the sector.
Indirect competitors
These businesses address the same need through a different offer or delivery model. A face-to-face training provider, for example, may compete indirectly with online learning, internal training or specialist consultancy.
Substitutes and doing nothing
The customer may solve the problem internally, use a general-purpose tool, postpone the decision or accept the current inconvenience. These alternatives can be more important than a recognisable competitor because they explain why a sale does not happen at all.
Useful benchmarks
A benchmark does not need to compete directly. One well-run business in another market may provide a useful comparison for onboarding, service communication, packaging or operational discipline. Keep it separate from the direct-competitor set so the analysis remains clear.
How to conduct a competitive analysis
1. Define the comparison set
Choose a manageable group that represents the actual decision. For many SME questions, three to five direct competitors, one or two substitutes and one benchmark provide enough variety without making the research unworkable. The appropriate number depends on the market and purpose; it is not a fixed rule.
Record why each business or alternative is included. If you cannot explain its relevance, leave it outside the first analysis.
2. Gather information from lawful, relevant sources
Use information that is public, supplied legitimately or collected through your own customer research. Sources may include:
- Competitor websites, product pages, service descriptions and published terms.
- Public price information and the way packages are structured.
- Search results, directories, marketplaces and public social profiles.
- Customer reviews, treated as individual accounts rather than verified facts.
- Published reports, announcements, job advertisements and event material.
- Your own sales conversations, lost-opportunity notes and customer interviews.
- Public company filings, where relevant, while recognising that accounts may be historic, abbreviated or unsuitable for direct comparison.
Record the source and date. Public information can change, and absence of information does not prove that a capability or problem does not exist.
Do not misrepresent yourself to obtain private information, encourage staff or suppliers to breach confidentiality, or copy protected content. Respect applicable law, platform terms and professional obligations.
3. Compare the customer problem and offer
For each competitor or alternative, record:
- The customer group addressed.
- The problem or outcome emphasised.
- The product, service or package offered.
- What is included, excluded or optional.
- The stated reason to choose the offer.
- Evidence used to support the promise.
- The commitment, risk or effort expected from the customer.
Separate what the competitor explicitly states from your interpretation. “Offers weekend support” is observable; “has better customer service” is an inference unless dependable comparative evidence supports it.
4. Examine pricing logic and buying friction
Where prices are public, compare the basis rather than the number alone. Is pricing fixed, hourly, per user, usage-based, subscription-based or quoted after discovery? What contract length, setup work, limits, support or exit terms affect the apparent cost?
Where prices are not public, record the buying process: enquiry, consultation, demonstration, proposal, trial or contract. A more complicated purchase may signal a tailored offer, but it may also create friction. Test customer reactions rather than assuming which is better.
5. Review positioning, channels and proof
Assess how each business explains its offer and reaches customers. Consider:
- Main message and calls to action.
- Website, search, referrals, partnerships, events or marketplaces.
- Case studies, reviews, credentials and demonstrations.
- Content themes and questions addressed.
- Response routes and information requested from a prospect.
- Consistency between the promise and the visible buying experience.
The Marketing Frameworks guide owns wider marketing planning. Here, channel evidence matters only where it helps explain a competitive choice.
6. Compare service experience and operating implications
Look beyond promotion. The offer must be deliverable. Compare what can be observed about onboarding, availability, fulfilment, support, communication, returns or issue handling. Use your own operational knowledge to identify what a competing promise would require in people, process, cash and systems.
A feature that attracts customers may still be unattractive if it creates unacceptable cost, complexity or risk. Competitive analysis should inform strategy, not pressure the business into matching everything.
7. Turn observations into decisions
Summarise the evidence into a small number of findings. A useful format is:
- Observation: what was found and where.
- Interpretation: what it may mean, including uncertainty.
- Decision: what the business will change, test or leave alone.
- Measure: how the effect will be assessed.
- Owner and date: who acts and when the decision is reviewed.
The Business Performance and KPI guide explains how to connect a measure to ownership and a decision threshold.
Competitive-analysis questions for SMEs
Use questions that expose customer choice and business consequences:
- Which competitors actually appear in sales conversations?
- What alternative does the customer use when they do not buy from anyone?
- Which customer problem does each offer lead with?
- What is included, excluded and difficult to compare?
- How is price structured, and what affects total commitment?
- Which claims are supported by visible proof?
- Where does the buying process create confidence or friction?
- What do reviews repeatedly praise or criticise?
- Which apparent gap matters to customers rather than only to us?
- What would be costly or risky for us to imitate?
- Which assumption should we test directly with customers?
- What decision will this analysis change?
For a disciplined way to collect first-hand evidence, see Customer Insight: Turning Conversations into Opportunity.
A simple competitive-analysis worksheet
Create one row for each competitor, substitute or benchmark and use consistent columns:
- Name and category.
- Customer segment and problem.
- Offer and delivery model.
- Price basis and customer commitment.
- Main message and differentiators claimed.
- Channels and buying process.
- Proof and customer feedback themes.
- Operational implications.
- Source, date and confidence level.
- Possible decision or test for your business.
A confidence field is important. Mark whether a point is confirmed, inferred or unknown. This prevents a neat-looking comparison from presenting assumptions as facts.
A hypothetical SME example
Consider a small business providing outsourced administrative support. It compares three direct providers, a software-only substitute and the option for customers to keep work in-house. The analysis shows that competitors emphasise task completion, while customer conversations repeatedly raise visibility and continuity.
The business does not immediately claim that it is better. It tests a clearer package built around named ownership, a shared status view and documented handover. It measures proposal acceptance, delivery time, client questions and internal administration. The example is illustrative, not a reported G&G client result.
How often should competitive analysis be updated?
Set a review rhythm that matches the decision. A full analysis may be useful during annual planning, a new offer, expansion or a material market change. Lighter checks can be triggered by new competitors, changed prices, major customer feedback, lost opportunities or supplier and regulatory changes.
Avoid constant monitoring without a decision purpose. Record what changed since the last review and whether it affects the strategy.
Common competitive-analysis mistakes
- Choosing only obvious rivals: substitutes and doing nothing may explain more lost demand.
- Collecting without a decision: research grows while action remains unclear.
- Treating claims as facts: marketing copy and individual reviews need context.
- Comparing price without scope: inclusions, terms, risk and service levels change the meaning.
- Copying competitors: matching every feature can weaken positioning and margins.
- Ignoring internal capability: an attractive promise may be difficult to deliver responsibly.
- Using stale evidence: record sources and dates.
- Confusing activity with insight: the output should change or confirm a decision.
Turn competitor evidence into business strategy
Competitive analysis is an input to strategy, not the strategy itself. The business still needs to choose which customers to serve, what value to create, which capabilities to build and what not to pursue.
G&G’s Business Strategy service can help turn market and competitor evidence into priorities, choices and accountable actions. If the first need is a wider evidence-led assessment of risks, opportunities and performance, explore the Business Review.
