Who competes with you for your customer’s time and money? Are they selling directly competitive products and services, substitutes, or possible substitutes? What are their strengths and weaknesses? How are they positioned in the market?

A good competitive analysis varies according to what industry you’re in and your specific Web plan and situation. A competitive analysis does have some common themes.

Begin by explaining the general nature of competition in your type of business, and how customers seem to choose one provider over another. What might make customers decide? Price, or billing rates, reputation, or image and visibility? Are brand names important? How influential is word of mouth in providing long-term satisfied customers?

For example, in the restaurant business competition might depend on reputation and trends in one part of the market, and on location and parking in another. For the Internet and Internet Service Providers (ISPs), busy signals for dial-up customers might be important. A purchase decision for an automobile may be based on style, speed, or reputation for reliability.

In many professional service practices, the nature of competition depends on word of mouth because advertising is not completely accepted and therefore not as influential. Is there price competition between accountants, doctors, and lawyers?

How do people choose travel agencies or florists for weddings? Why does someone hire one landscape architect over another? Why would a customer choose Starbucks, a national brand, over the local coffee house? Why select a Dell computer instead of one from Compaq or Gateway? What factors make the most difference for your business? Why? This type of information is invaluable in understanding the nature of competition.

Compare your product or service in the light of those factors of competition. How do you stack up against the others? For example: your travel agency might offer better airline ticketing than others, or perhaps it is located next to a major university and caters to student traffic. Others offer better service, better selection, or better computer connections. Your computer is faster and better, or perhaps comes in fruity colors. Other computers offer better price or service. Your graphic design business might be mid-range in price, but well known for proficiency in creative technical skills. Your automobile is safer, or faster, or more economical. Your management consulting business is a one-person home office business, but enjoys excellent relationships with major personal computer manufacturers who call on you for work in a vertical market in which you specialize.

In other words, in this topic you should discuss how you are positioned in the market. Why do people buy your product or services instead of the others offered in the same general categories? What benefits do you offer at what price, to whom, and how does your mix compare to others. Think about specific kinds of benefits, features, and market groups, comparing where you think you can show the difference.

Describe each of your major competitors in terms of those same factors. This may include their size, the market share they command, their comparative product quality, their growth, available capital and resources, image, marketing strategy, target markets, or whatever else you consider important.

Make sure you specifically describe the strengths and weaknesses of each competitor, and compare them to your own. Consider their service, pricing, reputation, management, financial position, brand awareness, business development, technology, or other factors that you feel are important. In what segments of the market do they operate? What seems to be their strategy? How much do they impact your service business, and what threats and opportunities do they represent?

AvatarSabrina Parsons

Sabrina Parsons is a successful Internet expert, veteran of several successful Internet ventures, and co-founder of her own consulting company Lighting Out Consulting. She is currently CEO of Palo Alto Software.