Competitive gap analysis is a valuable process for businesses aiming to stay ahead in the market. It involves comparing your company’s performance across key areas—such as products, pricing, and customer experience—against your competitors’.
In this guide, we’ll explore the components, benefits, and steps involved in conducting a competitive gap analysis with examples to improve your competitive advantage.
Understanding competitive gap analysis
Competitive gap analysis is a process that helps you identify the differences between your business and your competitors. It involves comparing various aspects of your business, such as products, services, pricing, and market presence, against what your competitors offer.
Doing this lets you pinpoint areas where your business may be underperforming or missing out on opportunities that could give you a competitive edge.
In business strategy, conducting a competitive gap analysis lets you understand where you stand to others in your industry.
This insight enables you to make informed decisions on adjusting your approach to better meet customer needs, improve your market share, and outperform your competitors.
Difference between competitive gap analysis and other forms of market analysis
While competitive gap analysis focuses on identifying gaps between your business and your competitors, other forms of market analysis take a broader view. For example:
- SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) looks at your business’s internal and external factors without specifically focusing on the competition.
- Market research studies customer behavior, preferences, and trends but doesn’t always compare your position directly with competitors.
Why is competitive gap analysis crucial?
Conducting a competitive gap analysis is essential for ensuring your business stays competitive, and strategically aligned with market demands. It offers several key benefits that can directly impact your overall success.
1/ Identifies market opportunities:
By comparing your business to your competitors, you can spot gaps in the market that haven’t been fully addressed. For example, there’s a particular feature or service that your customers are asking for, but your competitors haven’t responded to.
If you’re a SaaS SEO agency, you might find that competitors are not targeting high-intent keywords effectively, presenting an opportunity to dominate organic search. Recognizing these needs early on allows you to fill that gap before others do.
Moreover, you might discover that certain customer groups aren’t receiving enough attention from competitors. By targeting these untapped segments, you can create new growth opportunities and attract loyal customers who feel their specific needs are being met.
2/ Improves strategic planning:
Competitive gap analysis provides you with reliable data that can help fine-tune your business strategy. When you understand where your competitors perform well and where they fall short, you can adjust your:
- Product offerings: Perhaps you need to enhance your products, add features, or adjust your pricing to meet customer expectations more effectively.
- Marketing strategy: You may find that competitors are dominating certain marketing channels, allowing you to reallocate resources to areas where you can make a bigger impact.
- Customer experience: If a competitor provides better customer service, for example, you can work on improving your own customer experience to attract dissatisfied customers.
3/ Strengthens competitive position:
By identifying where you can outperform your competitors, you can create a stronger position in the market. Competitive gap analysis shows you where your business has strengths that you can focus on, such as superior customer service, better quality products, or a more personalized customer experience.
It also allows you to enhance what sets your business apart, giving you a clear advantage in your industry.
For instance, Scanova recognized ease of use as its core strength and used it to secure a spot among the top QR code generators in the market.
4/ Informs decision-making:
A competitive gap analysis provides you with data-driven insights that inform your decisions. Instead of making guesses about what might work or what could improve, you’re depending your choices on real comparisons between your business and your competitors. This makes your decision-making process:
- More focused: You’re prioritizing areas that will have the most impact.
- Less risky: With data backing your decisions, you’re less likely to make costly mistakes or waste resources on initiatives that aren’t aligned with market demands.
By using competitive gap analysis, you gain the clarity and insight needed to adjust your strategies and decisions, leading to more effective actions that promote growth and strengthen your market position.
Key components of competitive gap analysis
Competitive gap analysis is based on four main components that help you evaluate your market position and uncover improvement opportunities.
1/ Competitor analysis:
This is where you define both direct and indirect competitors. Direct competitors are businesses that offer the same products or services to the same audience. For instance, if you run a CRM software company, other CRM providers targeting similar industries are your direct competitors.
Indirect competitors, on the other hand, may not sell the same product but still meet similar customer needs like businesses offering basic contact management tools.
Taking the same CRM software example, if you run a Pest Control CRM company, you are not a direct competitor to Sales CRM companies like Salesforce and HubSpot, even though all are technically similar products.
To explore deeper, you can use tools like SWOT analysis to evaluate their strengths, weaknesses, opportunities, and threats or rely on benchmarking to compare your performance metrics with theirs.
To effectively analyze your competitors, you can use several tools and techniques, such as:
- SWOT analysis: This helps you identify your competitors’ strengths, weaknesses, opportunities, and threats. By analyzing these aspects, you can determine where they lead and where they fall short.
- Benchmarking: This technique involves comparing your business’s performance against industry standards or competitors’ key metrics (e.g., pricing, customer satisfaction, or sales growth). Benchmarking helps you understand where you stand in comparison to the competition.
2/ Market analysis:
Next, focus on market analysis, where you study broader industry trends and customer expectations. Next, focus on market analysis, where you study broader industry trends and customer expectations. For instance, in financial services, rising demand for streamlined processes in personal loans could indicate an opportunity to align your offerings with market expectations.
This step ensures you’re not just reacting to what your competitors are doing but also staying in tune with what the market demands.
3/ Internal performance evaluation:
While it’s important to analyze your competitors, it’s equally critical to analyze your performance. This allows you to understand your strengths and weaknesses and helps you identify where improvements are needed.
- Strengths: Consider your competitive advantages, whether it’s a unique product feature, a strong customer support team, or effective marketing strategies. Identifying these strengths enables you to utilize them in areas where your competitors may be lacking.
- Weaknesses: Evaluate areas where your business falls short compared to your competitors. This could include product gaps, slow response times, a lack of brand awareness, or lower-quality offerings. By identifying these weaknesses, you can prioritize improvements to close the gap.
For organizations in critical sectors like emergency medical services, leveraging specialized tools such as EMS reporting software can be instrumental in identifying operational gaps and streamlining performance analysis.
4/ Gap identification:
The final component involves comparing your business against competitors to identify gaps.
Types of gaps: Gaps could appear in several areas:
- Product gaps: Maybe your competitors offer features that you don’t, or their product solves problems that your solution doesn’t fully address.
- Pricing gaps: If competitors offer similar products at lower prices or with better pricing models (e.g., more flexible payment terms), this could be a gap.
- Customer experience gaps: If competitors provide an easier user experience, faster support, or a more engaging onboarding process, this might be an area to improve.
Steps to conduct a competitive gap analysis
1/ Set objectives:
The first step in conducting a competitive gap analysis is to set clear and measurable objectives. This step acts as the foundation for your analysis, ensuring that your efforts are focused and aligned with specific business goals. Without defined objectives, your analysis can become unfocused, making it harder to Identify meaningful insights.
Why setting objectives matters
- Guides your analysis: Objectives act as a roadmap, helping you prioritize areas to investigate, such as pricing, customer satisfaction, or market trends.
- Focuses resources: With clear goals, you can allocate your time, tools, and team efforts more effectively.
- Measures success: Defined objectives allow you to track progress and evaluate the impact of the actions you take to close identified gaps.
When setting objectives, ensure they are specific, measurable, achievable, relevant, and time-bound (SMART). These attributes make it easier to evaluate your analysis and implement improvements.
2/ Collect data:
Data collection is a critical step in conducting a competitive gap analysis, as it provides the foundation for identifying gaps and making informed decisions.
During this step, you gather relevant information about your competitors, customers, and your own business. The quality and accuracy of the data you collect will directly influence the effectiveness of your analysis.
When collecting data, prioritize gathering information in these key areas:
- Competitor insights: Understand what your competitors offer, how they position themselves, and where they lead.
- Customer feedback: Learn what your audience values, their expectations, and any unfulfilled needs.
- Internal performance metrics: Assess your offerings, pricing, and customer experience to compare against competitors.
Incorporating tools and resources for data collection can further enhance the analysis.
Tools and resources for data collection
Google Analytics
- Analyze your website performance, traffic sources, and user behavior.
- Compare your engagement metrics (e.g., bounce rate, session duration) with industry benchmarks.
SEMrush (or Similar Tools)
- Evaluate competitors’ SEO performance, including keywords they rank for, their backlink profiles, and content strategies.
- Identify opportunities to optimize your digital presence based on their strengths.
Customer Surveys
- Collect direct feedback from your audience about their needs, preferences, and pain points.
- Use surveys to uncover why customers may choose a competitor over you.
Competitor Websites
- Examine competitors’ product or service offerings, pricing, and value propositions.
- Analyze their user experience, such as website design, ease of navigation, and clarity of information.
Social Media and Reviews
- Monitor competitors’ social media activity to understand how they engage with customers. Read customer reviews to identify their strengths and weaknesses from a buyer’s perspective.
- For example, integrating tools like Google reviews widget on your website can showcase customer feedback effectively, improving transparency and trust.
- Read customer reviews to identify their strengths and weaknesses from a buyer’s perspective.
To further streamline your data collection process, consider leveraging AI-powered tools like Convin’s Conversation Intelligence Platform. Convin helps businesses analyze customer interactions, such as calls and chats, to extract actionable insights. By integrating tools like Convin into your data collection process, you can gather deeper, more actionable insights to inform your competitive gap analysis.
3/ Analyze competitor performance:
To analyze your competitors’ performance effectively, start by evaluating their strengths, weaknesses, and unique value propositions. Strengths might include their product quality, exceptional customer service, or innovative features. Understanding these can help you identify areas where they are leading the market.
Next, evaluate their weaknesses, such as poor customer reviews, limited offerings, or mediocre marketing efforts. These gaps might represent opportunities for you to stand out where they struggle.
Lastly, focus on their unique value propositions. This could be anything that sets them apart, like competitive pricing, customization options, or exclusive services. Recognizing these will help you position your business strategically.
4/ Assess your performance:
In this step, you evaluate your business’s current performance to understand how it compares to competitors. This involves taking a detailed look at your offerings, pricing strategies, and customer service to identify areas where you are strong and areas needing improvement.
How to assess your performance
Compare offerings: Analyze your products or services in terms of features, quality, and variety. Ask questions like:
- Are your offerings meeting customer needs effectively?
- Do competitors offer features or solutions that you don’t?
- Are your products outdated compared to industry standards?
Example: If your software lacks automation features that your competitors provide, it could indicate a gap in your offerings.
Evaluate pricing strategies: Look at your pricing model and compare it with competitors.
Consider:
- Are you competitively priced for the value you provide?
- Do competitors offer better pricing structures (e.g., discounts, bundles, or tiered options)?
- Is your pricing aligned with customer expectations and perceived value?
Example: If your competitors attract more customers with a subscription plan that’s flexible or cost-effective, you might need to rethink your pricing strategy.
Analyze customer service metrics: Review your customer service performance against benchmarks set by competitors. Focus on:
- Response times: Are you as quick to respond as your competitors?
- Support channels: Do you offer multiple channels (live chat, email, phone), or is your support harder to access?
- Customer satisfaction: Use customer feedback and surveys to understand how your service compares.
Example: If competitors provide 24/7 support while your service hours are limited, this could be a significant gap in customer experience.
5/ Identify gaps
In this step, you compare your performance with that of your competitors to pinpoint areas where your business is lacking or where competitors are outperforming. These gaps show opportunities for improvement and growth that can help your business gain a competitive edge.
To uncover these gaps, you need to evaluate key metrics and align them with customer expectations and industry trends. For instance, if your competitors offer additional product features that customers value but your business doesn’t, it shows a gap in your offerings.
Similarly, if their pricing strategies are more appealing, it suggests that your pricing approach may not be competitive enough.
Gaps can also appear from operational inefficiencies. For example, if customers are choosing competitors because of faster delivery times or more responsive customer service, these are areas that highlight where you’re falling short.
6/ Develop an action plan
Once you’ve identified gaps in your business performance compared to competitors, the next step is to create a strategic action plan to address those gaps. This plan provides a clear strategy for improving your offerings, aligning with market expectations, and achieving a competitive edge.
How to develop an action plan
(I) Prioritize the gaps:
Rank the identified gaps based on their potential impact on your business. Focus on areas that will provide the greatest return on investment or align most closely with your business goals.
Example: If a pricing mismatch is causing you to lose customers, addressing this gap might be a higher priority than launching new features.
(II) Set specific goals:
Define measurable objectives for closing each gap. Use SMART goals (Specific, Measurable, Achievable, Relevant, Time-bound) to ensure clarity and focus.
Example: If competitors provide faster shipping, your goal could be to reduce delivery times by 20% within the next six months.
(III) Develop targeted strategies:
Create strategies designed to address each gap. Strategies might include:
- Improving product features to match or exceed competitor offerings.
- Revising pricing models to align with market expectations.
- Enhancing customer support to meet industry benchmarks.
- Building backlinks to strengthen your website’s authority and improve search visibility against competitors.
Example: If competitors excel in online customer support, you could introduce 24/7 live chat and invest in training your support team.
(IV) Allocate resources:
Assign the necessary resources time, budget, and personnel to execute your strategies. Ensure teams are clear about their responsibilities and timelines.
Example: Allocate funds to hire specialists or invest in tools to streamline customer service or product development.
(V) Monitor progress:
Implement a tracking system to measure the effectiveness of your action plan. An extra option could be adding a Jira checklist to track tasks and progress more efficiently.
Use metrics and KPIs (Key Performance Indicators) to evaluate whether your strategies are closing the gaps.
Example: Track customer satisfaction scores after improving customer service to see if the changes are making an impact.
Example of competitive gap analysis
1/ Slack vs. Email Communication (SaaS)
Slack identified inefficiencies in workplace communication, such as disorganized email threads and poor team collaboration tools.
- Gap identified: Lack of real-time, organized team communication tools.
- Action taken: Slack introduced a platform for instant messaging, channel-based organization, and integrations with other apps, becoming the go-to tool for workplace communication.
2/ HubSpot vs. Fragmented marketing tools (SaaS)
HubSpot noticed that businesses used multiple disconnected tools for marketing, sales, and customer service, leading to inefficiencies.
- Gap identified: Lack of an all-in-one platform for inbound marketing and CRM.
- Action taken: HubSpot created an integrated suite of tools, simplifying workflows and providing businesses with a centralized system to manage their growth.
3/ Zoom vs. other video conferencing tools (SaaS)
Zoom identified usability and performance issues with existing video conferencing solutions like Skype.
- Gap identified: Poor video quality, complex interfaces, and unreliable connections.
- Action taken: Zoom developed a user-friendly platform with high-quality video, scalability, and features like virtual backgrounds, making it the leader in online meetings.
4/ AIOD – All-in-One Discount vs. Other Discount Apps (Shopify)
AIOD identified a gap in discount apps that only offer a limited set of discount features, forcing merchants to use multiple apps for different discount strategies.
- Gap identified: Lack of an all-in-one solution for diverse discount types (e.g., BOGO, volume, tiered, wholesale, etc.).
- Action taken: AIOD developed a comprehensive app that offers a wide range of discounts in one place—enabling merchants to manage all types of discounts, from bulk and tiered pricing to automatic gifts and BOGO offers, streamlining their discount strategy and improving overall sales performance.
Conclusion
In conclusion, conducting a competitive gap analysis provides valuable insights that can help you strengthen your market position. By identifying gaps in your offerings, pricing, and customer experience, you can refine your strategies to better meet customer needs and outperform your competitors. Regularly performing this analysis ensures that your business stays aligned with market demands, allowing you to capitalize on opportunities and make data-driven decisions that drive growth.
