You need to stand out in a competitive landscape to earn sales from your target customers. Whether you’re developing a higher-quality product or devising a competitive pricing strategy, competitor analysis can aid your efforts. But what’s the best way to gain these valuable insights? One option is to use a visual tool like a competitive matrix.

Here’s what a competitive matrix is, the different types, and how to develop a competitive advantage in your market.

What is a competitive matrix?

A competitive matrix—also known as a competitor matrix or competitive analysis matrix—is a visual representation, such as a grid or table of various data points (like product features and pricing) against one or several competitors. The goal is to facilitate your examination of competitors and market trends to identify gaps and opportunities in your target market.

For example, an ecommerce business selling locally roasted coffee could use a competitive matrix to evaluate its key competitors’ marketing strategies, identify its current campaign’s strengths and weaknesses, and use the information to create new marketing campaigns that stand out. This could look like identifying competitor messaging themes, deducing that they focus more on their coffee’s intricate tasting notes, and recommending specific brewing methods for their products. The business owner could then make their products more accessible to general coffee drinkers, simplifying their marketing and even product packaging to just four roasts—light, medium, dark, and decaf—with a simple tag line: ”Drink what you like, however you brew it.”

4 competitive matrix types

1. Competitive profile matrix (CPM)
2. SWOT analysis
3. Competitive advantage matrix
4. Gartner’s Magic Quadrant

There are several competitor matrix types to choose from, each with a different scope, focus, and structure. Here are four of the most common:

1. Competitive profile matrix (CPM)

A competitive profile matrix (CPM) is a table that compares your company with its major competitors based on a list of critical success factors. 

This competitive matrix analysis involves a scoring system where you assign a numerical value, or weight, to each critical success factor (e.g., brand reputation, product range, or market share) with the total value equaling one (1.0). Choose higher numbers for more important success factors, and lower numbers for less important ones. For example, a luxury apparel brand might place a higher weight (such as 0.3 or 0.4) on product quality, whereas a dropshipping business might prioritize online presence or shipping speed by assigning those factors a more significant weight.

From there, score your selected critical success factors on a scale from one to four, based on how well your own company or each competitor performs on that success factor. One indicates a major weakness, four a major strength. Multiply each score by the corresponding factor’s weight to get a weighted score. Then, add all weighted scores for each business to calculate the total score for your company and competitors.

For example, a business selling furniture might evaluate its competitors based on product quality (assigning a value of 0.2), brand reputation (0.15), online presence (0.15), shipping speed (0.1), employee retention (0.1), pricing strategy (0.2), and economies of scale (0.1). (Economies of scale mean that as you produce more of something, the cost per unit gets cheaper.) 

Here’s what its CPM table might look like:

After tallying each competitor’s total score on your competitive profile matrix, compare the results to determine how your company ranks against the competition. This reveals your own company’s position in the competitive landscape and highlights specific areas where your business can improve. 

For example, the furniture business could identify economies of scale as a major weakness and other factors like online presence and pricing strategy as minor weaknesses, and allocate resources to improve these specific factors and increase its total score. The business could implement a more robust social media strategy or increase ad spend to boost brand awareness to target online presence weaknesses.

2. SWOT analysis

A SWOT analysis matrix is a framework for evaluating your organization or project’s strengths, weaknesses, opportunities, and threats (SWOT). You can use SWOT frameworks for strategic decision making, to prepare for obstacles, or improve your current operational approaches. A SWOT analysis organizes these four components into a straightforward grid format, with each element positioned in its own section: 

• Strengths. Identify strengths based on factors like unique product offerings and minimal production costs—whatever gives you or them a competitive edge. 
• Weaknesses. Weaknesses could include limited resources, poor product quality, or unresponsive customer service. 
• Opportunities. You and your competitors could have specific opportunities, such as a growing market or new technologies for production efficiencies or product development.
• Threats. These include any external factors that could potentially harm a business, such as increasing competition, rising production costs, or declining market growth.

Once you’ve created a SWOT analysis matrix for your company and key competitors, use it for direct quadrant-by-quadrant comparisons. This helps identify patterns in the competitive landscape (like shared threats or opportunities) and strategic openings for your company to stand out (by leaning on a strength or capitalizing on competitor weaknesses).

For example, if you create SWOT analysis matrices for your furniture company and its competitors, you might notice that several competitors have slow shipping speeds. You could use this to your advantage by improving your own delivery times and promoting this with a targeted marketing campaign highlighting your company’s strength by referencing how quickly you can ship furniture directly to customers. 

3. Competitive advantage matrix

A competitive advantage matrix is a visual tool that plots companies along two key axes: an x-axis represents the potential size of a company’s competitive advantage (often tied to economies of scale) while the y-axis shows the number of opportunities for gaining a competitive advantage (such as product differentiation). 

Based on their placement along these two axes, competitors fall into one of four quadrants:

• Fragmented. Businesses that fit into the top left quadrant of the competitive advantage matrix are considered fragmented businesses with differentiated opportunities (such as unique products in a niche market), but do not benefit from economies of scale.
• Specialized. Competitors with both high potential for economies of scale and a large amount of differentiation opportunities fit into the top right quadrant. These are highly competitive companies in your target market.
• Stalemate. In the bottom left corner, competitors with limited size and opportunities for differentiation fall into the stalemate quadrant. These types of businesses are the least competitive when compared to the other three quadrants.
• Volume. Competitors that fit into the bottom right quadrant benefit from economies of scale without many opportunities for creating a competitive advantage through differentiation.

You can plot your own business and relevant competitors on the same matrix to see where each stands in terms of scale and differentiation potential. Ideally, your business falls into the specialized quadrant. If not, the matrix can help you identify strategic paths to get there.

For example, if your business is fragmented, you could focus on scaling operations to gain cost advantages. If you’re in the volume quadrant, you could invest in R&D or expand your product range to increase differentiation.

This matrix also helps identify which competitors are already specialized, so you can study how they achieved their position and apply similar strategies. Similarly, you can identify gaps in the market. For example, if you’re in a market dominated by Volume businesses, you could differentiate and carve out a stronger position by introducing unique product variants, for example.

4. Gartner’s Magic Quadrant

Created by research and advisory firm Gartner in the early 1990s, the Magic Quadrant matrix is a graph used to evaluate an industry’s competitive landscape based on two factors: a company’s completeness of vision (x-axis) and its ability to execute that vision (y-axis). This matrix works particularly well for businesses in the technology sector with a focus on innovation and capturing market share in a new or changing industry. 

In this matrix, established and emerging competitors are placed along the x-axis, moving further to the right the clearer their company vision is (for example, a company that routinely and successfully capitalizes on market trends would be further to the right). The y-axis reflects a company’s ability to execute that vision, considering factors such as overall financial health, market share, and production capabilities. 

Based on their placement along these two axes, competitors fall into one of four quadrants:

• Challengers. Top left. Competitors with a high ability to execute strategies but a slow response time to changing market trends or customer preferences.
• Leaders. Top right. Companies with a clear strategic vision as well as the resources and capability to execute those plans. These are typically the strongest players in your industry.
• Niche players. Bottom left. These businesses have limited execution and vision.
• Visionaries. Bottom right. Competitors with innovative ideas and strong market insight that lack the resources and infrastructure to execute at scale.

How to create a competitive matrix

1. Determine what factors to compare
2. Choose which competitors to analyze
3. Decide what type of competitive matrix to use
4. Perform market research on competitors
5. Build and update your competitive matrix

Here are the basic steps for creating an effective competitive matrix:

1. Determine what factors to compare

Start by setting the boundaries for your market analysis. What is the scope of research for your matrix? Are you looking at high-level competitive analysis for your industry or being more specific and focusing on one aspect of your business? 

For example, you might decide to focus your competitive matrix on your company’s market position in specific areas, like product quality or customer service.

2. Choose which competitors to analyze

Identify competitors relevant to your business, and include both direct and indirect competitors. Direct competitors sell similar products or services to the same target market, while indirect competitors offer slightly different products or services that fill a similar customer need. 

You might start with the major competitors with the largest market presence. To return to an earlier example, if you’re running an ecommerce business selling locally roasted coffee, your direct competitors likely include other coffee shops in your area, as well as online specialty coffee shops offering monthly subscription boxes, for example. Your indirect competitors would include grocery stores and major online retailers.

3. Decide what type of competitive matrix to use

Choose the competitive matrix that best suits the scope and focus of your competitive analysis. Here are some of the best use cases for the four competitive matrix types listed above:

• Competitive profile matrix. A competitive profile matrix is a useful tool for a broad competitor analysis that considers a wide range of factors. Since you can include as many relevant critical success factors as you want, you can customize the matrix to reflect what matters most in your industry, like pricing, product quality, brand reputation, customer service, innovation, or distribution channels.
• SWOT analysis. You can use the SWOT analysis framework for a less math-heavy evaluation of specific aspects of their business against yours—assessing the strengths, weaknesses, opportunities, and threats of their product offerings or marketing strategies alongside yours in broader category buckets. 
• Competitive advantage matrix. This type of matrix identifies where your company ranks in terms of economies of scale and differentiation opportunities in the competitive landscape, making it well-suited for analyzing production planning and product development.
• Gartner’s Magic Quadrant. This matrix works well for evaluating your position in a new or fast-growing market. 

4. Perform market research on competitors

Conduct market research on your competitors based on the competitive matrix factors. Collect relevant data through primary market research methods like survey groups, interviews, and observations, as well as secondary market research such as industry reports, case studies, or other preexisting public information.

5. Build and update your competitive matrix

Fill out your competitive matrix with the market research data. Once you have your competitive matrix built out, evaluate your competitors and your company’s position compared to those competitors. 

You might use this information to develop a unique value proposition (UVP) that helps you stand out from competitors. Similarly, a competitive profile matrix can highlight success factors that need attention, like low scores in customer service or employee retention. Regularly revisit and update your matrices monthly, quarterly, or annually to stay on top of shifts in the market and competitive landscape.