Competitor analysis means gaining a deep understanding of competitors and your position relative to them. You may have a weak position, but if you are the only one marketing it, you'll still have the edge. Likewise, if you have a strong position, but everyone is marketing better than you, you are lacking the edge.
The first thing a capable competitor analyst needs is honesty from a client. It's good to know how you pitch your company to your market, but it's also important to know your weakness and what plans you have to address these. It is also important to know hidden strengths. Often companies have or are developing capabilities they would prefer that competitors didn't know about. Proprietary secrets are nothing new, but it helps to know they exist and to have some sense of their nature. Once your company is well defined, we check out the competitors you identify. We also exercise searches to discover competitors flying under the radar.
Competitors encompass those who have similar capabilities, serve similar markets or both. They may also be brokers and representatives who seek to leverage broad offerings from a number of companies to become a single-source "supplier". In all cases, it is important to discover their strengths and weaknesses, so that your company can be differentiated - and be perceived to differentiate - to advantage.
In web-marketing, as in most other forms of marketing, your best opportunity to get a new customer is to catch them when they are dissatisfied with their present supplier. If you have no clue why they might get dissatisfied, you will not be able to present your company as worth jumping to. Prospects will move on to those that better address their concerns. Finding out what those are is critical to your growth.