Competitive Analysis Will Make or Break Your Business – Here’s Why and How To Do It!
Performing a comprehensive competitive analysis if often regarded to as an afterthought to many entrepreneurs and decision makers in an organization. Through this, product owners risk their own success in the development phase because they don’t know what they don’t know and are poorly-advised on what is needed to create a successful product in their industry. Marketing and sales people are also put at risk because if they’re unclear of the main advantages of their products compared to others, it makes it harder to do business and close deals.
As a product owner creating something new, you need to ask, “Why does this solution not exist in the marketplace today?” In this day and age, it’s safe to say that although most product ideas haven’t been successful, almost everything has been attempted. You might assume your product is unique, but the reality is that in most cases that is false. In order to develop a competitive advantage for your product that wins customers over, you need to identify what has worked and failed regarding other similar solutions. Otherwise, how can you be sure what you’re putting in the marketplace is providing innovative value? And how else can you make educated guesses based on what features customers will like and dislike? If you’re in marketing or sales, you’re probably not tasked with influencing a product roadmap, but the research will still be valuable in understanding the unique parts of doing business with you currently that will make for more effective advertising and selling.
In order to be competitive, it’s crucial to know what’s currently out there, as well as the types of offerings that have been well-regarded and those that have not. Having that firsthand knowledge of your competitors will provide valuable insight into the current and outdated trends of the products you will be competing with. By ‘trends’, this is not only limited to the design practices from a UX perspective, but also includes the traits and values company-wise, their customer segment, branding, and more. Analyzing each competitor’s level of success based on those attributes will really help connect the dots towards identifying what’s needed in creating a value-driven offering in the marketplace.
Identifying types of competitors
A competitor is someone that shares your goals and objectives along with the drive to achieve what you want. Some competitors will be extremely similar to you, while others you’ll share only certain commonalities with. You’ll differentiate these competitors by labeling them as either ‘direct’ or ‘indirect’. Let’s go into further detail:
Direct competitors: Companies (or products) that offer the same or a very similar value proposition to your current or future customers. Whether it’s the best solution or not, this is what your potential customers are currently using right now to solve their problem as it relates to your business. If you’re entering a new market, there might be no absolute “direct competitors.” However, for your own good don’t wrongfully assume this without doing the proper research beforehand.
Examples of direct competing products:
- iPhone X and Galaxy S8
- Google Search and Bing
- Microsoft Word and Google Docs
- Venmo and PayPal
Indirect competitors: Companies (or products) that offer the same value proposition to a different customer segment or a different value proposition to your exact customer. Indirect competitors can often offer a partial solution to your potential customer, but will act as more of a ‘band aid solution’ to the problem you’re intending to solve. Indirect competitors won’t offer the same insight as direct competitors as to what it actually takes to win your marketplace, but in my experience they’ve been great to take ideas from.
Examples of indirect competing products:
- Tinder and Shapr (similar value proposition, different customer segment)
- Public transportation and Uber (different value proposition, same customer segment)
- YouTube and Vimeo (similar value proposition, different customer segment)
Sometimes it can be difficult to differentiate between indirect and direct competitors. Labeling competitors as indirect or direct isn’t as important as realizing at a higher level what it is about each competing product that’s working or not as it relates to your business.
Searching for competitors
Below are my favorite ways to find the most relevant competitors you should be analyzing:
Customer-Facing Research: During your initial customer interviews or other forms of research, people might share names of products they’re currently using or other solutions they’ve heard of that relate to your business either on an indirect or direct level.
In-House Discussions: Those you’re working with, whether investors, clients, or members of your team could have named some products they want to compete with during various discussions of the product-planning phase.
Searching for competitors: Successfully identifying competitors through an online web search is a result of identifying keywords customers might use to search for similar offerings to yours. Ask yourself what words people would use to search for your solution. Often times this will lead to ‘Top 10’ and ‘Best Of’ articles that give you a clue for the types of solutions that exist that relate to yours in some fashion.
Additional tips for finding competitors:
- Try an assortment of different keyword phrases that relate to your product and also search for keywords that competitors are trying to be ranked for to get additional insights if possible.
- Don’t limit yourself to the first page of results and look through at least 5 pages before resorting to another search phrase. Just because a product isn’t very relevant today, it doesn’t mean there’s no nothing to learn from it.
Filling out a matrix with competitor data
My favorite way to do competitive analysis is through collecting all of the data in a matrix, as inspired by one of my favorite product strategy books called UX Strategy. In a matrix, you’ll be collecting an assortment of both qualitative and quantitative data points of each competitor, which will present a firm understanding of each competing company and what parts of their strategy are working or not.
Below is an exhaustive list of the most important things that I believe should be included over the course of your competitive research. When filling out the matrix in a spreadsheet, the below titles should be columns and your competitors should be rows.
- Competitor name
- Website URL and App Store location
- Crunchbase URL
- Purpose of the site (value proposition)
- Year founded
- Funding rounds
- Revenue streams
- Monthly traffic or # of app downloads
- # of items/SKUs (if applicable to your business)
- Social network popularity
- Content types/categories
- Personalization features
- Competitive advantage (perceived)
- Overall usability evaluation
- General notes
Though plenty of information can be found by browsing the product website, going on Crunchbase, and watching YouTube videos, in order to get a complete look at a competitor you’ll need to actually use their product or service. With that, I recommend creating your own user accounts for each competitor if possible and sharing password access with other team members, so they can relive the same experience if they’re working with you on this project. To avoid suspicion, it’s best to not use any of your personal information during the account creation process. When you’re actually using the platform, you can analyze important factors that you wouldn’t have otherwise, such as how popular it is and how usable the experience is. Even more, certain experiences and UX patterns will become visible that might be useful if you’re working with designers. For a project I was working on, I labeled a certain application as a top 3 direct competitor initially, but when I downloaded it the experience was broken. That changed my outlook on the competitiveness of the market.
After gathering all the research, here are examples of some valuable insights you might find:
- Your direct competition exists, has user traction, and a lot of money, therefore you should rethink going into business to compete with them.
- Your competition poses as a threat, but you realize that none of them offer the same unique experience as your product, so there’s potentially room for you in the market.
- There’s not a lot of competition out there that competes with your value proposition leading to potentially a lot of opportunity for a low upfront investment.
- You realize the features and UX patterns that most competitors are using that depending on if they’re good or bad, could either be great additions to your product or beneficial to leave out.
- Similar to the above point, through looking at reviews, you can identify the pros and cons of your competitors to determine what’s needed to develop a competitive advantage in the marketplace through feedback.
- If you’re in marketing or sales, you might realize your product has a lot of key advantages compared to others that you didn’t know existed that will influence your selling tactics. Or it doesn’t and you need to talk to the product manager!
Without looking at the current competitive landscape, it’s impossible to know where the opportunity lies with your product. As a product owner or UX strategist, it’s your job to build something unique and you can’t do that through ignoring your competition. If you’re on a marketing or sales team where this information isn’t available, you need to take action and create it yourself because it’s how you’ll show your differentiation to tell your story in the midst of all the competition.
Thanks for reading and please feel free to share your thoughts!