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How to undertake a competitor analysis
Preparing a Competitor Analysis is an activity that all Product Managers undertake at some point in the job. As Product Managers, having solid knowledge of our rivals and their activity in the marketplace helps us make better decisions during the strategic product planning phase. It ensures that we’re ready to respond to our competitors and exploit any weakness in order to gain a larger share of the pie.
An important distinction to make before we begin is that a Competitor Analysis is not a Product Comparison. Although we may make mention of the types of products sold, we should not be including the detailed product features in a Competitor Analysis. Quite often, two seemingly distinct products can solve the same customer problem or satisfy a similar need. At its core, a Competitor Analysis is a document that evaluates the strengths and weaknesses of your rivals.
brainmates outline a six-step process for competitor analysis:
Step 1: Define your market
A first step is to try to articulate what market it is that you serve. Who are the customers in this market and what problem, need or want are they experiencing? Which organisations are currently satisfying these needs or wants and how do these organisations differ? If there are multiple products tailored to different market segments try to define the ways in which these products can be grouped together or set apart. Using simple 2×2 matrices (e.g. price vs. functionality) can help to categorise your competitors and help to show what customers are looking for.
Step 2: Create a list of your direct competitors
Once you’ve established some broad categories you should now look at direct competitors to your product. These include any company that sells a very similar or identical product or service in the same footprint as your organisation. For example; if your company sells Cable TV service, you would only list your competitors as those offering a similar service that your customers can also purchase. If the competitor’s service does not extend to your company’s geographical footprint, there may be no point including this competitor in your analysis. Their product offering however may be interesting and you may include it in a Product Comparison paper.
If there are many competitors in your market, choose a handful of competitors that you believe are the largest threat to your organisation. Make sure to think about where the market is heading – Manufacturers of CD Walkmans should have seen the writing on the wall with the arrival of MP3 players.
Step 3: Analyse competitors
Unless you have a budget to conduct formal research, its best to use available resources such as news articles, industry journals, analyst reports, the company’s website, marketing collateral, company reports and so forth. You may also want to do a general blog search to find out what their customers’ and others are saying about the company and the products they offer. Networking events and tradeshows also present great opportunities to collect data about your competitors. Your more loyal customers may also share information with you.
According to Davidson (1997) in his book, “Even More Offensive Marketing” sources of information can be grouped into 3 categories:
- Recorded Data: This includes published information such as an Annual Report.
- Observable Data: This includes data based on a range of sources.
- Opportunistic Data: This is qualitative data coming from discussions with suppliers, ex-employees or information from blogs by customers.
This is a useful method of categorising data and may help you determine what information holds true or may be false.
Step 4: Summarise competitor product and market strategies
Once you’ve gathered your data, its best to organise the information in a table format.
Consider the following headings in your table:
- Company Name
- Competitor Description – Describe the company.
- Competing Product – Describe the competing product, its purpose and high level functionality.
- Competing Price – List the price of the competing product.
- Target Market Description – Describe the market at which the competing product is targeted.
- Distinctive Strengths – Describe the core business strengths of the company.
- Distinctive Weaknesses – Describe the core business weaknesses of the company.
- Market Strategy – Describe the company’s market strategy. A market strategy is the way in which the company has approached the market. (niche market player, price leader etc)
- Market Share – Describe the market share the competing product has in your main target market.
- Sales Volume – Describe the sales volume the competing product has generated in your main target market.
- Threat Level – Describe the threat level the competing company poses to your company, relative to your product.
A useful tool is to produce a simple value curve model for your industry. This can be particularly useful if you are seeking out ‘gaps’ where competitive threats are weakest.
Step 5: Compare and contrast competitors with your products
The final step in preparing a Competitor Analysis is to review and analyse the data. What story is the data presenting? Are your competitors a threat or is your organisation on par with the largest competitor in the marketplace? Is your product lagging in the marketplace?
More importantly, analyse the data against your company’s strategy and product so you know where your company and product stand relative to the competitors’.
Your conclusion should be presented to other business stakeholders especially when you’ve decided the next steps. For example, you may alter your Product Roadmap as a result of the competitor analysis. Sales and marketing teams may benefit from summaries that contrast your product with key competitors and emphasise your product’s strengths so that they can take this message to market.
Step 6: Keep your competitive analysis accurate up-to-date
Lastly, if you have the opportunity, maintain the competitor review and analysis every 6 months. It provides you with an external perspective. Competitive analysis needs to be integrated with other product management and marketing activities. Overly concentrating on what competitors are doing can distract you from remaining focused on your customers.
How do you conduct a competitor analysis? How often do you keep track of your competitors? What advice or tips would you share with fellow product managers?