“How to….” undertake a competitor analysis

Updated July 2020.

A competitor analysis is one of the fundamental things you should do before you launch a new Product or business. Here’s the six-step process we follow to measure the competition.

How to undertake a competitor analysis

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 it may contain the types of products sold, we should not include 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 should evaluate the strengths and weaknesses of your rivals.

Here is Brainmates’ six-step process for competitor analysis:

Step 1: Define your market

The first step is to articulate the market you serve.

  • Who are the customers that are currently buying your product?
  • What problem does your product solve for these customers?

The same product may serve more than one segment, addressing different problems or challenges that each segment has. You need to establish this from the outset, before you review your competitors, because you may be competing with different companies in each market segment. When defining your market, pay attention to both demographic information as well as psychographic information. The psychographic attributes you define may mean that you identify multiple segments which will need to be targeted in different ways.

Step 2: Create a list of your direct competitors

Once you’ve established your market segmentation categories you should now look at direct competitors to your Product. These include any company that sells a very similar product or service in the same footprint as your organisation. For example; if your company sells dog grooming kits, you would normally only include competitors that also sell grooming kits to your area. The exceptions to this are if they are likely to expand to your area soon or if their product offering is interesting and useful to include  in a Product Comparison paper.

If there are too many competitors in your market, choose a handful that you believe are the largest threat to your organisation. Make sure to consider where the market is heading – for example Netflix overtaking Blockbuster, Uber and taxis, Airbnb and hotels.

Step 3: Analyse competitors

To begin your analysis 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 Hugh Davidson in his book “Even More Offensive Marketing” grouping your sources of information into three categories can help you determine how useful it is and also whether it’s true or false . He suggests:

  • Recorded data: this includes easily available published information such as an annual report.
  • Observable data: this data has to be found and put together, often from different sources – like pricing, or advertising campaigns.
  • Opportunistic data: qualitative data coming from discussions with suppliers, ex-employees or information from blogs by customers.

Step 4: Summarise competitor product and market strategies

Once you’ve gathered your data, a table is an easy way to  organise it. Consider the following headings:

  • Company name
  • Company description
  • Competing product’s purpose and high level functionality.
  • Competing product price
  • Target market for competing product
  • Company’s distinctive strengths
  • Company’s distinctive weaknesses
  • Company market strategy – eg niche market player, price leader etc
  • Competing product’s overall market share in your main target market
  • Product sales volume
  • Threat level – estimate the threat level the competing company and product poses to you

Once you’ve completed this another useful tool is to produce a simple value curve model for your industry. This can be particularly helpful if you’re 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? 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 compared to your competitors.

Your conclusions should be presented to other business stakeholders especially when you’ve decided what steps you will take with your strategy. 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, review the competitor  analysis every 6 months, or more often if your market changes frequently. It provides you with a valuable external perspective which can help to inform your business and product strategy as well as more tactical decisions like which products or features to prioritise. You do need to make sure your competitive analysis is integrated with other product management and marketing activities.

One note of caution is to not focus too heavily on what your competitors are doing. A competitor analysis is a useful tool and guide but your overall priority should be to continue to delight your customers by solving their problems.

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