Why is is important to analyze the competition?
Anytime I hear someone say, “we don't have any competition,” I know two things. First, they are defining competition incorrectly. Second, they're in for trouble when it comes to growth. It's why I think it's critical to spend consistent and continued effort analyzing the competition.
But why do so many people think they have no competition?
Mostly it's because they're defining what they offer in an incredibly narrow, internal perspective. Internal? Yes, what I mean is that we can all get caught describing what we do from the inside out. We're often caught talking about ourselves by terms and technologies that are unique to our offering.
But customers don't always (or often) care about how we do what we do. What they care about is the results. And so, from the outside in perspective, they have a lot of alternatives. And that means we all have competition.
If that's where you find yourself, you have to know that people are constantly evaluating alternatives whether you want them to or not. And that's why it's so important to learn how to perform a competitive analysis correctly.
How do you do a competitive analysis?
The mistake most people make is that they look at competitors once. Normally as they're creating their product. So it's a point in time that influences their original offering and efforts.
But your competitors are constantly changing.
I can't tell you how often, in my coaching, that I find a product owner talking about a competitor incorrectly. They haven't kept current with how the space they're in is changing.
How do you solve this?
You spend time several times a year (I suggest at least quarterly) analyzing the competition.
What should a competitive analysis include?
There are a lot of folks that have different templates and formats for how they do a competitive analysis. There are even companies that offer solutions for competitor intelligence. I'm going to walk you thru the steps I suggest.
Evaluate which segments your competing with
Another common mistake I see a lot is when we're talking about competitors across different segments. Not everyone is your customer. If you are marketing a hotel near the airport, you aren't competing with a Ritz Carlton (with its world class spa). Sure, you both have hotel rooms with walls, a bed, and a bathroom, but you're focused on different customers and that's going to impact everything else you monitor and compare.
In the software space where I spend most of my time, there's a difference between SaaS products focused on enterprises, and plugins for WordPress.
So start with your customer and more specifically, with the segment you're focused on. Articulating things with more nuance (what I call a micro-segment) will help you even more.
Determine who your competitors are
Now that you've defined your segment, it's time to look for competitors that are serving that same segment. But before you rush into defining your list of competitors, I have one more recommendation for you.
Instead of defining your competition as those who are serving your segment with products like yours, focus on those who are serving your segment solving the same problem.
Let's imagine you are producing an SEO product. You're likely to define your competition as those who are also producing an SEO plugin (assuming you're in the WordPress space).
But customers want greater discoverability and more traffic. See what I mean? The moment I define the problem, I suddenly have a larger set of competitors.
Decide what products you're competing on
Now that you have a segment, a core problem being solved, and a broad list of competitors, you can begin a proper competitor analysis. Because now you can create the list of the products you're competing on.
I've written about this before, but back when I was working with a team to create the first Managed WooCommerce Hosting product, I didn't define my competition as other Managed WordPress hosts that were offering WooCommerce hosting. That would have been hosts like WP Engine and SiteGround.
Instead, I was also comparing eCommerce platforms that my target segments were also looking at – like Shopify and Squarespace.
Compare pricing for competing segments
Only now will I look at pricing. Most people start with pricing way too early. And if they've narrowly defined their competition and product offerings (based on internal technology, etc.), they're going to come away with a pretty small comparative analysis.
This is also where you have to dig in deeper to really understand how much things are costing customers to do a real comparison.
For example, Shopify has a $29.month plan. But when you dig into their own reports, you discover that the average customer (on that plan) is paying $89/month.
Real comparisons take work. They may require secret shopping. Or if your competition is public, you may have to listen to (or read) their quarterly earnings call.
It's work but an invaluable source of data.
How are your competitors marketing
When I talk about micro-segments and products I often use the example of Mercedes offering 6 SUVs, or Hilton hotels in Chicago (14 of them).
How in the world are they differentiating all these products?
It's because they're offering different products to different segments. And you can discover those segments by reading their marketing. Really reading it.
As a result, you'll start to notice what their positioning is telling you about their product and their segments.
Want a quick example? Read this page from Monday.com and then read this other page. Two different segments drive two different approaches to positioning. This is what I was talking about the other day.
Now update your positioning
The product managers I spend a lot of time with at Nexcess for our WordPress and WooCommerce hosting would often study the competition on an every other month basis.
The result was that we'd learn a lot about all our competition. But we'd also learn a lot about our customers. And how other products were delivering value to all our target segments.
From there you know what we'd do? We'd constantly tweak our positioning.
And you can do the same!