Deep Dive into Your Competitors (Part Two)

In this post, we continue to look at how startup and early venture founders can best understand the competitive landscape that they plan to enter soon. In the last post, I described how to identify organizations that provide your target customers with direct or indirect solutions. Once identified, you begin to conduct an in-depth analysis of each competitor, exploring each element of their business model Osterwalder’s Business Model Canvas is the selected template.] Once the business model analysis is complete, there are several approaches you can take to develop a market entry strategy. I plan to review three such practices, a non-traditional SWOT, competitive positioning, and market entry impact analysis. I am indebted to my good colleague, Craig Gosselin, who shared these approaches with many former students as a guest lecturer. I still teach versions of them to this day. This post will conclude with some thoughts on research sources and ongoing monitoring of competitor activities.

Non-traditional SWOT Analysis

The first analysis recommended variation on the traditional Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis model. In this variation, you start by listing the strengths and weaknesses of each of your competitors. What aspects of their business model are considered strengths by the customer, the marketplace, their industry? What weaknesses does the media identify? Customer forums and blogs? Industry reports? Once you have identified each competitor’s strengths and weaknesses, you can define the opportunities that their weaknesses create for you and what threats may occur due to their strengths. By conducting this type of SWOT analysis for each business model element, you can identify several ways to position your venture for market entry.

During the business model analysis, you explore each competitor’s product offering and value proposition to the customer. How do customers perceive the strengths of their product offerings? Are they satisfied or dissatisfied? In your earlier analysis, you will have listed the benefits your competitors’ product offers the customer and what features are instrumental in creating said value. Typically, you are conducting this analysis in conjunction with your customer discovery research. You should have a pretty good sense of what product benefits and features are essential to your target customer and to what degree they are satisfied or dissatisfied. You can start by listing all the benefits and associate features and check the status of each competitor. What benefits do they offer, and which features are highlighted in their marketing content? Here you are looking to see what aspects of the product are customers most satisfied, which is strength versus those that customers consider less than satisfactory or weakness. You can create a clear listing of all critical benefits and features and check with a plus (+) or minus (-) to indicate each competitor’s product offering status.

You can follow a similar approach for each of the remaining business model elements. For customer segmentation, please list all the customer types that require a solution and then review each competitor’s marketing materials to assess what segments they currently engage. It is essential to determine how focused the competitor is in their segmentation practices. Are they focused on a particular segment or limited customer profile? Or are they offering their products to a broader population with minimal targeting? Whether you should consider any of these conditions as strengths or weaknesses will depend on the industry and overall maturing of the product category. However, by understanding the segmentation practices of your competitors, you will readily see opportunities or threats for your venture. Are there segments being underserved (an opportunity)? Is the market as a whole well covered by your competitors (a threat)?

In your business model analysis, you review your competitors’ marketing strategies to determine the quality of their customer engagement strategies. One approach to assess their strengths and weaknesses is to look at how well your competitors are engaging customers throughout the sales funnel. You can break this down into separate areas to explore – initial awareness, customer acquisition, post-purchase retention, and service. Are they strong in customer acquisition but less successful in retention? Are customers expressing satisfaction or dissatisfaction with customer service? You can begin to give plus and minus scores for each of these areas, giving you a good sense of where you can create stronger relationships with the market.

On the operational side, you can identify the core competencies of your competitors. Do they have unique skills or experience that support their capacity to provide value to their customers? If so, can you develop or acquire a similar ability? Similarly, you can look at any essential resources that add or detract from their competitive strengths and potential advantage. Here you are looking for any assets that may be challenging for your to replicate, such as intellectual property or physical locations. You should also look at competitors’ key partnerships. You especially want to look for sales channel relationships that provide vital access to the market. Or strategic alliances with well-recognized entities that provide your competition instant credibility and brand recognition. These partnerships can serve as barriers to your successful market entry and, therefore, threats that you will need to diminish.

Finally, your competitors’ profit models can be a source of either opportunity or threat. Pricing is a common challenge for a startup. Rarely can new ventures compete on price. How competitors price their products is an important area to address. By understanding the current pricing strategies, you can devise a plan to enter the market in a unique position by offering a solution with more value, thus worth a higher price. Or counter the pricing threat by offering unique payment schedules or special discounts for early customers.

Competitive Positioning

After completing the above competitor SWOT analysis in conjunction with learning from engaging your target customers, you should plan how to position your product offering for market entry. The starting point for this kind of analysis starts by identifying and selecting two priority benefits that your target customers want in an effective solution. In other words, what are the two top priorities that your customer considers when deciding to purchase and use the offered solution? Selecting these two benefit areas for this analysis is always challenging. 

There are many ways to define the benefits of your solution to the market. I usually start by looking across five benefit categories: product performance, pricing, access, service, and experience. There is a good chance that your customer views some aspect of one or more of these categories as essential and key to their purchase decisions. For example, your customer may find product performance benefits derived from specific product features critical to their purchase decision, along with a price commensurate with the value offered. Thus, they will look at all the products in the market that possess this feature and are reasonably priced.

This understanding of your customer’s needs provides the starting point for this competitive positioning analysis. You start by taking these two benefit areas, “feature X” and price, defining their extreme ranges, then create a typical X-Y axis chart with four quadrants. As part of setting up this analysis, make sure that you explain each benefit area clearly. It works well if you can quantify the ranges as part of their definition. 

For example, let’s say you are developing a new bike for urban commuters. From your customer discovery and market research, you realize that the bike’s weight is vital to this customer. As it turns out, many urban bike commuters need to carry their vehicles inside when not in use. So the lighter, the better. In this case, weight is quantifiable, so you can make it clear the difference between heavy and lightweight. 

Additionally, this is a competitive market, and many customers will be price sensitive. So you can define your second benefit area as pricing ranging from more to less expensive. Again, consider adding relevant dollar amounts as a way to describe the range of pricing. 

The final step is to place competitors who offer ebikes to urban commuters in the quadrant that best describes their position. Some competitors will have lightweight bikes but at premium prices. Other companies may provide heavier ebikes at lower prices. If this is the case, you will want to develop an ebike that is both light and comparatively inexpensive (most likely not an easy design to accomplish). If you can design such a product, you will be well-positioned to compete for the urban commuter ebike buyer. 

As a final note, don’t be hesitant to create more than one positioning map. For example, it may be necessary to look at different benefit areas for various customer segments. In our ebike example, some customers might be more interested in safety or comfort or multi-terrain capabilities.

Market Entry Scenario Analysis

The final analysis you can conduct is what my colleague, Craig Gosselin, calls competitive chess. As in chess, you are more successful if you can anticipate the moves of your competitors in reaction to your entry into the marketplace. So as part of your overall analysis of the competition, you can determine what actions or changes the competitors might make to their product offerings or business model to compete with your business. The bottom line is that once you enter the market with your venture, your competitors will not remain stagnant.
I suggest that you look at various scenarios within five categories: product offerings, pricing, customer experience, marketing & sales, and resource allocations. You start projecting what your key competitors might change within each category as you enter the market. You are planning to enter the market with a product with some unique features. Can competitors quickly add these features to their existing products? Increase marketing to your beachhead customer segments and selected channels? Offer special discounts or promotional programs? Don’t hesitate to project multiple scenarios and timeframes (short-medium-long term actions) in each category. This activity helps you determine potential changes to your strategy and business model as market dynamics play out.

Competitor Research Sources

You can learn a great deal about your competitors’ business and their business model through many secondary sources. Everything from industry reports, public financials, marketing materials, and social media can provide you with a great deal of information. Be creative and open to new sources, and you will be surprised by what you will find.
Here some ideas:

  • Collect all competitive literature and advertising
  • Conduct an internet search through various trade publications, looking for information on product introductions, plant expansions, financial results
  • Acquire competitors products or try services if affordable and accessible in the public domain
  • Construct competitor’s product roadmap – recent product introductions, timing, features performance
  • Review product capabilities and related details from blogs, videos, and other digital marketing tools that customers access through social media, search engines, and other tools.
  • Visit trade shows speaking directly to competitors and suppliers
  • Use public financial sources to access annual reports, 10K reports, keyword searches through financial papers and magazines
  • Search databases like Crunchbase to learn about funding, merger & acquisition activities, and other company-level info.

One of the most productive things you can do to enhance your research on the competitors is to create a Google Alert for each competitor. Then you will get email alerts right to your inbox on any associated news or social media comments. It will help you stay on top of each competitor.

For more on this subject and other entrepreneurship topics, get a copy of Patterns of Entrepreneurship Management, 6th Edition.

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