Analyzing Your Competitors: Your Company’s Life Depends on It
Analyzing Your Competitors
Of all the statements I hear from entrepreneurs, the one that causes me to shake my head the most is, “We don’t have any competitors.” Any entrepreneur who believes that is wrong, dead wrong.
Every startup has competitors.
Every startup has competition that keeps customers from buying your product. Customers may not believe they need what you are selling. Competitors may have better offerings or even solutions that are just good enough. Your solution may be nice, interesting, elegant—BUT customers don’t think it’s worth the price.
Instead of focusing on all the features and benefits of your solution—turn the discussion around. Here are several tips to help entrepreneurs identify the reasons that a customer would NOT buy a product, and then applying that information to create sales.
- Competitors are not limited to companies that are selling the same thing your startup is selling. It could be that people are using current technology in a way that you don’t even think about to fix the problem you are trying to solve with your new technology.
- Being a first mover is not the barrier to market that it once was. If you can build a solution easily, so can someone else. In a connected world where development is relatively inexpensive, it’s much easier to seize on a good idea and iterate past even new solutions in the marketplace. If the market has an identified need, even if there are no named competitors today, tomorrow there will be.
- Competition in reasonable doses can be good. Competition means that customers and the market are aware of the problem that your solution is working to solve. If your customer has considered the competitors, they will be able to tell you what they liked and what was missing. This informs your product plans.
- Too many competitors can be a bad thing. Too many choices confuse customers and can make the decision process overly complex and inefficient. In a crowded field, it can be difficult to differentiate a product—especially without the benefit of strong customer references and an installed base of users. Inadequately differentiated solutions push toward commoditization rather than a clear value add. This puts pressure on price.
- Even if you don’t have direct competitors, you still must compete with the status quo. Often, inertia, risk-avoidance, and current practices are the toughest competitors, especially in enterprise sales. Customers have been dealing with whatever problem your solution is designed to fix well before you and your ideas entered the scene.
The process of analyzing competitors
Performing an ongoing, full review of the competitors is critical. Deeply understand your customers’ current practices. Deeply understand your competitors’ product offerings.
- Between talking to customers and searching online, any entrepreneur can identify competitors. You will likely discover competitors that you didn’t even consider to be competitors.
- Analyze the competition the way a customer analyzes it. If you don’t know how a customer would evaluate a solution, ask them. What are their criteria for a vendor? What is their prioritized list of features.? What will they pay? What would be nice to have? You need to know your competition better than your customer does.
- Archive this information in an online due diligence room. It will provide invaluable perspective to your product roadmap. It will help you better serve your customers. Plus, understanding your competition is critical to your credibility in fund-raising and with your Board. So many entrepreneurs don’t have a comprehensive competitive analysis in investor presentations, that an entrepreneur who provides thorough and thoughtful analytics stands out.
Competitive analysis is a core module in Rev1’s Learning Labs curriculum. Additionally, we provide toolkit worksheets to help entrepreneurs get off to a good start with competitive analysis and then apply that analysis to creating a product canvas as a roadmap to creating solutions customers want to buy.