Conducting Competitive Analysis for Strategic Advantage

If competitive analysis sounds like an alien concept or the most challenging task, you’re not the first. But for a career in product management, this is integral. You must analyse your competition, even when you enter a high-risk-reward career such as an entrepreneur. 

Simply meeting customer needs is not enough to beat the competition. According to Donald Lehmann and Russel Winer, the product is successful only when it can offer something better to the customer, which even the competitor cannot. That is possible when we understand the competitor’s strategies. And that is done through competition analysis. 

What is Competitive Analysis?

Competitive analysis is a strategic business move and a systematic way to outgrow a competition. A business can win a larger market share than its rivals by deciphering how they perform. 

To analyse the competition, a product manager or marketer must find out how competitors run their product development processes, what they ignore for their customers, their pricing strategies, and how they leverage the marketing mix. These could be strengths or weaknesses of the competitors. But there could be more factors to uncover depending on the size of the competition, industry growth rate, and such. 

If you have gained some insights and want to continue learning such topics, it’s best you choose the product management courses. 

Why is Competitive Analysis Important?

So, how can competition analysis benefit you? Let’s explore some advantages with some examples, that pertains to different sectors and company sizes. 

Informed Decision-Making

The competitors' product offerings, market positioning, and customer feedback help product managers make informed decisions. This insight helps prioritise product features, determine pricing strategies, and direct development efforts towards aspects that resonate with users.

Example: A product manager analysing competitors in the fitness app market notices a rival's successful implementation of a feature allowing users to track water intake. Recognising the growing trend towards health consciousness, the product manager prioritises developing a similar feature in their app. This is to cater better to user wellness needs.

Anticipating Market Trends

Product managers gain a better understanding of market trends through continuous competitive analysis. This allows them to proactively adapt their product roadmap to meet evolving customer needs, ensuring their product remains relevant in a dynamic marketplace.

Example: In the streaming services industry, a product manager observes through competitive analysis that a competitor invests heavily in exclusive partnerships with popular content creators. This prompts the product manager to anticipate a shift towards exclusive content as a critical differentiator. Subsequently, they initiate talks with content creators to secure unique shows for their platform, anticipating the market trend.

Innovation and Iteration

Competitive analysis acts as a catalyst for innovation. It inspires product managers to think creatively, fostering a culture of continuous improvement and iteration. Insights from competitors stimulate new ideas and approaches to product development, fostering a competitive edge.

Example: Within the automotive industry, competitive analysis reveals that a competitor has integrated AI-powered predictive maintenance in their vehicles. This prompts the product manager to explore collaborations with AI companies to develop a similar predictive maintenance system for their cars, enhancing customer experience and fostering innovation in their product line.

Risk Mitigation

Understanding competitors' successes and failures helps in risk assessment. Product managers can anticipate potential threats to their product's market share, enabling them to devise strategies to mitigate risks and safeguard their product's position in the market.

Example: An e-commerce product manager observes a competitor facing backlash due to security breaches resulting in customer data leaks. Learning from this incident, the product manager invests in robust cybersecurity measures. This is to ensure their platform is fortified against potential security threats. It is for mitigating risks and maintaining customer trust.

Customer-Centric Approach

Product managers gain insights into customer preferences, pain points, and expectations by analysing competitors' interactions with customers. This knowledge aids in shaping a more customer-centric product roadmap and delivering solutions that better meet users' needs.

Example: Within the smartphone industry, competitive analysis highlights customer dissatisfaction with lengthy warranty claim processes from a rival brand. Leveraging this insight, the product manager implements a hassle-free warranty claim system. This is to prioritise quick and seamless customer service to enhance user satisfaction and loyalty.

Steps to Conduct a Competitive Analysis

Here is how to conduct a competition analysis systematically, as Lehmann and Winer mention. 

Data Sources to Prioritise

Start with secondary data sources like annual reports, websites, news articles, etc, because they are cheaper, readily available and cover most questions about competitors.

Then, go for primary data. Primary data can be obtained from salespeople, customers, consultants, etc, to get specific answers to your questions. 

Nuances to Consider for Data Collection

• Be aware of competitors' signals. The costly actions like new product launches are genuine, while cheap talk like interviews may not be. So, assess credibility.
• Tap unconventional data sources like local newspapers, shareholder meetings, and packaging imprints. 
• Leverage the web for patents, help wanted ads, forums, etc. But beware of fake signals.
• Benchmark competitors by being a customer. Purchase products, open accounts, etc., to learn first-hand.
• Avoid unethical tactics like bribing competitors' employees as "there are usually several ways to collect a key piece of information." Be defensive and prevent leaks.

Product Features Matrix

Compare product features in a matrix to identify relative strengths and weaknesses.

• Identify Key Features: Determine the main aspects that define products/services in the category.
• Choose Comparison Criteria: Select specific factors like features, pricing, reviews, etc., for comparison.
• Create the Chart: Use a table, matrix, or visual graphic to compare products/services against chosen criteria.
• Analyse & Find Opportunities: Review the chart to identify gaps and areas for differentiation.

Here is a very simple example of creating a product comparison chart. 

Product	Price (INR)	Features	Customer Support	User Ratings
Product A	₹19,000	Advanced Features	Email & Phone	4.5/5
Product B	₹23,700	Basic & Premium Versions	Live Chat & Email	4.2/5
Product C	₹16,120	Basic Features	Phone Only	4.0/5
Product D	₹20,450	Premium Features	Live Chat	4.7/5

Objectives Assessment

Determine if competitors are pursuing growth, hold or harvest objectives based on pricing, promotion, distribution and other observable actions.
The authors highlight three types of strategic objectives that a competitor may have for their product.

Growth Objective

• The competitor aims to increase market share and sales volume for the product.
• Profitability may be secondary in the short term.
• Signals a competitive, aggressive stance.

Hold Objective

• The competitor aims to maintain or consolidate the product's current market position.
• Seeks to stop losing share and stabilize the product.
• May be a temporary strategy before resuming growth.

Harvest Objective

• The competitor aims to maximise profits from the product in the short term.
• Market share gains are not a priority.
• Signals the competitor is de-emphasizing the product's importance.

Strategy Assessment

Look at all elements of marketing strategy - targeting, positioning, differentiation and marketing mix. 

For consumer products, track competitor's ads for messages and media choice. For industrial products, examine sales literature, trade ads and the customers.

Also, compare value chains to see sources of competitive advantage in functions like operations, logistics, marketing, etc.

Nuances to Understand

• Don't just look at claimed differentiation. Ensure customers value it and it can be sustained.
• Segmenting data requires some inference if not clearly stated. Look at ad placements, customer focus, etc.
• Pricing analysis should cover discounts, changes over time, and differences across markets.

Capabilities Analysis

Consider both product-specific and corporate-level capabilities. 

Nuances to Understand

• Consider R&D strategy, processes like TQM, House of Quality, and key performance measures which influence capabilities.
• Assess flexibility - supplier relationships, manufacturing processes, workforce skills. These impact the ability to respond.

Future Strategies

Extrapolate historical trends or link strategy changes to shifts in capabilities. You can also simulate competitors' likely moves. But, simulations require thoughtful role-playing.