How To Compile A Customer-Centric Competitive Analysis
8 practical steps to Compile A Customer-Centric Competitive Analysis and to map out the competition while keeping customers at the core of the process, tested with thousands of entrepreneurs.
A competitive analysis is a tool that shows where a new business idea or a new product is positioned against competitors. It is able to highlight strengths and weaknesses, and helps establish what makes a new product unique.
However, the key thing is: unique in the eyes of who?
One of the ways to compile a competitive analysis capable of informing an effective Unique Value Proposition (or UVP) statement is to use the validated customers needs that the new business or new product is willing to solve as a foundation. As Ash Maurya puts it, “the key to unlocking what’s different about your product is deriving your UVP directly from the number-one problem you are solving. If that problem is indeed worth solving, you’re more than halfway there already“.
These are the eight steps we have tested with hundreds of entrepreneurs to help them compile a meaningful customer-centric competitive analysis:
1. Validate the assumptions about target customers’ problems
This is always the first stage of any business idea validation or new product development process. We usually run a series of qualitative one-to-one interviews (and not online surveys) in the form of informal conversations with customers in which we understand whether the problems we want to solve exist, how big is the pain, who feels the problems the most, what customers do today to solve them, and where did they hear about alternative solutions.
If target customers either adopt strategies to solve the problems, put in place a workaround or use one or a combination of competitors’ services as a solution, it’s a very good sign, as it means that they feel so much the pain that they spent energies (and money) to solve it.
2. Extrapolate from the meeting notes the top two pains that customers want to alleviate
This is a difficult exercise, because multiple jobs and related pain points may emerge during 20+ hours of face to face interviews. We personally find that asking customers to complete a ranking exercise at the end of the interview helps us have clarity about what is the most important job they want to do and the biggest pain, and it gives us some hints about recurring patterns.
In any case, if the recruitment was not completely random, if the initial assumptions were not completely wrong and we haven’t messed up during the interviews, there will be similarities and the two main jobs to be done and their pains can be extracted. These will be the two key customer values, or what the target customers care about the most when they face the problems that the business idea or new product is willing to solve.
3. Draw a 2×2 matrix on a whiteboard and put each of the key pains on an axis
An example of competitive analysis matrix for Uber in London
Above is an example of how to map competition based on Uber in London. Key customer pain #1 on axis Y (comfortable and easy to use service), key customer pain #2 on axis X (price). The top of the Y axis will be the positive side (I am really good at solving this problem), the bottom the negative one (I can’t solve this problem at all). Same for the X axis, but it will be positive on the right, and negative on the left.
4. Do extensive research on your competitors
Either because they have been mentioned by customers during the interviews or because you found them searching on Google. We’d visit their websites or better, if we can, we’d buy and try their service ourselves for a while. The idea here is to make a list of all competitor products’ features that aim to help customers alleviate the key pains selected at step 2. We’d leave all other features aside for now.
5. Rank competitors for each of the two key customer pains
Based on the information collected and on our personal experience after having tried them, how well are competitors’ products solving the two problems selected at step 2? Which one is the best? Which one is the worst? We’d put them in order, one by one, ranking their performance at alleviating the two key pains.
6. Now put the competitors names or logos on the matrix, according to the ranking completed at step 5
This is quite straightforward. You will gradually see the matrix being populated with logos in all the quadrants. The reason why we put customer pains on the axis, is because during the interviews we’d have found out that these are the two things that matter the most to the target customers when they are trying to do the job. When they will make a choice on what to buy, they will evaluate the products in that way. This is a customer centric exercise, and it puts what target customers want at the core of everything. It’s not an exercise on profitability, or prioritisation based on effort and impact. It’s about what customers care about.
7. Size each competitor with a bubble
This is optional, but helpful. What defines the size of the bubble really depends on the business. It might be revenue or market share if it’s a company, number of downloads if it’s an app, Unique Visitors or Page Views if it’s a website. If it’s measurable, the best thing is to set a size for each circle based on the perceived “unfair advantage” in the Lean Canvas. In this way we will have visibility on how our competitive advantage compares to competitors.
One thing is really important: the metric used to give a size to each circle in the matrix needs to be the same for all competitors.
8. Now put your business idea or new product on the matrix
This is the moment of truth. Where does your business idea sits on the matrix? The thing is: you want to be at the top right.
Anywhere else is not good enough and it means that either your idea is resolving problems customers don’t really care about, or your competitors are far better than you in solving these customers’ problems. So if you are not at the top right, you’d have to go back to the drawing board, and define new solutions to solve customers problems.
Have a business idea? Take the first step of your Lean entrepreneurship journey by compiling a Lean Canvas.
https://studiozao.com/wp-content/uploads/2019/03/Copy-of-DSC09908-1030x580-1.jpg5801030Studio Zaohttps://studiozao.com/wp-content/uploads/2019/03/studiozao_logo-300x139.pngStudio Zao2019-04-05 11:20:452019-08-07 11:27:49How To Compile A Lean Canvas, The Business Plan In One PageStudio Zao Innovations ltd
Lessons From Corporate Entrepreneur London Event In March 2019.
https://studiozao.com/wp-content/uploads/2019/04/five-things-a-corporate-entrepreneur-should-do-to-succeed.png18634016Studio Zaohttps://studiozao.com/wp-content/uploads/2019/03/studiozao_logo-300x139.pngStudio Zao2019-04-04 22:44:332019-08-07 12:47:06Five Things You Need To Know To Succeed As A Corporate EntrepreneurstudioZao innovations ltd
Four practical steps to identify early adopters and start getting traction for a business idea. A process tested with hundreds of entrepreneurs.
https://studiozao.com/wp-content/uploads/2019/02/hot-to-identify-early-adopters.jpg40166016Studio Zaohttps://studiozao.com/wp-content/uploads/2019/03/studiozao_logo-300x139.pngStudio Zao2019-03-20 17:24:052019-08-07 13:18:41How To Identify Early Adopters For A Business Idea
An immersive weekend sprint from Friday evening to Sunday afternoon to make your business idea a reality. Expert venture builders will take you through a systematic venture development process. Join the next available weekend.
https://studiozao.com/wp-content/uploads/2019/07/how-to-start-business-uk.jpg8001500Studio Zaohttps://studiozao.com/wp-content/uploads/2019/03/studiozao_logo-300x139.pngStudio Zao2019-07-30 13:58:182019-08-13 11:30:01HATCH — Start a Business in 3 Days
Develop ground-breaking AI solutions to improve mental health and healthy ageing for the NHS during a one-week free-to-enter venture sprint in Cambridge, 2nd - 6th Sept 2019
https://studiozao.com/wp-content/uploads/2019/06/gateway-NHS-innovation-healthcare-AI-startup-competition-thumbnail-1.png431701Studio Zaohttps://studiozao.com/wp-content/uploads/2019/03/studiozao_logo-300x139.pngStudio Zao2019-06-01 14:19:232019-08-09 09:09:41Your Innovation Gateway to the NHS is Open!
A unique opportunity for Entrepreneurs and Startup Founders with a track record and interest in Smart Cities, Retail, Fashion, Apparel and Sports to connect with Pentland, one of the key global players in UK.
https://studiozao.com/wp-content/uploads/2019/06/H20-active-2018-1__1560355888_184.108.40.206.jpg24563680peter neyrahttps://studiozao.com/wp-content/uploads/2019/03/studiozao_logo-300x139.pngpeter neyra2019-05-30 12:34:182019-08-09 09:07:53Join Pentland Brands to Shape the Future of Sports, Outdoor Apparel and FashionStudio Zao innovations ltd