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.