“What enables the wise commander to strike and conquer, and achieve things beyond the reach of ordinary men, is foreknowledge...
If you know the enemy and know yourself, you need not fear the results of a hundred battles.
If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.
If you know neither the enemy nor yourself, you will succumb in every battle.”
- Sun Tzu, Art of War
When you look into the mind of your customer, you will discover dozens of competitors competing for their cash. (And if you think your startup has no competition, think again.)
There is always an alternative solution in your customer’s mind. Even if that means your customers do the work themselves.
Getting competitor intelligence will give you a clear understanding of where you stand in the market, and what you need to do to win new loyal customers.
Competitive intelligence is the process of gaining key information about the products, customers, and competitors in your market. This process is also known as competitive analysis.
By analyzing the competition, you will learn:
This, in turn, will improve your marketing return-on-investment before you spend a single dollar.
When gathering competitive intelligence, you’re finding clues to position your startup for high growth.
Like most research, not every startup needs to do competitive intelligence. But quality competitive research is profitable because you will better have data to support your strategy.
Competitive intelligence should help you do two things:
To do this, you will need to:
Your goals will change what methods you should use when creating your competitor analysis. This article will give you the tools necessary for 80% of the goals for early-stage startups.
When dealing with your startup's competitors, there are two schools of thought:
You may have heard the advice it’s best to ignore the competition. This is a mistake, and I’ll show you why.
Most entrepreneurs use this thought process:
What do you miss out on when you choose not to do a competitive analysis?
Yes, you can choose to ignore the competition. But ignoring them doesn’t mean they aren’t competing for your customer’s wallet.
To start, list out all competitors you know about. Second, use review websites like G2 Crowd and TrustRadius to find other competitors you may have missed. Finally, you need to talk to customers to find out what solutions they have used in the past.
You may think you can skip the last step of asking customers because you know most of your competitors already. This is a mistake.
First, it's the customer who buys your product. A competitive analysis isn’t valuable if it doesn’t aid you in getting more customers.
Second, it’s not uncommon for entrepreneurs to miss 30-40% of their competitors when they don’t talk to their customers.
Third, competing solutions aren't always what you expect. Customers know what solutions they use to solve the problem your tool alleviates. And you may also miss up-and-coming products that your customer already knows about.
You should perform a competitive analysis during customer discovery interviews or during customer experience interviews.
After you've found your competitors, bucket them into different market niches.
A market often has many niches. This is especially true for large markets. For example, in web hosting there are three major niches:
There are other companies serving smaller niches, such as FlyWheel for designers. But these three niches cover the majority web hosting startups.
You get to choose how you segment the market. But you need to segment in a way that your customers make a buying decision. For example, I could segment web host companies by those that focus on privacy or security. A simple way to check if your market is an actual market is to do keyword research to see
Once you've found the main market niches, choose which market to target first.
How did Facebook start its growth ramp?
Facebook's first users were Harvard students. Next, they served Ivy League universities. They then expanded into prominent state universities, all colleges, and finally opened to the general public.
Wealthfront took a similar approach. Andy Rachleff began by creating a best-in-class product for Facebook employees. After reaching the tipping point, Rachleff focused on LinkedIn employees. In time, Wealthfront opened its doors to the general public.
Why did Facebook, Wealthfront, Lyft, Lyme, Pinterest, and Poshmark exclude some customers they could serve?
It's easier to win a small market and expand into a bigger market than it is to win the entire market at once.
Again, you need to focus on the battles you can win.
Decibite could position itself against all three web hosting niches. But they are taking on the generic hosting market, as you can see from their comparison landing pages.
Focus on serving the smallest viable market. Once you become the biggest fish in the pond, move to a larger pond. Wash, rinse, and repeat until you're the 500-pound gorilla no one can ignore.
After you've chosen your niche, find out what features matter to your customers.
It's easy to find the features that your competitor's think matters to their customers. They will list these features on their website, most often on their pricing page.
Write all features down in a spreadsheet, even if the features aren’t necessary. Then mark who offers what features and where relevant, how much of that feature they offer.
For example, let’s say a startup called AceCook provides a ½ cup of happiness and 2 lbs. of clovers. At the top of your spreadsheet, you will include the columns “happiness” and “clovers.” In the row marked “AceCook,” you will fill in 1⁄2 cup for happiness and 2 lbs. for clovers.
After doing research by hand, talk to your customers to find out what features they value the most and the least. Let’s say they value 4 lbs. of clovers and dislike eggplant. In your spreadsheet, you will want to add “eggplant” and find out which of your competitors offers this feature.
Finally, you will want to find out what features your audience loves. For every feature they chose as the most important gets +1 point, while every feature they value the least gets -1 point.
Once you've added up the points, you’ll find what features your customer’s value. In the example above, the customers prefer clovers over eggplants. And happiness wasn't a buying factor. Of course, you will want more data before tossing out eggplants and happiness from AceCook.
AceCook should consider doubling the number of clovers, especially if all competitors offer 4 lbs. of clovers in their product.
Finally, you will look at what marketing channels your competitors are using and how effective they are doing.
Everything you need to learn in this step I talk about in the article on how to craft your go-to-market strategy. But here's a quick summary:
The most efficient way to analyze your competitor is to check their website and talk to your customers. You can also check review websites, blogs, and looking at customer opinion on social media.
As I mentioned earlier, checking a competitor’s website gives you an opportunity to look at the competition yourself. This is important because it allows you to compare what you learn with what competitors are doing.
Talking to your customers will give you key intel how successful your competitors already are doing.
Review websites will give you direct feedback from the customer. You should know some review websites pay users to write feedback. This can lead to fake reviews.
Affiliate blogs and review websites aren't inherently bad. But it’s important to know how these websites choose the products to feature and review each product.
Social networks often are less biased by pay. Relevant Reddit communities (called subreddits), forums, Twitter, Quora, Facebook Groups, and Slack are excellent sources of competitor intelligence.
The danger with social media is these customers may not be your ideal buyer. This may lead you to build your product for the wrong person. Also, the information you find is more likely to be out-of-date.
Once you have finished your competitive analysis, you are ready to put in place two powerful methods to ramp your growth:
While it’s critical to find your optimal growth channels, you should position your startup first. Then when you promote your business, you will have a clear and compelling reason for customers to choose your product over the competition.