Let’s dive into the process of finding competitors. The first step is to set up a system for capturing the information you gather. Whether it’s using a Google Sheet, Excel, Evernote, or any other tool, make sure you have a place to record the competitors you find.
Next, divide your list into two categories: known and unknown competitors. If you work within a company, you probably have a good idea of who your known competitors are. These are the ones you’re already aware of and likely grumble about. For entrepreneurs, you might not have a known category yet, and that’s okay. We’ll focus on finding both known and unknown competitors.
To identify unknown competitors, we need to understand the problems your customers are facing. Take the product or feature you’re evaluating and ask yourself what problem it solves and for whom. Be specific in defining the problem and the target audience.
Now it’s time to use three techniques to find competitors. The first technique is to channel the type of user you’re building your product or feature for and think about how they would complain about the problem online. Take note of the specific wordings, phrases, or contexts they would use when expressing their frustrations. Google these variations and look for companies using similar verbiage, individual online discussions, and related search results.
The second technique is to literally describe what your product or feature does. Be like a robot and provide a straightforward description. Look for companies using those literal descriptions in their features, pay attention to the ads at the top of search results (as they may be related competitors), and take note of what Google suggests as related to your description.
When using these techniques, consider using quotation marks for exact matches and search for how you would pitch your product or feature in one sentence. Be specific in your searches to avoid irrelevant results.
By applying these three techniques and capturing the information in your sheet or chosen tool, you’ll start building a list of both known and unknown competitors. Remember, the goal is to gather a comprehensive list that you can later analyze and make informed decisions based on the competitive landscape.
Direct / Indirect / Potential Competitors and Their Impact
Direct Competitors are those who target the same customer group and solve the same problem as your product. They offer similar solutions, and users must make a direct choice between your product and theirs. In the restaurant metaphor, these would be Italian restaurants across the street serving the same tortellini.
Indirect Competitors also solve the same problem but in a different way or for a different customer group. They may serve a subset of your target customers or have a larger market that overlaps with yours. In the restaurant example, this could be a restaurant in a different neighborhood that serves Greek food, which some people confuse with Italian food.
Potential Competitors offer something to a similar or overlapping customer group but don’t solve the same problem or have products in the same product line as yours. They are worth keeping tabs on as they may expand their offerings or evolve into competitors. In the restaurant metaphor, an Italian grocery store that could potentially add a restaurant function would fall into this category.
Substitute Competitors solve the same core problem but in a completely different way and target different customers. They provide an alternative to your product or service. In the restaurant analogy, a substitute might be DiGiorno’s Pizza, which satisfies the core need of being hungry for Italian food without the experience of going out to eat.
After categorizing your competitors, you can prioritize them based on their impact. Direct Competitors should be at the top, followed by Indirect Competitors, Potential Competitors, and Substitute Competitors. This tiered system helps you focus on the most important competitors while still being aware of the others.
By understanding the different types of competitors and organizing them accordingly, you can gain a clearer picture of the competitive landscape. This allows you to direct your attention to the competitors that matter most and analyze their offerings and strategies more effectively.
The Five Criteria for Understanding Competitors
So far, we have covered the first two criteria: the Product Core and the size of their user base. Now, let’s move on to the remaining three criteria.
The third criterion is the Financial Strength of your competitors. It is important to know how well-funded your competitors are. Financial strength can provide them with a competitive advantage in terms of resources, marketing, hiring top talent, and expanding into new markets. Well-funded competitors may have the ability to outspend you in areas like advertising and research and development. Understanding their financial position allows you to assess their potential capabilities and plan your strategy accordingly.
The fourth criterion is Market Position. It is important to evaluate where your competitors stand in the market. Are they the market leaders, challengers, followers, or niche players? Market leaders typically have a dominant market share and brand recognition, while challengers aim to gain a larger market share. Followers tend to imitate the strategies of market leaders, while niche players focus on a specific segment of the market. Understanding your competitors’ market position helps you identify their strengths, weaknesses, and competitive strategies.
The fifth and final criterion is the Innovation Landscape. This criterion involves analyzing how innovative your competitors are and their track record of introducing new products or features to the market. Are they known for groundbreaking innovations, incremental improvements, or are they lagging behind in terms of innovation? Understanding your competitors’ innovation landscape allows you to anticipate their moves, identify potential gaps in the market, and make informed decisions about your own product roadmap.
By considering these five criteria — Product Core, user base size, financial strength, market position, and innovation landscape — you can gain valuable insights into your competitors’ capabilities, strategies, and potential threats. This knowledge will help you position your own product effectively, identify areas for differentiation, and stay ahead in the competitive landscape.
The Last Three Criteria for Understanding Competitors
To summarize, the remaining three criteria to consider when evaluating your competitors are:
Design: Assess your competitor’s ability to create products that are aesthetically pleasing and well-designed. A well-designed product can attract users and provide a competitive advantage, especially in markets where design and usability are key differentiators. Companies like Apple are known for their emphasis on design, which can pose a threat to competitors in various industries.
Brand: Understand the perception and strength of your competitor’s brand. A strong brand can lead to higher customer loyalty, greater market influence, and the ability to charge premium prices. When competitors with strong brands enter new markets or launch new initiatives, they often bring a significant number of customers along. On the other hand, a weak or conflicting brand may limit a competitor’s ability to expand into new areas. Assess the relative positioning of your brand compared to your competitors and consider the advantages and weaknesses associated with each.
Speed: Evaluate how quickly your competitors can develop and launch new products or features. Speed is particularly relevant when comparing larger companies with established structures and hierarchies to smaller, more agile teams. As companies grow larger, their decision-making processes and bureaucracies can slow down their ability to execute quickly. If your competitor’s speed is a competitive advantage, consider avoiding situations where success depends on the timing of product launches.
By understanding these five criteria — product core, user base size, financial strength, market position, design, and brand — you can gain valuable insights into your competitors’ capabilities, strategies, and potential advantages. This knowledge will help you make informed decisions and develop effective competitive strategies as a Product Manager or Entrepreneur.
