In this article, we continue the study of the Discover phase in Product Marketing. In particular, I intend to focus on how to do the competitor analysis and benchmarking. This crucial step will allow you to define the contours of the positioning and the unique sales proposal.
As I explained to you in the introductory guide to Product Marketing, the Discover phase consists of a series of intelligence steps in which the Product Marketing Manager collects data and analyzes it before proceeding toward strategy and growth.
Finding the right approach for competitor analysis in Product Marketing
Competitor analysis falls under the broader hat of Competitive Intelligence. When we talk about competitive intelligence we refer to a set of monitoring and data collection activities aimed at studying the scenario outside the company: significant players in the sector, customers, regulations, market trends, and the like. The ultimate goal is to support management in strategic decision-making processes.
Some of the objectives of Competitive Intelligence overlap perfectly with those of competitor analysis:
- Discover the strengths of competitors in order to implement marketing developments and campaigns to meet the standards required by the market.
- Highlight the weaknesses of competitors to find areas of opportunity and to gain market shares.
- Identify the Unique Value Proposal of the product, i.e. what distinguishes it from its competitors’ counterparts and which can represent a competitive advantage on the market.
Speaking of competitive advantage, it is useful to refresh our ideas a little with the basic theory.
Definition of competitive advantage: set of elements that contribute to making the performance of the product superior to those recorded in the products of direct competitors. Basically, it is that added value that differentiates your product offer on the target market from that of others.
It is imperative to mention Michael Porter, a Harvard professor, to whom we owe the theorization of the main concepts on how to achieve market leadership:
Lower cost: the production at lower costs of products similar to those of competitors allows to increase the margin on the selling price and attract wider audiences. On the other hand, this competitive advantage involves risks related both to technological innovations (which allow reducing costs on a large scale) and to the lack of production improvement (since we are focused only on the lowest possible cost).
Differentiation: it is the company’s ability to enhance the product through those unique and distinctive features that allow it to impose a premium price. The customer knows why they spend more and is happy to do so. However, this strategy also has risks. The main one is that the target does not recognize the Single Value Proposition and is therefore not willing to pay for it.
Focus: in order to implement the previous strategies relating to cost reduction and the enhancement of differences, efforts need to be focused. The competitive advantage on price is pursued by limiting the number of reference markets, the one on differentiation by profiling a target sensitive to quality. In any case, production will have to deal with critical mass and the ability to satisfy demand.
Benchmark analysis: definition and phases
For the analysis of competition in Product Marketing, it is also possible to resort to the use of benchmarking: an analytical evaluation that allows you to measure the product against a series of pre-established standards.
Benchmarking in fact translates as a comparative analysis, while the benchmark is the indicator used as a touchstone to create a comparison between the parameters of your product and those of the competition. Benchmarking also serves to isolate, study and evaluate progress, weaknesses, and strengths in relation to the most important players in the market.
How is the benchmarking activity carried out?
Benchmarking requires the application of precise methodologies, on which I do not go into the merits. Now we need to understand the basics of the activity:
- Study the comparative context: what is the ecosystem of your product? You could choose just a group of competitors or a relevant and similar sector. In any case, the Product Marketing Manager is always very clear about where he is moving and what are the elements that act around the product.
- Identify the benchmark: you need a criterion to understand what we are going to compare and how we intend to do it. Only in this way will the analysis bear the hoped-for results and will it be possible to identify areas for improvement and opportunities/threats on the market.
- Track the KPIs: the analysis of competitors through benchmarking aims to identify the relevant and strategic KPIs. Only by monitoring these Key Performance Indicators can you identify the elements necessary not only to keep up with the competition but to anticipate it and innovate the sector.
Why is the analysis of competitors in Product Marketing important?
Competitor analysis is used to collect as much information as possible to identify what competitors are doing and how they do it: products, marketing tactics, and market shares. The goal is to be able to develop an effective GTM (Go-To-Market) strategy and gain the coveted competitive advantage. In this way, it will be possible to improve the production, sales, and marketing process.
“Through competitive intelligence and competitor analysis, organizations reduce strategic risk and increase revenue opportunities” (Cam Mackey, executive director of “Strategic and Competitive Intelligence Professionals”).
Here are the main advantages that the Product Marketing Manager knows he can derive from a well-planned and executed competitor analysis:
Result: knowing fundamental data relating to direct competitors and indirect competitors.
- Advantage: keeping up with industry trends, trying to innovate to exceed the reference standards.
Advantage: keeping up with industry trends, trying to innovate to exceed the reference standards.
- Advantage: adapt and develop the most effective Go-To-Market strategy.
Result: Collect deeper data on the scenario of opportunities and threats.
- Advantage: Make informed strategic decisions in order to support Team Marketing and Team Sales.
How is competition analysis done in Product Marketing?
To make a competitor analysis that works, you will first need to categorize the competition. The macro-categories are:
- Direct competitor: a company that produces or provides a product/service similar to yours and which operates in the same market, is a direct competitor. This is the category to pay attention to the most when analyzing the competition first.
- Indirect competitors: are those companies that do not produce or provide a product/service exactly the same as yours, but which could intercept the same need and/or solve the same problem. What is the use of monitoring indirect competitors? Not to be caught unprepared if they become direct competitors over time.
For each identified competitor it is advisable to select the flagship product, which in English is defined as a bread-and-butter product. Focusing on the strengths of the best-selling product, the one with the best specialist press reviews, or the one with the longest life cycle, gives you the opportunity to learn more about the winning features and functions. An excellent starting point for developing features or correcting defects, so that your product also satisfies the needs and solves customer problems.
While you monitor how indirect and direct competitors move in your target market, don’t neglect to evaluate your product analytically. The benchmarking technique, as mentioned, allows you to understand what differentiates your product from that of the competition, identifying the priority criteria, or the analysis ‘alerts’ that allow you to remain competitive.
What tools to use for competitor analysis?
To gather so much information and analyze it so that they give useful and actionable results, you will need to proceed with a plan that answers the following questions:
- What do I want to track and why?
- How do I collect the information?
- How do I analyze the data?
The answer to the question “What do I want to monitor and why” is strictly linked to the objectives of your competitor analysis. What you decide to control and measure will be one of the pillars of your strategy as a Product Marketing Manager. The indicators can be many, I will list some of them by way of example:
- market share;
- organization of the product team and/or marketing team;
- features of the flagship product;
- communication techniques;
- presences on social networks;
- customer reviews;
- press review.
As regards the collection of information, the research data can be the result of customer and focus group feedback, to be cross-referenced with the data already present in the company databases. The summary reports must contain in-depth notes that return a photograph as truthful as possible of the scenario analyzed and the actors on stage.
In the next chapter, I will focus on the tools you can use for competitor analysis in Product Marketing.
Porter matrix for competitor analysis
The analysis of extended competition, also known as the Five Competitive Forces Model, or Porter matrix, allows you to evaluate the competitive position of the product. In particular, we analyze those continuous forces, acting in the same economic environment, which can lead to the loss of competitiveness and therefore, profitability. They are:
- Direct competitors: these are companies that offer the same product/service in the same reference market.
- Suppliers: companies with significant bargaining power since they procure components, raw materials, and/or services necessary for the production process.
- Customers: the buyer personas for whom the product/service was designed, developed, and marketed.
- Producers of substitute goods: they are comparable to indirect competitors because they produce goods that are different from your product, but which satisfy the same needs of the target.
- Potential entrants: companies that could enter the market are considered potential competitors. It could be the case of a supplier, as well as an indirect competitor, or even a startup.
SWOT analysis in Italian
Among the various business design tools, the SWOT matrix (an acronym for Strengths, Weaknesses, Opportunities, Threats) allows you to evaluate both internal and external factors: exactly what we need for an effective and successful Product Marketing plan. I proceed with a brief outline of the basic concepts and I refer you to this link for further information.
Take for example an eCommerce that sells sneakers shoes.
SWOT’s strengths are effective and efficient initiatives, i.e. those that work. You can identify them by answering some questions such as:
What do we do very well?
What does the target audience appreciate about our company?
Strengths SWOT analysis example: Customers Service
The eCommerce customer service has an NPS score of 85, much higher than that obtained from the competitor analysis.
The weaknesses are the poorly performing initiatives, which need improvement adjustments. In this case, the questions to ask could be these:
What can we improve?
What initiatives are ineffective and why don’t they work?
SWOT analysis example of weakness: Problems using the app
Mobile app transactions are on the decline due to some unresolved bugs.
The analysis of strengths and weaknesses helps you identify opportunities. There could be some weaknesses that could be improved upon. Returning to the case of sneakers eCommerce, here is a possible example of an opportunity in SWOT analysis:
The new version of the app: to fix the bugs identified an updated version of the application for mobile devices is developed and released.
Threats are potential problems. They differ from weaknesses as they relate to external factors beyond the control of the organization. Some typical questions for identifying SWOT threats are:
What is the competition better than us?
What market trends are worrying for our product?
A threat to the eCommerce object of our example is the presence of a new online sales site that can erode the customer base.
Practical advice on how to create the SWOT diagram for competitor analysis
The SWOT matrix is often represented by four divided quadrants. In the upper part Strengths and Weaknesses are represented, while in the lower part Opportunities and Threats. Among the many models, I propose this one that is adaptable to specific business needs.
Examples of SWOT: Amazon e Google
Before leaving the SWOT matrix and moving on to the next topic, here are two SWOT business cases of multinationals: Amazon and Google.
Amazon SWOT Analysis
The following image summarizes the key elements of Amazon’s SWOT analysis.
SWOT analysis example: Google
Big G also uses the SWOT matrix to monitor corporate strategy and to keep indirect and direct competitors under control, as well as the factors useful for growth and risk reduction.
SWOT Analysis Google
To complete the SWOT analysis it is advisable to integrate it with the PEST analysis. The latter focuses on external risks associated with possible market disturbances, monitoring the following elements:
- Policy – Legislative changes and regulatory changes can affect the market, as can any government crises.
- Economy – Economic growth, recession, and inflation are factors that directly impact the markets.
- Company – The socio-economic ecosystem is the habitat of your customers. Collecting data on average education level, lifestyle and demographic data allow you to accurately profile needs.
- Technology – Technological innovations rapidly change production processes and the values of competitive advantage.
What is my experience with competitor analysis in Product Marketing?
My name is Luciano Castro and I am the president of Product Manager Alliance, the first Italian and European association of Product Management. In the role of Product Manager, I have experience in the field of digital products: I have been CTO and CEO of companies in the Aruba group. Today I deal with making ideas and products grow.
How? I invest and work with startups and Fortune500 companies. Furthermore, as founder and CEO of Castro & Partners, with a group of qualified professionals, I support companies and managers to maximize their operational efficiency.
If you think my skills can help you turn your projects into business, contact me: together we will go from strategy to action!