Hosting early-stage startups in such demanding week brought to us several learnings. One of the things we noticed was that several of them didn’t yet have a clearly defined competitive advantage, which wasn’t challenging them enough to think about how powerful their value proposition was.
A proper competitive analysis can help understand who are your competitors, which strategies they are using and how successful they are being with it, how you can predict their future actions or even reactions to your offer. And this can benefit your startup by having a better focus in the marketing strategy; identifying under-served opportunities in the market; taking advantage of competitors weakness to boost the market share, and making better-informed decisions. But essentially, a well-defined competitive advantage is the basis for any startup’s unique value proposition, and a continuous analysis this should be part of every startup’s DNA.
Here is our competitive analysis template that we use to work with the startups. It’s pretty basic, and it’s only one way of doing it, so let’s break it down:
Overview and profile: Who are your competitors? What’s their unfair advantage as a team? Where are they based? Who are their key-advisors? What’s their previous funding? How big? Are they working on a short-term vision or long-term vision? What’s their business model?
Competitive advantage: Main differentiator from your competitors, how do you offer costumers greater value, either by means of lower prices or by providing greater benefits and services that justify higher prices. At the end of the day, why do costumers choose your company and not others? Don’t forget to call up your competitors, and make sure you experience their service so you clearly know how they work and communicate with customers.
Target Market: The primary target market is the group of customers that will use your service the most. You might not know exactly who your target market is (because you are still validating and testing), but you need to think about who suffers the most from the problem you are solving, and what are they using now to solve it. The most important players you should compare to are the ones that operate directly in the same targeted market, but you should always follow other competitors that operate in other geographies or targeted groups – you can even learn and have insights from their experiences and strategies. You can do this by analyzing their website, marketing tone, strategies, and channels.
Marketing Strategies: Do a detailed analysis of your marketing strategy and of your competitors. Good sources to look at are websites, advertising campaigns, promotions, and newsletter. Also, the website traffic analysis can help a lot by showing from where the traffic comes from and how much are they spending on their website marketing campaigns and how. The purpose is to predict how it affects your business and how you can do a defensive marketing strategy – if needed – or how can you effectively attack their market share.
Product and Services: Compare the offerings to those of your competitors. Keep in mind, product benefits and features, product quality – honest scale from 1 to 10 – and brand credibility
Pricing: Detailed Pricing strategy of each player. Are you a low-cost or high-positioned provider? What is your profit margin? How am I basing my pricing strategy – cost, customer or competitor? Is it a continuous service provider? Or a one-off purchase? Do your prices differentiate depending on the channel – online vs brick n’ mortar?
Distribution Channels: How do you get your products or services into your customer’s hands? Define how much work is done remotely, onsite or automatically. Compare with your competitors, are they automating more aspects of the process? Do they use a middle-man? Do they spend more time in front of the clients? Which strategy is translated in better customer relation? Who has better satisfaction metrics?
Metrics: Any metrics that allow you to do a general overview of the market and strategic positioning of your startup, versus your main competitors
Tip: Complement your competitive analysis with an accurate SWOT analysis, to help think about strategies. You can then map out your competitive positioning, to help you identify where you are in the minds of your customers, in comparison to our competitors, and with that, help define your value proposition.
This article was originally posted on the Lisbon Challenge Blog.