Your competitors serve as both a mirror and a window: a thorough competitive analysis will reflect your users’ needs back at you while also offering a glimpse at the road ahead.

No matter how mature or successful your company is, there’s always a good reason to conduct a competitive analysis when you’re launching a new product, pivoting to serve a new user demographic, or implementing significant new features.

Chief among these reasons is market validation. If there are absolutely no existing solutions similar to yours, it may mean you’re onto something truly original and innovative. However, it usually signals there simply isn’t a market or a compelling need for your product.

A competitive analysis evaluating your competitors, their prices, and their success will either prove or disprove that a need exists, that people are willing to pay for a solution, and that products like yours can achieve profitability.

Competitive analyses also reveal the strengths and weaknesses of your competitors in relation to your own product or service.

The goals of a competitive analysis do change slightly depending on the maturity of your company and your specific products.

Pat Dooling, former consultant at Bain & Company in Silicon Valley, current venture capitalist, and advisor at Classify, suggests that startups pre-product market fit focus on who and what you’re competing against.

“Pre-product market fit, you’re really trying to define your market, generally from a perspective of the potential customer and the value your product could add,” said Dooling. “This requires looking at how these customers are solving this issue today in a pretty broadly defined way. Maybe they are solving the need by using something that you might consider a direct competitor; but maybe they are solving this need in a totally different way.”

For companies that have found product market fit, the main focus should be on how you are going to compete, Dooling said.

“Post-product market fit, you’re shifting into a mode of how to really ‘sell’ your value to customers,” he said. “You need to think much more specifically about how you are going to position yourself to add enough value, relative to the price you are charging, that a customer is willing to switch from what they are currently using today”

Ultimately, competitive analysis helps the product team identify ways they can both keep up with existing solutions on the market while also introducing more innovative features or improvements to get ahead.

Your competitive analysis playbook

Simple is better when it comes to building your competitive analysis matrix.

The key to a good template in this case is to make sure you have everything you need and none of what you don’t. Including superfluous information in a competitive analysis template will distract your team from the stuff that actually matters, which can be detrimental to a prioritization process.

Keeping your competitive analysis template concise will help to keep the product team focused on the aspects of competing solutions and companies that make a real difference in the eyes of the customer.

What to include in a competitive analysis

We’re going to run through the must-haves when conducting a thorough competitive analysis. You can also duplicate the competitive analysis template we made on Notion to use it in your own research.

Company

This column provides a high-level overview of the competitor. Attach a short document your product team can click into that includes a link to the website, screenshots of the UI, and customer reviews. A simple way to capture most of this information is to link to the company’s G2 or Product Hunt profile.

Including customer reviews in your competitive analysis is key – getting a sense for a company through their website is helpful in identifying their value prop and market positioning, but customer insights give you the most accurate and transparent picture of the product in action.

It’s important to view the product through the eyes of the customer to get a first-hand, unbiased perspective on the features that work and the ones that are ripe for improvement.

Who is it for?

This is where you analyze the competition’s target market. Who do they build for, and who actually uses this product? If you’re making a similar solution but building for a different market, it could signal an opportunity to bring a proven solution to a new set of eager customers.

For example, Zigazoo is finding success as “TikTok for kids.” They exploited a whitespace in the market not by developing an entirely innovative product, but by going after an underserved market within the context of a social media platform based on short-form video.  

Identifying which audience a competing app serves may also indicate that your team is going after the wrong kind of user and could benefit from a pivot.

There are a variety of inferences your team can make from this information, depending on factors such as user retention and churn rate. If you’re having trouble gaining traction in one market, identifying user personas similar to the ones your competition targets may help your team find a new demographic to pursue.

What problems are they solving?

This is where you identify the need your competitor addresses. The problem they address may be slightly different than the one you solve, or it may be one part of the set of problems your product addresses.

Maybe your product and your competitor’s product both try to reduce the time it takes to track down a file, but your solution also addresses collaboration challenges. This could indicate there is an opportunity to overtake the competition by doubling down on improving collaboration rather than trying to beat them at file management.

How are they solving the problem?

Here, you’ll list key features that deliver meaningful value to the customer. This column is especially helpful once you’ve aggregated the profiles of 3 to 5 competitors. You can note trends across companies and identify the features that are now considered must-haves but were considered niche or differentiating a few years ago.

Noting these trends is one of the reasons it’s wise to do a competitive analysis at a regular cadence, whether it’s quarterly or once a year. Things change pretty fast, especially in SaaS – once one company introduces a super popular new feature to the market, it’s only a matter of time before others take note and create their own version.

It’s a good idea to sign up for free trials of competing products to flesh out this section. Test their UX firsthand, get a sense for their information architecture, see the aspects of their app or service that inspire delight and the features that frustrate you.

Analyzing competing features also allows you to spot gaps or weaknesses. This is where the truly exciting opportunities for innovation are hidden. Being the one to develop a wholly unique UX or unlock unexpected value for a group of users puts you in a position to grab some of that sweet, sweet market share.

Why do customers use this product?

This is your competitor’s consumer-facing value prop. Analyzing their value prop can help you understand why this product seems to resonate with customers when so many other products fail.

If you’re a messaging app competing with Slack, for example, note what they put in their Google search description: “Slack is where the future works. Slack is a new way to communicate with your team. It’s faster, better organized, and more secure than email.”

Slack’s marketing copy suggests customers use Slack because it’s faster than traditional forms of workplace communication, it’s the future, and it’s what all the forward-looking companies are using. That’s their “why.”

Looking at each companies’ value prop gives you an idea of their position, and how you fit into that landscape. You can do a few things with this information. You can position yourself against your competitors – Slack, for example, positions themselves against email – develop a completely different value prop, market yourself as a companion or an addendum to these products, etc.

Pricing

This tells you how much customers are willing to pay for similar solutions. This information is one input to consider alongside pricing testing and analysis.

It’s important to include free services in this comparison. For example, if you’re developing an email client, Gmail, of course, should be on your list. Your task then is to figure out how you can beat “free” through value-adding features.

Social Media & Year Founded

Competitors’ social media accounts and the year they were founded provide some context on their progression. Through their social media accounts, you can see how they market themselves and engage with customers. Noting the year they were founded gives your team an idea of how long they’ve worked to get where they are.

Roadmap/Vision

Linking to or extracting relevant information from your competitor’s press releases, new partnerships, new product or feature announcements, and publicly-available product visions can help your team gain insight into where they’re heading.

Are they partnering with a company outside of their target market? This indicates they’re expanding their offerings, launching a new line of products, or pursuing a new cohort of users. It’s good to keep your eye on the direction your competitors are heading, especially if it shifts.

New product and feature releases can also serve as a warning that features you considered differentiators will no longer distinguish you from the competition.

What to avoid in competitive analysis

While competitive analysis is an integral part of the product management process, it shouldn’t dictate your product roadmap. Trends are fickle, and markets are unpredictable. The insights you gain from competitive analysis are only one small piece of the research, data, intuition, and user feedback you’ll use to map out your strategy and roadmap.

“Avoid substituting a competitive analysis or any exploratory market research for a continuous conversation with the user base,” said Sahiba Guleria, Product Designer at Classify. “It is really important to talk to your existing and potential customers to understand their needs and challenges.”

Another potential pitfall to be wary of is analyzing too many competitors. Pick 3 to 5 of your closest competitors, and leave it at that. New companies crop up everyday, and you can’t keep track of them all. Your time is valuable, and spending too much time reviewing your competitors doesn’t deliver enough value to justify the effort after you’ve gotten a sense of the current landscape.

Analyzing any more than 5 competitors at once leads to diminishing returns – once you understand the basic features of the top 5 companies and how the market leaders design their app, investigating other companies will likely not reveal much more that you haven’t already learned.

That’s the rundown on competitive analysis. Good luck out there.

Oh, and if you’re feeling frazzled and overwhelmed at work, try Classify. We built it specifically for product managers. It’ll help you stress less.