Competitors make our own products better—they create urgency and drive innovation by providing both motivation and a measuring stick. If your product is the only one in the market, you’re either first (but not for long) or trying to serve a need that doesn’t exist. Competition validates the market and provides context for everyone involved.

Paying attention to what competitors are up to is important for everyone, but for product managers it can be particularly valuable. Not only does competitive analysis illustrate a product’s strengths and weaknesses in comparison to those from other vendors, it can also inform how to sell and position it.

The benefits of competitive analysis

Competitive analysis might seem like a pain in the neck and an activity that pulls you away from your job of working on your own products. But popping your head up and looking around at what’s going on in your neighborhood has plenty of upside.

Trendspotting

While your customer and prospect interactions provide lots of insight into what’s happening in the market, observing what competitors are up to can be equally enlightening. You can see when new technologies and applications move from being discussed with analysts and the media to actually showing up in products. You can discover completely new applications and target markets for your product category emerging, plus you can see which positioning terminology and topics are gaining steam (or fading away).

Updating table stakes

In a multi-vendor marketplace, there’s certain functionality that simply must be present to even begin the conversation with prospects. But what was required when you developed your MVP three years ago may have evolved since then. Identifying whether you have the bare minimum to compete and are meeting the expectations of prospects is product management’s job, and it’s far better than finding out during a disastrous sales call.

The price is right… or is it?

Figuring out what to charge for enterprise software or SaaS solutions is a dark art, but building a pricing strategy in a vacuum is downright foolish. No matter how great your solution may be, if you’re charging twice as much as something comparable you’re not going to win many deals. Knowing how competitors are packaging and pricing their products ensures the sticker price won’t induce shock or leave margin on the table.

Keeping up with Joneses

While a product doesn’t need to replicate every single feature its competitors offer, it helps to know what others are including and deciding if your solution should boast that capability as well. Even if you opt not to add smell-o-vision or 3D renderings, your team will know the other product has it and can address it during sales calls and trade shows if it comes up.

Learning from their mistakes

Your product is going to make bad bets, investing in features that don’t get adopted and technologies replaced so rapidly it wasn’t worth bothering to support them at all. But in a competitive market some of those misbegotten adventures can be avoided by observing the stumbles and missteps of competitors. Instead of always trying to be first, sometimes sitting back to see how things pan out for your peers is a wise move before dipping your own toes in.

Before you begin a competitive analysis

A competitor’s website isn’t always an accurate portrayal of what their product can actually do—it’s the portrait they are painting about what they want others to think about their product. While they may list out features and capabilities, it’s often far more about positioning and style than substance.

The goal of competitive analysis isn’t necessarily to create a giant feature comparison matrix, but rather “identifying the distinctive competencies of each organization – in the buyers eyes,” says Neil Kelty of PERQ. When given the opportunity to speak with a prospect that opted to purchase someone else’s product, “make it about ‘Why our product couldn’t win the sale?’ Because it’s almost never the salesperson’s fault – it’s usually the fault of poor qualification, product positioning, or the sales process you’ve built not matching the buying process.”

Never provide information to your coworkers and executives without accompanying analysis. Anyone can read a headline and forward a link, but as a product manager you can add context and speak to what this news means to your company.

“My ability to read through information and quickly draw connections and conclusions was not something that most other people shared,” says Jacques Murphy of Product Management Challenges. “Be sure to write down your analysis (no matter how minor) so that everyone can benefit from it. Your coworkers may not necessarily make those conclusions when they read through the materials.”

Finally, narrow your focus. As product management, it isn’t your job to analyze which keywords competitors are targeting or how well their latest social media campaign performed. Your analysis should be limited to product capabilities, packaging, pricing and positioning.

How to perform a competitive analysis

There’s no one right way to do competitive analysis, but scope creep can turn it into a timesucking vortex. Here are some basics every competitive intelligence project should cover:

Using a framework

Competitive intelligence is only useful if you can make sense out of it and use the data to make decisions, otherwise it’s just a pile of anecdotes. You’re going to have a lot of information—and it won’t remain static as competitors continue evolving and new ones emerge.

That’s why relying on a framework to collate and communicate your information is so helpful. Not only do you avoid starting from scratch, it also lets your coworkers contribute to the effort productively.

One framework is called Strategic Canvas. In this framework, each row represents a different Value Element (be it a feature or aspect of the offering, such as price and performance). Each competitor receives a numerical rating for how they stack up for each element. With this matrix you can see how products rank relative to each other as well as identifying which elements are universally important (or unimportant).

“To develop effective competitive strategies, you need to make a realistic assessment of your own and competitors’ strengths and weaknesses, as viewed by the market,” says Gayatri Puwar of Wells Fargo. “You need to ask yourself what each of your competitors do very well, better than your own company in each of these areas and then, ask yourself in what areas are each of your competitors weak?”

Another framework for measuring up the competition is a SWOT (Strengths, Weaknesses, Opportunities and Threat) analysis. You might have already done one of these for your own product or company, but you can use the data you’ve collected and complete them for your rivals as well. Although you won’t have as much detail on them as your own firm, it’s still an excellent format for presenting information and comparisons among the various players in the market.

If you’re in active competition with a limited set of competitors and it’s obvious who prospects are selecting, you can create a win/loss matrix. This will illustrate who’s regularly winning deals against you, who you rarely actually compete with, and who you’re routinely besting.

Additionally, it illustrates which type of customers are happy with you now (and buy) and which ones want something you’re not currently able to offer (be it feature, price or something else).

“A prospect who just evaluated the competitive landscape and selected a winning vendor is the ultimate source of the latest market intelligence, but this key resource is often left untapped by organizations who are not able to effectively capture this information,” says Zach Golden of Anova Consulting Group. “Companies that effectively employ win / loss analysis can gain a significant advantage because of their ability to gather and react to unbiased prospect feedback and competitors’ strategies.”

And whether it’s the Gartner Magic Quadrant or a homegrown grid, placing competitors along two axes to see how they are positioned relative to each other is another tried-and-true big picture framework. This won’t be as granular as some other methods, but it sums things up nicely in a quick snapshot.

Websites and collateral

Yes, we already poked holes in the efficacy of these sources, but that’s not to say they don’t have any value; there’s simply no better way to see what your competitors are up to. However, these are marketing and sales channels, so anything gleaned from them should be taken with a grain of salt.

Tutorials, help documentation and webinars are often one of the best ways to understand exactly what your competitors have to offer when you can’t get a demo or actually use the products yourself (which is obviously ideal when applicable).

Social media

While social media may be best suited for arguing about politics and sharing cat videos, it’s also a great forum to find out what people are raving and complaining about. Looking at social media activity about competitors—and not just what’s being generated by them—provides another window into what the market thinks about a product.

Social media can also provide a window into a company’s focus by looking at what their public personalities are talking about. Whether it’s the CEO or a notable “visionary” on the payroll, their tweets and posts can tip their hand about what they’re up to.

Uncover the hidden clues of press releases

While some announcements are quite blunt in their meaning—“We now accept Bitcoin!”—others may have some buried nuggets. When a company announces a strategic partnership, key hire or unusual customer deal, it can signal they’re moving in a certain direction they’re not quite ready to broadcast just yet.

Hirings, departures, promotions and title changes can also be informative. Such as when a company hires several salespeople with experience in the education sector, maybe they’re going to make a push into that market.

Your competition isn’t always your competitors

Users can be crafty, and they don’t always solve problems using the tools and methods you might predict. For example, when kids wanted to chat with each other in school they didn’t always turn to using Snapchat and WhatsApp under their desk or seek out a slick new texting program they could use on the sly. Instead they started using the comments feature in Google Docs to communicate while it looked like they were just working on their papers or taking notes.

Low-tech, free and already available solutions will frequently hijack potential customers—particularly those on a budget or operating in an enterprise setting—despite the fact that your product category is theoretically far superior. So don’t forget to broaden your scope when it comes to identifying “alternative solutions.”

Competitive insight should inform, not drive the product roadmap

The point of conducting competitive analysis is not to identify all the things your rivals shipped “first” and bump those to the top of your development queue. While you’ll sometimes see they added something you think your customers would also find appealing, there are plenty of reasons to not attempt cloning your competitors.

If your product wasn’t already delivering a baseline of functionality, then you wouldn’t have any customers yet and every sales call would end abruptly with the prospect declaring they can’t buy your product because the other guy’s does XYZ and they can’t live without that. Instead the objective is seeing what the other parties are up to and looking for a bit of inspiration and a little defensive positioning.

“It’s certainly true that an obsession with ‘the competition’ is a bad idea,” says Justin Lee of HubSpot. “When companies get tangled up in rivalries, they often miss out on more important things.”

Conversations with current customers and prospects are the true driver of your roadmap, but competitive intelligence is a great extra ingredient to the process. Instead of observing that a competitor has added a feature and declaring that your product needs it to, you can survey your customers and prospects to see if that’s something they care about or are interested in (or if it’s something they’ve been asking for already and you just haven’t gotten around to yet).

Competitive analysis never ends

You’re never “done” with competitive analysis. While a particular exercise might have an endpoint, there’s always something new to keep up with, which is why product managers should use digital tools to alert them when something noteworthy occurs.

Using news monitoring services (such as Google alerts), subscribing to industry newsletters (and actually looking at them), following competitors on social media, and signing up for their news updates are great ways to keep your finger on the pulse of what’s happening in the market without having to proactively remember to check in on them. This will alert you when new releases or features are announced, big deals are signed or major hires (or fires) occur.

Don’t be embarrassed, your competitors are doing the same thing, too.