Competitive product analysis: How to outdo your competition

In previous chapters, we’ve covered the key elements of product research: the methods to use, how to conduct it, and when to experiment with your product. Now, it’s time to look into competitive product analysis; its benefits, and the step-by-step process to get started.

Competitive product analysis is a product research method that studies competitors, the industry, and target audiences. The goal of competitive product analysis is to use the data to improve your product, prices, or positioning, and ultimately get ahead of competitors.

Competitive product analysis vs. competitor product analysis
Be careful not to confuse competitive product analysis with competitor product analysis. While both can give you insights about your competitors, a competitor product analysis helps you identify your unique selling points against others by testing out their products. In contrast, a competitive product analysis focuses on the bigger picture—the market, pricing and packaging, and more—and identifies product gaps and opportunities.

Competitive product analysis provides insights into the market and what factors influence user decisions. When conducting a competitive analysis, consider not only individual competitors, but also general user motivations and preferences, market trends, and technological advancements.

Data and insights from competitive product analysis benefit all product and customer-facing teams, allowing them to develop solutions that solve real user problems and get ahead of competitors. Here’s why competitive analysis needs to be in your game plan:

Competitive product analysis makes everyone on the team more connected to your product and users. Findings from this study can benefit different teams, including:

Looking at what other companies are doing reveals opportunities in the industry and allows you to take the initiative in filling those gaps. This doesn't mean you'll always find space to create something new, but you can always identify ways to improve your existing products.

Competitive analysis also helps you identify emerging customer frustrations. You can then discuss those findings with your team to prioritize and take timely action to solve those problems rather than letting your competition get hold of that information.

By actively listening to your (and your competitor’s) customers, you can prevent your users from switching providers, or get potential users to switch to your product when frustrated with a competitor. “Your customers shouldn’t get to the point of demanding those features or leave you for a competitor that already offers that functionality. You should be using research to intuitively meet those needs before their dissatisfaction grows,” explains Denise Hemke, Chief Product Officer at Checkr.

With competitive product analysis, you can see what works and what doesn’t without investing too much time and money. For instance, if by checking your competitors' reviews, you notice that users like it when they can edit fields on a spreadsheet—you can run product experiments and add that functionality to your product. On the other hand, if you were planning to add Slack alerts but find that users complain about them being invasive, you might disregard the idea—or conduct further research to see if there's a better way to do it.

Another way competitive analysis can help you identify strengths and weaknesses in the market is by researching technological aspects. For example, suppose the engineering team wants to use a new technology. You know that a particular competitor just migrated its platform to that technology, so you ask the sales team for insights. They tell you that the competitor is now underperforming since the migration. You keep researching and notice that many platforms hosted on this technology experience performance issues. This might lead you to find other alternatives and opt for a better platform, enabling you to provide a better product offering.

You're likely to find areas where you offer a superior solution than your competitors, but sometimes they might be doing better than you. Take this opportunity to look at the industry leaders in an aspirational way and set your biggest competitors as a benchmark for success.

For example, if you launch a social media app where you can share posts in the form of audio, you’re probably going to gain some traction but will have to compete against Clubhouse and Twitter. These two huge competitors will be challenging to reach, but you can set goals with their numbers as a benchmark and work steadily to achieve those ambitious metrics over time.

Competitive product analysis shows what makes your product stand out so you can define your unique selling points (USPs). When you have a product that can solve customers’ needs and is also different from others, you can create highly-targeted messages, making it much easier to market and collect early adopters.

Let’s say you launch your audio-only social media app, and you’re worried it might be too similar to Clubhouse. However, when you do competitive analysis, you notice that it’s different from Clubhouse because users can share short voice notes with their followers asynchronously. That’s your USP: Users don’t need to be online at the same time to have conversations.

When doing competitive analysis, it's important to go through a list of small and big competitors. That’s because startups are likely to move faster; they’re eager to grow, and are willing to keep trying new things until they’ve found a formula that works. On the other hand, big companies have the power of setting trends—and the budget to make noise about it. So, analyzing firms of both sizes gives you insights into the current market trends and what might be trending soon.

Plus, by actively listening and doing market research, you can get on top of those trends and take the initiatives to market faster.

To get hold of the competitive landscape and define what to focus on next, follow these 11 steps. However, if you’re following a continuous product discovery process and regularly collecting user insights, you might start at any step of this process based on your needs. Here’s our in-depth guide for conducting competitive analysis:

There’s no point in taking the time to conduct a competitive product analysis if you don’t know what you’re expecting to get out of it. Make sure you set clear, measurable goals aligned with your overall research strategy. Examples of competitive product analysis goals are:

Remember to link your objectives to the business strategy to create win-win scenarios for you and your customers.

You don’t need to run individual and detailed analyses on each competitor (that’s what competitor analysis is for). Instead, come up with a list of competitors you’ll pay the most attention to during your research. Choose a mix of direct and indirect competitors of all sizes to identify product gaps and user pain points.

Direct competitors are products with similar characteristics and target audiences. For example, Pepsi is a direct competitor to Coca-Cola: they sell sodas to the same target market. Indirect competitors, on the other hand, can compete with you for the same target audience but offer different products. So, a water brand is also a competitor to Coca-Cola, but an indirect one. That is because the same person can choose to drink water or soda at lunch, but the product, benefit, and messaging are different.

This step determines how you'll measure the success of your study, and it's tightly linked to your goals and objectives. For example, if your objective is to identify three unique selling points, your evaluation criteria could be:

With those actions, you could discover that your product is better than others because your customer support gives faster answers or your enterprise plan is less expensive. You can also spot features that could become your value proposition, e.g., finding out that your product is the only one in the market that offers a filter functionality.

This is about planning how you obtain information, which tools you’ll use, and the research methods you’ll implement.

When we talk about ‘tools’ we’re referring to any platform that simplifies the product research process—this might be a UX research tool, a usability testing platform, or a tool like note-taking apps, spreadsheets, or video conferencing apps.

‘Methods’ refer to how you get hold of the information, such as through user interviews, usability testing, diary studies, voice of customer (VoC) analysis, observation, content and copy tests, or card sorting.

Each method helps you gain insights into a different aspect of the product. “When I look at product reviews, I do it from an experience point of view,” explains Lade. “I won't look at the number of stars necessarily. I'll look at what people say in the app stores about those products and what they're saying on social media. I want to hear the experiences, particular features, or problems they mention."

Head to Google and search the competitors you’ve chosen to study. Look at their social media profiles, websites, press releases, and product pages. Take note of key messages, tone of voice, who they’re targeting, and what their claim is.

Suppose you’re looking at a no-code builder tool and the header says: ‘Developers can build complex applications and so can you. Develop high-performing applications without writing a line of code. Drag, drop, and you’re ready to go.’ There you can see that the tool is talking to non-developers. It uses a casual tone of voice, and its biggest claim is that you can build highly powerful apps without writing code.

If you compare their claims with user reviews, you might discover that the app could be more intuitive or that customers experience a steep learning curve. If your product is easier to use, you can target customers and gain market share just by changing how you do product marketing.

Depending on the objectives you’ve set for your research, you’ll want to talk to potential customers that are using, or have used, your competitor’s product. During these conversations, ask questions that will give you insights into the following:

This information helps you understand potential customers and their role in the market. It also helps you understand how they feel about the options they have at hand and what their expectations are about a similar product offering.

Collect pricing data from competitor websites, user data, and online forums. You should save all pricing data and compare different structures. The goal is to review the different competitors’ pricing tiers and identify how they differentiate them. E.g., are they setting prices based on value or costs? While cost-based pricing is mainly used on physical products with manufacturing costs, value-based prices are more common in SaaS products because you set tiers based on access to functionality.

Benchmarking prices allows you to review potential price points compared to your cost structure. You should also consider pricing elasticity to determine your launch prices and how to make adjustments over time.

The next step to conducting competitive product analysis is to monitor market trends and anticipate future changes. You can do this by following industry influencers and reading academic publications, press releases, and business trends reports. You can also run surveys and attend industry events to note those trends yourself.

By getting early information on market trends, your innovation team can work on developing new key features or products to capture early adopters. Also, hopping on trends early can help you gain authority and get new eyes on your product.

A SWOT (strengths, weaknesses, opportunities, and threats) analysis is a strategic planning tool for assessing your competitors’ products. It means writing down the strengths and weaknesses, as well as external opportunities and threats of competitors. A SWOT analysis gives you insights into your competitors and how to get ahead of them.

For example, let’s come back to the no-code tool. Your competitor’s strengths could be that the tool is free and fast to load. Weaknesses include the fact you can’t take the application’s code elsewhere, and sometimes you need to save the progress manually. The customization options are limited, so that’s an opportunity for you. But the sudden boom of tools like GitHub Copilot that can write AI-generated code threatens it.

Using this information, you can conduct further research to identify how strongly users feel about those weaknesses and opportunities, and work on building a solution to close those gaps.

Lastly, make sure you share the analysis data across teams. All product and customer-facing departments should be aligned in terms of messaging and positioning. Some ways to create a good information-sharing system are sending an internal newsletter, presenting findings to all departments, or including an agenda point about product updates at team meetings.

“You can have a general communication channel where you can share information about what you found during research,” says Lade. “It keeps people updated and also encourages them to share what they have found in their own customer feedback sessions or any form of research.”

Sometimes, sharing findings on a channel can make it complicated to keep track of insights, so Lade recommends keeping multiple repositories and reviewing them periodically. “There are two repositories that we use, one for reports and one for insights,” she says. “In the first one, we add all key reports we find during research, the ones marketing and sales teams find, and any external reports we buy. The second repository is for insights and things that affect the product directly. And we include those in Jira for the team to take immediate action.”

Observing the market and what your competitors are doing is as important as having regular check-ins with your customers and doing quality reviews on your product. It gives everyone on the team a clear direction for how to present the product, and it allows you to set competitive prices and benchmarks for success.

While a competitive analysis may seem like an additional step to your product research process, you're likely already looking around you to make internal decisions. Ensure you have clear research goals, determine your top competitors, develop a SWOT analysis, and actively listen to what users say. Find ways to take the learnings from research and share them across the organization—you'll be outshining the competition in no time.