How to conduct competitive analysis in product discovery

The essence of product discovery is creating products that fulfill your users’ needs.

To do that, however, you need to position your product well and differentiate it from the competition.

That’s where competitive analysis comes in.

As a key element of market research, competitive analysis will provide you with all the information you need to understand your competition and their products.

This’ll help you not only to understand your target market but also better understand your potential customers and their needs.

In this article, we’ll discuss in-depth why competitive analysis is important for product discovery and how to conduct it.

Let’s go!

Why is competitive analysis important for product discovery?

Developing a product and placing it on the market is an inherently risky activity with no guarantee of success.

Researching and getting to know the market you’ll be selling your product to before launching it will help minimize that risk.

Imagine diving off a cliff without checking if there are sharp rocks at the bottom.

That’s what you’d be doing without doing competitive analysis during product discovery.

So, what are the benefits of doing competitive analysis during the product discovery process?

5 benefits of competitive analysis

As pictured above, some of the benefits of competitive analysis are:

• Finding weaknesses in your products
• Learning new technologies
• Improving your marketing strategy
• Converting more customers
• Increasing your market share

By doing competitive analysis, you’ll be able to present a better value proposition to your potential customers and current users.

In other words, you’ll be able to more effectively communicate why customers should choose your product over your competitors’ products.

That will give you a competitive advantage over your rivals, attract more customers and increase your market share.

We’ve already mentioned that product discovery is about making sure your product fulfills your users’ needs – having a strong value proposition and positively differentiating your product from your competitors’ offerings is key to achieving exactly that.

How to conduct competitive analysis

Now that we’ve discussed why competitive analysis is important for product discovery, let’s go through every step of the process in more detail.

The steps you’ll need to take are as follows:

• Identifying your competitors
• Analyzing their product, price, place and promotion
• Researching their social media presence and SEO efforts
• Doing a SWOT analysis
• Creating a competitive matrix
• Analyzing your findings and positioning your product

Let’s dive in!

Identify your competitors

The first step when doing a competitive analysis is, of course, identifying your competitors.

The simplest way to start is searching your product type on Google and jotting down the top results i.e. the most popular products in your particular niche.

Well-written blogs ranking or listing the best products in your niche are very useful for this, too.

To keep your analysis manageable, don’t pick more than 10 competitors to analyze at a given time.

Let’s say you’re developing a heatmap tool – the tools that’ll crop up the most are Crazy Egg, Hotjar, Lucky Orange, Smartlook and Mouseflow.

Of course, simply googling your product type, listing the first 5 results and calling it a day isn’t enough for credibly identifying your competitors.

Some other steps you should take to inform your analysis are:

• Check online discussions about similar products on sites like Reddit and Quora
• Examine review websites, forums and product comparison websites
• Attend industry conferences and trade shows
• Use competitive intelligence tools for quantitative insights about your niche

All of these are not just useful for identifying your competition but you’ll also get valuable insights that’ll be useful later on.

Your next step should be to categorize your competition as either primary, secondary or tertiary competitors.

Competitors

Primary competitors offer the same product as yours and target the exact same audience as you.

They’re the main subjects of your competitive analysis and correctly identifying them is crucial for the success of your analysis.

Secondary and tertiary competitors don’t have the same goals or sell a similar product as yours but they share the same target audience.

Analyzing them can inform your product discovery process as you might get new feature ideas or identify unfulfilled user needs in your market segment.

Once you’ve correctly identified and categorized your competitors, you can move on to the next steps.

Analyze their product, price, place and promotion

Once you’ve picked out your main competitors, the best place to start analyzing them is with a tried and true method like the 4 Ps marketing mix – product, price, place and promotion.

While different variations and expansions of the basic method have cropped up since, the original 4 Ps represent the core of a company’s activities and are excellent for competitive analysis.

4 P

Analyzing them, you’ll get a holistic view of your competitors’ offerings, how they position themselves in the market and their interaction with their target audience.

The obvious place to start is with the product(s) you’ll be competing against.

You should pay particularly close attention to:

• Their product’s features
• Branding
• The product’s user experience (UX) and user interface (UI)
• The quality of the product
• Their unique selling proposition

Examining these factors in detail will help you identify gaps in the market and unfulfilled user needs, as well as help you identify how to differentiate your product.

When looking at how your competition prices their products, ask these questions:

• What’s the price range for this type of product?
• Do they offer a freemium option or is it strictly paid?
• Is it a one-time purchase or a subscription model?
• Do they offer several different subscription tiers or not?
• Do they offer discounts? If they do, how often and what percentage discount?

Knowing the answer to these questions will help you come up with your own pricing that just might give you a competitive advantage.

Place is a category that might seem much less relevant to digital products than to brick and mortar stores – it’s an easy mistake to make.

However, place also covers where they, and you for that matter, market their products which is extremely important.

For example, if your product targets Gen Z customers it makes little sense to focus your marketing efforts on Facebook.

Lastly, you should examine their promotional activities and strategies:

• How many active advertising campaigns do they have at any given time?
• Which social media platforms do they focus on?
• What does their messaging look like?
• Do they offer special promotions and discounts as a part of their marketing strategy?
• How do they engage with their users?

There are tons of other questions you should ask too, especially if they’re industry-specific questions, but the questions that we’ve discussed above are a great starting point for a competitive analysis.

Leveraging the insights you gather through competitive analysis to inform your product discovery process will help you create a better product that truly fulfills your users’ needs.

Research their social media presence and SEO efforts

Social media marketing and search engine optimization (SEO) have become key revenue generators for businesses.

In 2022, the value of the social media advertising market globally reached $226 billion and it’s expected to grow to a staggering $385 billion by 2027.

The global SEO services market reached $74.76 billion in value in 2022 and is expected to nearly double to $146.96 billion by 2027.

Having a strong social media presence and investing in SEO is essential to growing your revenue and the success of your products.

It’s no surprise, then, that analyzing your competition’s social media presence and SEO efforts is a vital part of competitive analysis in this day and age.

So, what should you pay close attention to when doing a competitive analysis of their social media?

Like always, it’s best to start with the basics:

• Which platforms do they use?
• How many followers do they have and how fast is that number growing?
• How often do they post on each platform?
• What’s their engagement rate?
• What hashtags do they use most often?

While this is a great place to start, to truly gain an edge you’ll need to go beyond these relatively simple metrics.

This is where social listening comes in.

Purposes of social listening

Social listening will give you much deeper insights into how your target audience talks about your competitors and their products.

With these insights, you’ll also get information that you can use in other areas of your competitive analysis.

As for your competitors’ SEO efforts, there are several key questions you should answer:

• Do they try to create SEO content?
• How frequently do they upload blogs?
• Do they create quality, informative content?
• Which keywords are they targeting?
• On average, how well do their pages rank on Google?
• How many backlinks do they get?

Fortunately, sites and tools like Ahrefs will allow you to find this information quickly and easily.

You can even find your SEO competitors i.e. sites that rank for the same keywords as you – they’re not necessarily your competitors in the market, but analyzing their content can be informative for your own SEO efforts.

Once you’ve answered these questions, you’ll be able to identify gaps in your content as well as other important information like new keywords it would be profitable to target.

Competitive social media and SEO analysis is all about finding gaps in your competitors’ approach and content and then capitalizing on those same gaps to gain an edge over your competition.

Do a SWOT analysis

Doing a SWOT analysis on your competitors is one the best ways to get an overview of where they stand in comparison to you while you’re conducting your competitive analysis during product discovery.

SWOT stands for Strengths, Weaknesses, Opportunities, Threats – using this framework you’ll get a clear picture of your competitors’ position in the market which you can then use as a reference going forward.

You’ll need to update your analysis periodically as these categories evolve and change over time – what was a weakness at the time you first did a SWOT analysis could’ve potentially become a strength by the next time you use it.

Let’s say you’re developing a sports live score app and you’re doing a SWOT analysis on competitor A, one of the earliest live score apps introduced to market.

In this particular example, it might look something like this:

• Strengths – market share, brand legacy, in-depth statistics
• Weaknesses – outdated user interface (UI), lagging during peak traffic
• Opportunities – updating the UI, integrating AI for statistics analysis
• Threats – emerging competitors, changing consumer behavior

Of course, these are only a small sample of potential strengths, weaknesses, opportunities and threats for this particular example.

SWOT analysis

Pictured above are some other common answers for each of these categories that are likely to crop up.

Regardless of your industry or niche, SWOT analysis is a reliable framework for competitor analysis and using it will give you insight into your target market.

This will help your product discovery process be successful as you’ll be able to identify and solve specific user pain points and problems your competitors might not have gotten around to solving.

It’s also a good idea to do a SWOT analysis of your business as well to truly get a holistic picture of your position relative to your competition.

Create a competitive matrix

When doing a competitive analysis during product discovery you’re inevitably going to gather a huge amount of information you’ll need to analyze.

The best way to represent that data for easy reference and analysis is by creating a competitive matrix.

A competitive matrix is a visual resource representing the data you’ve gathered through competitive analysis.

You’ve got a lot of options here, ranging from a simple Excel/Google Sheets spreadsheet you can easily make yourself to more complex third-party visual matrices.

Another handy option is to create side-by-side comparison charts for each of your primary competitors.

You can also create matrices about specific elements of your competitors’ business, such as their social media efforts or their marketing strategies.

source: Ask Marketing

Pictured above is an example of how you can set up a competitive matrix analyzing the marketing efforts of your competition.

If you’re targeting a market that’s covered by their reports, the Gartner Magic Quadrant is a very useful visualization tool to quickly get a grasp on your own place in the market relative to your competitors.

Gartner evaluates businesses on two criteria – completeness of vision and ability to execute.

Depending on how you score, you’ll be grouped into one of four categories:

• Leaders
• Challengers
• Visionaries
• Niche players

There are a couple of caveats you should consider, though.

If you’re just breaking into a market for the first time, you obviously won’t be featured in their reports and you’ll need to meet their inclusion criteria – regardless, seeing where your competitors stand can still be very useful.

Also, Gartner updates their reports annually, sometimes biennially, so they might not be entirely up to date when you’re doing your competitive analysis.

Another useful matrix for competitive analysis is Porter’s five forces model.

This framework analyzes five competitive forces inherent to every industry to help businesses determine if they can be profitable in a specific industry or not.

The five forces that are subject to analysis are:

• Competition in the industry
• Potential of new entrants
• Power of suppliers
• Power of customers
• Threat of substitute products

Using this framework you’ll get a clear picture of the dynamics in your chosen industry and will be able to adjust your product discovery accordingly.

SWOT analysis is also a competitive matrix but due to its ubiquity and utility we’ve covered it in greater detail above.

In any case, your options when it comes to creating a competitive matrix are varied and you should pick whichever framework you’re most comfortable with.

The main thing is that the data presented is able to be easily understood at a glance.

Naturally, any competitive matrix you create should be regularly updated so as not to lose its relevance.

Analyze your findings and continue with product discovery

Once you’ve identified and thoroughly researched your competition it’s time to analyze your findings to inform your product discovery process going forward.

After you’ve completed your competitive analysis, your product discovery team should examine the results and brainstorm about how they affect their plans going forward.

One of the main benefits of product discovery is idea validation and you should be prepared to pivot in case your idea isn’t validated.

Competitive analysis, and market research more broadly, are key elements of idea validation.

The insights you get from competitive analysis will help you position your product better as you’ll have a better understanding of your target market and audience.

Learn more about our discovery process →

App development starts with product discovery…

What could happen, for example, is that a gap in the market you thought existed turns out not to exist in reality.

If the main selling point of your product was a feature that closed that nonexistent gap, that’ll impact the value proposition you can offer to your users.

Of course, that doesn’t mean you should ax that feature entirely but unless you’re confident that you’ll be able to offer a unique functionality to go with it, it shouldn’t be your product’s main selling point.

What could also happen is that you identify a different gap in the market, maybe even several, which should then be the focus of your discovery efforts going forward.

In short, if you’ve thoroughly analyzed your competition you should be able to use the insights you’ve gathered to successfully continue with product discovery – even if the results of your competitive analysis don’t quite match your initial expectations.

Competitive analysis in product discovery: summary

Without knowing what your competitors are offering it’s extremely difficult to create a successful product that fulfills your users’ needs.

The end goal of conducting competitive analysis during product discovery is to maximize your product’s chances of success.

Competitive analysis allows you to identify gaps in the market, unfulfilled user needs and unaddressed user pain points.

It’ll also give you an idea of what to focus on during the next steps of the product discovery process.

So, how do you conduct competitive analysis?

To summarize, the steps are:

• Identify your competitors
• Analyze their product, price, place and promotion
• Research their social media presence and SEO efforts
• Do a SWOT analysis
• Create a competitive matrix
• Analyze your findings and continue with product discovery

If you want to learn more about the ins and outs of product discovery, feel free to reach out to us about our product discovery process or read our article on continuous product discovery.