The Role of Competitive Analysis in Effective Product Strategy (With Steps and Templates)
A product manager's role is challenging in today's business environment. You have to manage the expectations of the business while influencing the team around you to make better decisions. Strategy is a key component to both aims, and strategy isn’t an island. Unless it finds itself at the start of an entirely new type of business, your company has a competitive landscape.
The ability to strategically navigate the competitive landscape is not just a skill but a critical necessity. This guide aims to provide a deep dive into the importance of competitive analysis in shaping a resilient and effective product strategy. We'll also explore how specialized platforms like airfocus can be a game-changer in this complex yet essential process.
Why product strategy?
Product strategy is a high-level plan that outlines the key objectives, market positioning, and business goals for a product or a suite of products. It serves as a strategic roadmap that informs every aspect of product development, from ideation to market launch and beyond. For instance, Tesla's product strategy focuses on sustainability and innovation, evident in its electric vehicles and renewable energy products.
A poorly conceived product strategy can harm a product and the company as a whole. Common pitfalls include:
Lack of Focus: Trying to be everything to everyone often leads to a diluted brand and confused customers.
Ignoring Customer Feedback: Overlooking customers' wants can result in a product nobody needs.
Failure to Adapt: A static strategy can quickly become obsolete in a rapidly changing market.
Understanding the essentials of competitive analysis
Competitive analysis is a structured approach to identifying your competitors and evaluating their strategies to determine their strengths and weaknesses relative to your product. This involves a multi-faceted assessment of market variables, customer behavior, and other external factors.
(Here is a competitive analysis template that you can use.)
For example, Netflix conducts competitive analysis to understand how its content and subscription models stack up against competitors like Amazon Prime and Hulu.
Lack of competitive analysis can result in the following:
Missed opportunities: Failure to identify market gaps can be costly. Market gaps represent unexplored or underserved areas with a demand but insufficient supply. Failing to identify these gaps means missing out on potential revenue streams and the chance to establish a strong market presence. Over time, competitors who do identify these gaps can gain a significant advantage, making it more challenging for you to compete effectively.
Resource misallocation: Investing in the wrong features or markets can be wasteful. Resources such as time, money, and manpower are finite. Investing them in features or markets not aligned with customer needs or demand can result in low ROI (Return on Investment). This wastes valuable resources and diverts them from areas where they could have been more effectively utilized, thereby hindering overall business growth and profitability.
Poor decision-making: Uninformed decisions can lead to product failure. Decisions made without adequate information or analysis are essentially gambles. In the context of product management, this could mean launching features that customers don't want, pricing products in a way that makes them uncompetitive, or entering markets where there is little demand for your product. Such uninformed decisions can result in poor sales, negative customer reviews, and, ultimately, the failure of the product.
The significance of competitive analysis in product strategy
Competitive analysis serves as the backbone of an effective product strategy. It provides actionable insights that enable you to:
Identify market gaps: Recognize unexplored opportunities in the market.
Understand customer pain points: Gain a nuanced understanding of customer needs.
Strategic decision-making: Make data-driven decisions on product features, pricing, and marketing.
The symbiotic relationship between competitive analysis and product strategy
Competitive analysis and product strategy are deeply interconnected. The insights from a thorough competitive analysis can be leveraged to gain a strategic advantage, informing decisions on feature development, pricing, and market positioning.
Conducting a competitive analysis
In the following section, "conducting a competitive analysis," we delve into the nuts and bolts of constructing an effective competitive analysis from the ground up. This section serves as a comprehensive roadmap for product managers, detailing each critical step in the process and offering actionable tactics to execute them successfully.
We also highlight the collaborative nature of competitive analysis, emphasizing market research teams, data analysts, and product development teams play roles in creating a well-rounded and insightful analysis.
This section aims to equip you with the practical tools and strategies you need to not only conduct a thorough competitive analysis but also to integrate these insights into your overarching product strategy seamlessly.
Steps for conducting a competitive analysis for product managers
Identify competitors: Create a comprehensive list of competitors. Use tools like SEMrush or Ahrefs to identify competitors based on keyword overlap and market presence.
Gather data: Utilize multiple sources like customer reviews, market reports, and social media. Set up Google Alerts for competitors to receive real-time updates on their activities.
Analyze strengths and weaknesses: Evaluate each competitor's pros and cons. Create a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis for each competitor to provide a structured evaluation.
Assess market trends: Keep an eye on emerging trends that could disrupt your market position. Subscribe to industry newsletters and follow thought leaders on social media to stay updated on market trends.
The wrong way to conduct competitive analysis
Ignoring smaller competitors: Focusing solely on major players can be a strategic blunder.
Static analysis: A one-time analysis is insufficient in a dynamic market.
Overemphasis on product features: Competitive analysis extends beyond feature comparison to pricing, customer service, and brand reputation.
Collaborative efforts in competitive analysis
Product managers don’t work alone. Here are ways you can leverage other team members.
Marketing teams: These teams gather raw data from various sources. For example, they might conduct surveys to understand customer preferences or collect sales data from third-party sources.
Data analysts: Data analysts interpret the raw data to identify trends and patterns. They might use statistical models to predict future market behavior. For instance, a data analyst could use machine learning algorithms to forecast customer churn rates based on historical data.
The product team: Your team can help you analyze. For example, if you're developing a photo-editing app, the product team might compare your app's filter options, user interface, and speed against those of leading competitors.
Real-world examples of competitive analysis
Slack
Slack conducted an in-depth competitive analysis to understand their position relative to competitors like Skype and Google Hangouts. Introduced unique features like seamless integration with other productivity tools.
Spotify
They performed a detailed competitive analysis to understand how to differentiate itself in a market dominated by Apple Music and Amazon Music. Introduced features like personalized playlists and social sharing options.
Airbnb
The hospitality giant conducted a competitive analysis against traditional hotel chains and other vacation rental platforms. This led to the introduction of experiences and localized guides, setting them apart from competitors.
Integrating competitive analysis in an agile sprint process
In an Agile environment, competitive analysis can be integrated into the sprint process to make the product development cycle more responsive to market dynamics.
Dedicate a portion of each sprint: Allocate the first two days of a two-week sprint to update the competitive analysis, which would then inform the prioritization of backlog items for the sprint.
Incorporate competitive insights into user stories: As you create new user stories or refine existing ones, incorporate competitive analysis findings to align them more with market needs.
Review and adjust: At the end of each sprint, review the impact of implemented features against the competitive landscape and adjust the product backlog accordingly.
Stakeholder updates: Include a section in the sprint review meeting dedicated to discussing updates in the competitive landscape and any strategic shifts needed.
Communication of competitive analysis
Effective communication is vital for the successful implementation of competitive analysis insights. Product managers should:
Create detailed reports: Documentation ensures findings are accessible and actionable. Use a standardized template for all competitive analysis reports to ensure consistency. Include an executive summary, methodology, key findings, and recommendations.
Conduct team meetings: Regular discussions allow for collective understanding and strategy formulation. Schedule time dedicated solely to discussing competitive analysis. Use this time to update the team on new findings and brainstorm strategic adjustments.
Use visual aids: Graphical representations can simplify complex data. Utilize tools like Tableau or Microsoft Power BI to create dynamic dashboards that can be easily updated and shared with the team.
How airfocus can help
airfocus offers a modular product management platform that adapts to your unique needs. It provides tools for prioritization and roadmapping and even has built-in AI capabilities to assist product managers.
Use these tools because they help you visualize and think through the strategy and your competitive analysis. Your roadmap is a communication tool, so use it to share notes on competition and why your features matter to the bottom line is a powerful way to keep your stakeholders informed and your priorites aligned.
In the world of product management, competitive analysis is an ongoing, strategic endeavor. It plays a pivotal role in shaping a resilient and forward-thinking product strategy. Platforms like airfocus offer tools that can significantly simplify this process, enabling product managers to focus on creating exceptional products.
Adam Thomas
Read also
Create effective product strategy
Experience the new way of doing product management