Competitor threat analyser canvas
Competitor analysis should affect your product, sales and marketing strategies. The competitor threat analyser is a canvas designed to structure this activity with a primary focus on feeding into your product strategy. It can also be used when developing new products. Your win rate will not be relevant in this case. The canvas is primarily focused on software products. If you want to use this for physical products, please feel free to do so, although you may need to modify it.
Aspects like market share can be calculated, or if you already have a good enough idea, fill these in without detailed analysis. Each canvas section should add value and not be a pointless administrative task.
Defeating the competition
Consider everything you gather in competitor analysis through the lens of winning. Collecting information on a competitor’s product and brand only to continually treat it as interesting information is a waste of time. In other words, your analysis should create a strategic impact.
Important anti-patterns
Feature matching - The aim is not to achieve feature parity but to understand why this competitor wins. Some features may not be of interest to customers even if heavily marketed. This can be a hugely costly mistake. With a large product, this could result in years of work.
Copying their new work - Just because a competitor says they are releasing a new or superior feature does not mean you need to panic and respond. This is especially true of claimed differentiators, not all of these will be of value to customers. Start by talking internally about the threat (e.g. with your sales team). If sufficient, reach out to existing customers that you trust.
Not understanding their positioning - They may be differentiating on ease of use or price. For example, if on price, they will not produce a product that wows customers, they will continue to seek efficiencies and reduce prices. If you focus on features, you will miss their threat and could be undercut. When you understand their positioning, you may decide they aren’t worth competing with and focus on a different area of the market.
Not understanding their target customer - If their target customer is very different, for example, they have a simple use case and want a low-cost product. In this case, your offering will not be attractive. If you want to compete, you need to change your Ideal Customer Profile (ICP). You should only do this if you believe this will maximise success. Otherwise, you should let the sales go. View any that land as a bonus. If your ICP is very different, you may not want to respond to this competitor.
Competitor Threat Analyser Canvas
Feel free to recreate the canvas in a tool of your choice. Please attribute the author (Timothy Field), the source of the canvas (this webpage) and add the CreativeCommons BY-SA license
Video
This video provides an overview of the canvas.
The canvas as a strategic input
This is an example of a completed strategy item that can be fed into your prioritisation. This one is based on a major loss of sales to a competitor due to their better support offering. You may split this activity between the person who conducts the problem analysis and the person who focuses on solutions. It is most important to have a strong problem statement, hence it is first. You may have several solutions, and it is advisable to preselect the best option rather than add many items. Avoid creating too many strategy items by only recording those with the highest impact. Quantify the problem to determine this.
Canvas sections
The detailed guide below explains how to use each canvas section.
Market position
How a competitor describes itself and its strengths is not always the same as the customer’s opinion. Ultimately, this will be reflected in the organisation’s position in the market. Fundamentally, the organisation’s health can be judged by its size and whether it is growing, stagnant, or losing business.
Product Positioning
This considers how the organisation wants its product to be viewed. Done well means they are demonstrating to customers how they meet their needs.
With many products, there will be a lot of basic information about how they work. This is particularly true when customers aren’t knowledgeable. With product positioning, you should focus on how competitors promote their differentiators, such as customer service, quality, price, and ease of use. If they consider themselves your direct competitor, they may call out the differences between your product and theirs.
The picture above considers two types of differentiators. You should record their claimed differentiators, what the competitor says it is best at. Remember, just because they have claimed it doesn’t mean it is true.
There are several sources where you can deduce their product positioning, including their website, marketing and any sales materials you can gather. Here are some useful questions:
Differentiators - Do they explicitly state differentiators?
Tagline - A tagline is a short summary of their offering. This can usually be found at the top of their website homepage.
Price - Do they push a low-cost or high-cost version(s) with additional differentiators?
Customer reviews - Do they push selected customer reviews that highlight their strengths?
Target customer
A product should have a target customer group that it is focussed on. A product that goes too wide will find its functionality bloating and messaging becoming confused. Determining their target customer group helps you decide if they are a direct competitor. There can be many clues as to their customer type:
Naming targets - They talk about the type of customers they target. For example, they explicitly mention targeting scale-ups.
Current customers - They have information about the current customers they have sold to. Look out for ones that promote the product. This could be in promotional material such as videos, case studies or talking at events.
Functionality - Their product’s functionality clearly reflects a customer type. For example, they have a simple use case that will appeal to a beginner.
Sales - In B2B sales, where they often pitch to the same customers as you or attempt to take your existing business.
Social media - They use social media platforms or messaging that appeals to a particular customer type.
Product recognition
The better known the product is, the higher the likelihood of it competing with you. Pay attention to organisations that are spending a lot of time and effort on marketing and advertising.
Measuring product recognition
Surveys
Here are a couple of simple surveys:
Customer Survey 1 - Aided product awareness
Run a survey with your target customer group
Show multiple products, including yours
Record the percentage of those who recognise your competitors
Customer Survey 2 - Unaided product awareness
Run a survey with your target customer group
Ask each customer to name products they know of in your product category
Record the percentage of those who name your competitor
Website traffic
Use website tracking tools to review how much traffic is coming to their website. These can give you a lot of other competitive insights such as which keywords they rank highly on (SEO).
Market share
Organisations with a large market share can represent a significant threat. They may have a lot of resources available to enable them to cut prices or build new differentiators.
Market share calculation
The total industry sales can be determined through public bodies such as the CBI and business whitepapers. It can be calculated using total revenue or non-financial metrics like number of customers or units sold. Select a period of time, such as a financial year, and run the calculation below:
Market share = company sales / total industry sales * 100
For example:
Total industry sales = £10 million
Company sales = £2 million
20% Market share = £2m company sales / £10m total industry sales * 100
For more detailed information see this article from Indeed.
Growth
A competitor with rapid growth indicates its strategy is succeeding. Pay particular attention to why new competitors are doing so well. You can use the market share calculator over time to identify trends.
Customer channels
Customers will provide valuable insights to each other, creating a view of a product that will be more important than your marketing and advertising. In this section record the channels to monitor/interact on.
Buyer reviews
These are the official channels on which customers leave reviews.
Where the product is discussed
Competitors reach their customers
Identify the channels where competitors reach their customers. This includes:
Sales - Driving awareness of their brand and products.
Loyalty - Creating a relationship with existing customers to retain them.
Identify where your competitor’s target customer group are in both digital and non-digital channels. For non-digital, this may include conferences or specialist meet-ups.
You should monitor these channels for product feedback and future direction.
Customers talk to each other
Customers may offer each other advice, criticise or praise a competitor’s product. This may be outside of an organisation’s control and offer unfiltered insights.
Pricing
In this section, you should record your competitor’s pricing. Successful pricing will directly relate to a customer’s perception of value. Customers will not have the same expectations of a high-cost product versus a low-cost one. Pricing is a value lever. In other words, it can be used as a differentiator to drive sales. You will use this pricing information to assess the value of their offering in the win/loss analysis section.
Consider if they are using penetration or skim pricing strategies as per the information below.
Penetration pricing
A penetration pricing strategy can be used with a new product to gain market share. Prices may rise when they have gained enough market share. If you and existing competitors start reacting to penetration prices, you will see a race to the bottom where profits significantly shrink. If you have an established product, avoid reacting to a new product:
Until you see a significant, sustained drop in sales.
If the company is operating at a loss, it may not be able to continue for long.
Skim pricing
This strategy can be used with a new type of product in high demand with little to no competition. If your competitor has a new product that is much better than your own, it is strongly recommended that you react to it. For example, Blockbuster didn’t react quickly enough when streaming services like Netflix began to replace it. Your competitor will be able to maintain skim pricing until you respond. The competitor may make fewer sales at this point due to the high price.
Future threats
Organisations typically want to excite new customers with the promise of increased value.
Identifying development in progress:
Do they have public information, such as a product roadmap, available?
Do they talk about new work in the sales demos and webinars?
Identifying key messaging:
Are they changing their product positioning?
Are they targeting a new customer group?
What subjects or trends does their new public content cover?
Are they marketing future functionality
Are they promoting themselves as thought leaders?
Are they framing themselves as better in some aspects or directly comparing themselves to you?
Determining Threat level
You should only record important threats.
Development in progress
Development in progress can represent a high threat as new features can become differentiators. In the same way you would test your own features, you can do this with your competitors:
Take a feature and determine what problem it is solving for customers.
Confirm the problem size with existing customers.
Create a lightweight visual mock-up and test the idea with your sales team and some trusted customers.
This will give you some evidence of its likely future success.
Key messaging
Assess the messages against those you think will bring a genuine competitive advantage. For example:
You are losing business due to a competitor’s feature, and they have just started to promote it.
They are about to target your high-value customers.
Product growth
A competitor with significant product growth should be considered a future threat. It is highly advisable to work out why they are winning.
Win / loss
Having specific information about the reasons for winning and losing is the most important aspect of competitor analysis. This overrides all claims a competitor makes in their sales and marketing information.
Our win rate versus this competitor
This field will not be relevant if you are creating a new product. The deals considered in the overall win rate should be where the customer meets your Ideal Customer Profile definition. If you are attempting to sell to a customer who has different needs and include them in your figures:
Your results will look worse, leading you to react when it is not necessary.
You may change your product and impact the clarity of your value proposition.
Below are two options for calculating this:
Use a sales team calculation when:
You have a sales team making a large majority of sales.
Use a market share calculation when:
You have a sales team, but the majority of sales go through a digital channel.
You have a sales team but are rarely shortlisted. For example, when you are a new organisation.
You don’t have a sales team.
Sales team calculation
This is related to sales team performance when you are shortlisted. These figures will not be available if you are not in the running. Select a period of time, such as a financial year, and run the calculation below:
Win rate = closed-won deals / (closed-won deals + lost deals) * 100
For example:
Closed-won deals = 60
Lost deals = 40
60% Win rate = 60 closed-won deals / (60 closed-won deals + 40 lost deals) * 100
Your sales team may be able to further break this down by customers that meet your ICP definition.
Market share calculation
You may have to consider market share calculations where you have no sales team. The Market Position tab explains how to calculate this.
Competitor strengths and weaknesses
The customer’s overall decision to purchase or not may be down to a group of reasons. There can also be additional factors outside of the product itself, such as trust in a salesperson. If this is the case, then record these in the “other” category.
Gathering information with a sales team
Gathering information on why you won is often easier than why you lost. Customers may no longer want to talk with you or give you false answers to save embarrassment. If you can get this information, gather it as closely as possible to the point of sale or loss. If you win and leave it too long, the customer will tell you what they think about a product, not their pre-purchase impressions.
Gathering information with customer reviews
Use the customer channels tab to identify where to find this information.
Gathering information with sentiment analysis
If you don’t have enough information or want additional information, consider running a sentiment analysis. Sentiment analysis looks at the overall tone of customers. There are automated tools that can help:
Track positivity - Give percentages of positive, neutral and negative comments.
Gain customer insight - Understanding customer’s opinions gives you insight into them. For example, you find a lot of complaints that part of their software is hard to use.
Value (at the price)
The impact of customer knowledge:
Knowledgeable customers will approach a purchase decision with expertise. Those who are very familiar with the type of product you are offering will see through any marketing hype. They may even be using a competitor’s product. The reasons for winning and losing will be much more based on reality. It will also be harder to gain customers switching from similar solutions if the effort is high and there are few true differentiators. As the market matures, you will see higher percentages of knowledgeable customers.
Customers with poor knowledge will approach a purchase decision based on perceived value. Their reasons can be based on simple opinions and marketing.
Price sensitivity:
Knowledgeable customers - They will have a good idea of what true differentiators are and be very price-sensitive when asked to pay more for services and features they consider low value. Understanding what they view as valuable differentiators becomes very important.
Customers with poor knowledge - They will be more susceptible to marketing and sales strategies. You and your competitors may be able to convince them in pre-sales that differentiators are more important than they really are. You can also charge more simply because you are an established brand. This is because they trust you.