How to do a valuable competitive product analysis?

In order to make a valuable competitive analysis , it is necessary to analyze from two dimensions: the product itself and the product's competitive strategy, and write a high-quality PRD document based on this.

When it comes to competitive product analysis, product operators should be familiar with it, but many people, including me when I first entered the industry, define competitive product analysis as: downloading an app, playing with it, and then writing a mind map or word of a "review".

But this is too amateurish. After a period of work and reading, I realized that competitive product analysis must be analyzed from two dimensions: product and product competition strategy. Only in this way can we make a truly valuable competitive product analysis and write a high-quality PRD document based on it. This article is about the competitive product analysis model written based on my experience and knowledge learned.

Components of competitive product analysis

1. Analyze the product from the product itself: This step is something that most product managers can do, including downloading and experiencing the functions, interactions, and UI of competing products, and finding the profit points of competing products.
2. Use the competitive product analysis framework to analyze competing products from a business perspective: This is something that many new product developers, including myself before, fail to do or fail to do in a standardized manner, and usually end up losing sight of one thing while focusing on another. This will also be the focus of this article.

Analyze competing products from the product itself

Since most people will do it, I will just briefly describe it:

Get a complete experience of the product and organize the functional points, interaction logic, UI style, and profit model.

Get the updates of competitors from the app store or third-party platform. Here are some things to sort out:

• Frequency of competitor updates
• Competitors' previous updates

Statistics show that updates of competing products are mostly maintenance or new features. In a highly competitive environment, products need to be frequently innovated to maintain their competitive position. The competitive pressure in the industry can be judged based on the updated content of competing products.

Check the reviews of the app from the app store or third-party platforms. Compared with good reviews, bad reviews are more meaningful - bad reviews can often bring us inspiration and discover new needs.

But one thing is worth noting: bad reviews do not mean that the competitor has failed. Users who are willing to give bad reviews are often those who are willing to continue using the competitor, while users who are hesitant will not give any reviews at all.

The above is the conventional competitive product analysis around the product itself. The advanced mode will be described in detail below.

Analyze competitive products from a business perspective using analytical frameworks

The analysis framework is divided into the following four parts:

1. The future goals of competitors.
2. Competitors’ assumptions about themselves and their industry.
3. The capabilities possessed by competitors.
4. The competitive strategies currently adopted by competitors.

1. Future goals of competitors

Analyzing the future goals of competitors is the core element of competitive product analysis. Understanding the core goals of competitors helps us understand the market segments that competitors really care about.

If the competitor is too strong, it will help us to identify the "red zone" during the growth stage. If any product does not have a strong backing, it is not recommended to easily touch the sensitive areas of the competitor, otherwise it may lead to strong retaliatory competition.

The future goals of competing products are usually divided into:

1) Business goals: In short, it is the goal of the competing product itself, such as becoming the most popular video software on the market, becoming the most user-friendly taxi-hailing software, etc.

2) Competitive parent company goals

That is, the purpose hidden behind the company developing the competing product, which is often a very popular product in the market. In fact, it is just a chess piece of the company behind the scenes. The role of this chess piece may be to serve as a probe for entering the industry, or it may be a "troublemaker" that disrupts the industry and reshuffles the cards.

It varies according to corporate culture. For example, the early "Tencent Video" was just a player that was complained about, but it quietly became a "video distribution platform" on par with iQiyi. Tencent is also gradually getting involved in the film and television industry, gradually realizing backward integration - it not only has cost advantages in distributing projects that it has invested in, but also has certain bargaining power with the sellers of film and television works as a platform buyer.

2. Competitors’ assumptions about themselves and their industry

The second major element of competitive analysis is to determine the hypothesis of the competitive product, which can be divided into the following two parts:

1) Assumptions that competitors make about themselves

Understanding competitors’ assumptions and judgments about their own position is often a winning weapon. For example, the development team of a competitor may be confident that their product has high user loyalty and has excellent interaction and UI that can retain users. But the reality is that many users choose this product simply because they see that this app can meet one of their needs. At this point, if you try to start a price war (membership discounts, first-order discounts, etc.), you may be able to take advantage of the time lag caused by your competitors' blind confidence to seize market share and gain a competitive advantage.

2) Assumptions that competitors make about the industry and other competitors

Because of their competitive position, competitors often have biased judgments about their industry and other competitors. Competitors at the top of the competition tend to overestimate the industry's development potential and underestimate the intensity of competition among their competitors. Competitors at the bottom of the competition also tend to underestimate the industry's potential.

By carefully analyzing competitors’ assumptions and judgments about themselves, the industry, and other competitors, we can discover the shortcomings of our own judgment of the environment (our products are also competitors of others). Discover important needs that were overlooked during product design, new strategic activities taken by competitors that were not noticed in time, and take advantage of competitors' misjudgments to adopt effective targeted strategies to gain competitive advantage.

3. Competitors’ capabilities

In my habit, I usually adopt two sets of models to classify the capabilities of competitors: one is based on ability type, and the other is based on competitive potential. The former is like a student's Chinese, math, English, physics, and chemistry, and the latter is like a student's character and morality.

Ability type classification :

1. Product capabilities: that is, the quality of the products currently produced, and the breadth and depth of the product line.
2. Marketing capability: the ability to promote and publicize competing products, and whether there are better promotion channels.
3. Operational capabilities: whether it has unique proprietary knowledge and unique patents or cost advantages.
4. Development capability: the overall level of the development team.
5. Financial capability: that is, whether it has stable cash flow (usually depends on the size and financial status of the competitor's parent company) and whether it has good profitability and financing capabilities? Are you carrying a large amount of debt? Generally, companies with large amounts of debt are more unstable and are likely to make a desperate move? Similarly, companies with less debt usually have less pressure on product growth due to the lack of pressure. But precisely because there is no financial pressure, it is not easy to truly defeat the products of such companies. As the joke goes, those who can beat Zhang Sanfeng have been outlasted by him.
6. Management capabilities: The management capabilities of the competitor's development team and the competitor's parent company's management attitude towards the competitor. The leadership qualities and abilities of core managers are crucial to the product development process. Whether the management is flexible and adaptable also affects the competitor's ability to withstand pressure.

Competitive potential classification :

1) Core Competencies

What are the capabilities of the competitors in the various segments involved, and what are they best at? What are you worst at? As the scale expands, what trends will these capabilities show?

Take the video app as an example: What about the TV series library of this video app? Are there any exclusive sources? Are there popular commentators for live sports broadcasts? Do you have exclusive broadcasting rights to popular variety shows? As the number of users increases, will this app give up the competitiveness of certain sections and concentrate resources on developing short videos?

2) Ability to grow

Can the capabilities of competing products be enhanced as their scale expands? Is it unable to sustain the expansion in scale? These depend on the development capabilities of the team and whether the management has a bigger vision and is willing to invest costs to expand the scale rather than simply exploiting the surplus value of employees.

3) Ability to respond quickly

How responsive is the competitor to competitive measures from other competitors? Do you have the ability to counterattack immediately?

For example, some time ago, WeChat was able to directly block all sharing links from MaCong and Chatbao in Moments, which is a quick response capability. Usually, this capability is determined by the following factors:

• Is it possible to quickly obtain large amounts of cash to deal with emergencies - is there free cash reserves and backup borrowing capacity?
• Is there excess production capacity?
• Are there any version iterations or alternative products that have been developed but not promoted?

4) Ability to adapt to change

What is the ability of competitors to adapt to changes in the industry environment? Can it adapt to the following situations:

• Cost competition.
• Manage more complex development models, such as whether multiple teams can maintain the same project at the same time.
• Increase new demands or develop new alternative products and peripheral auxiliary products.
• Launch service competition.
• Marketing activities upgraded.

4) Endurance

How stamina do competitors have to fight a protracted war? Is there cash flow pressure? Is the parent company of the competitor willing to support the competitor in a long-term non-profit or low-profit situation with intense competition?

4. The competitive strategy currently adopted by the competitor

It is necessary to identify the competitive strategies currently adopted by competitors. There are three types of competitive strategies:

1. Total cost leadership strategy : Gain cost leadership by reducing quality, and then attract low-end users through price advantages, achieving overall profits higher than the industry average.
2. Differentiation strategy : By providing complete and high-quality products to attract mid- to high-end users who are relatively insensitive to price but pursue overall quality, greater profits can be achieved, but the cost is relatively high. Once the strategic activities are designed incorrectly, the product may be declared a failure and unable to survive.
3. Concentration strategy : Due to the limitations of product and resource capabilities, one may choose to serve only a certain group of people. For example, a video software only provides animation or sports live broadcasts, but the service is of high quality. This model can concentrate limited resources to provide high-quality services, and as the scale expands, economies of scale can be formed to further reduce costs.

Understanding the current strategies and positioning of competitors can help you better and more accurately analyze each change in competitor demand and the intention of their marketing activities, grasp their true goals as quickly as possible, and then take effective measures to protect the core competitiveness of your own products.

The above is the competitive product analysis model written based on my experience and knowledge. I wonder what you think about it. If you have any valuable comments, I hope you can share them with me.

Author: KairoFan

Source: KairoFan