Startup Competitive Market Analysis
Every startup founder needs to learn how to do a competitive market research analysis. So where do you start?
There is nothing worse than pitching your idea to an investor and having them say something like, “Oh, you’re just like X Company that was just funded.” That might be when you have an “eyes wide open” moment because you’ve never heard of that company.
There are a number of books written on the topic if you want to go in-depth on strategy and methodology:
- Blue Ocean Strategy – by W. Chan Kim – outlines that highly competitive markets create a bloody red ocean and you should look for markets and opportunities where there is a blue ocean.
- Business Model Generation – by Alexander Osterwalder – uses the business model canvas (BMC) as a structure to review competitors and the nine categories of the BMC.
- Crossing the Chasm – by Geoffrey Moore – is the bible of how products grow into new markets.
Startup Market Research
Let’s start with a hands-on method you could implement on a Saturday afternoon. Open a Google Doc to take notes – the document will start to take shape as you do the research. It will feel a bit circular as you start because you’ll be bouncing around between browser windows and taking notes.
Install a couple of Chrome browser plugins before you get started:
- DataMiner is a free tool that allows you to extract tables and lists
- Open SEO Stats allows you to see how the page ranks for traffic, keywords, site and page info with one click.
- Keywords Everywhere will show you the volume, price, and competition on each search under the search bar.
Additionally, get a copy of Skitch (or similar) which is a free tool from Evernote that allows you to copy components of a page (like the image above).
Start with the Theme
Your idea has a theme, it could be “crowdsourcing real estate down payments.” Think about the theme as the keywords that someone would type into a Google Search bar if they were looking for your solution.
Go to The Topic Explorer and type in the theme. Which companies come up as top ranking?:
- Competitor list
- Keywords – start building a list of keywords for future use
- Search volume
- Cost per Click – CPC
- Annual Trends
Head to Google.com with the start of the list. Don’t type in the URL, but instead search for the company names. Who is buying those “branded” keywords? Add those companies to your list to research. Repeat this process with the new list and build out the list of those companies that are internet savvy enough to be buying keywords.
Add Some Intelligence to your List
With the Companies list – build a list with URL links for future reference. Start to fill out the company profiles with third party resources.
- Use CrunchBase to learn more about the company. You can pull the data that includes how much money they have raised, how many employees, press releases, etc. None of this data in isolation is enough to make a go or no-go decision about your startup. You’re putting together a market profile, so keep pushing ahead with data.
- Make sub-bullets under the company names for Products list
- Features – how do they position their product?
- Pricing information – what are they charging monthly or annually? Are prices hidden behind a modal box that requires you to provide contract information? How they position their price indicates the sales model:
- High prices or hidden prices indicate a salesperson needs to be involved in selling the product – likely due to complexity as well as price/expense
- Low prices hope for a self-service or inbound sales model where customers can do a 30-day free trial and convert to paid with a credit card
- Look at TechCrunch Deadpool list – if companies or products like yours have failed, why do you think they failed.
- Use the Wayback Machine to look at how companies positioned their products over time. In this example, there are 408 captures of the site from 1998 to 2016
- Who are your Indirect competitors? Think of these as a competitor in adjacent markets or services – for example, could someone configure Salesforce.com to do the same thing you are doing with your product?
- Companies list
- Products list
Keep the research going
- Follow key executives on LinkedIn
- Build out a Google Alert on each of your new found competitors
Who’s writing about your topic?
Bloggers follow all kinds of topics and there are review sites for all kinds of products.
- Go to Medium.com and search for your topic
- Look for bloggers on Wordpress that write about your themes – go to Buzzsumo.com and look for your theme or topic
- Subscribe to follow their blog, Twitter feed, etc.
- Comment on the blog, a genuine thoughtful comment vs. an ask – save that for later
Consider starting a blog on your topic. Content is really going to matter over time and you should start thinking about how you can be a thought leader on the topic or theme of your product.
OK, time to take a break and think about how all of these pieces fit together. Don’t forget it’s better that you ask the hard questions in advance of the investor questions. If your product idea is going to fail, when do you want to know, in three weeks or three years?
- If you had to rank the competitor based on what you know today, change the bullet points to a numbered list.
- What are common features between companies? These become a minimum feature set required to launch
- What is the average price, what’s high and low? Do you think you can build, sell and make reasonable returns (35-70%) on your product for that price?
- Who has raised capital? From whom did they raise the capital and when?
- If you have no competitors, why do you think that is?
In conclusion, research is an ongoing process and is seldom conclusive or inconclusive. But you will be educated and knowledgeable about your market.