The two most important elements to define a powerful Unique Value Proposition statement are to communicate why a business is different from what is already available on the market, and to make sure that the difference matters to the target customers. And this is where a customer-centric competitive analysis comes to rescue.
A competitive analysis is a tool that shows where a new business idea or a new product is positioned against competitors. It is able to highlight strengths and weaknesses, and helps establish what makes a new product unique.
However, the key thing is: unique is the eyes of who?
One of the ways to compile a competitive analysis able to inform an effective Unique Value Proposition (or UVP) statement is to use the validated customers needs that the new business or new product is willing to solve as a foundation. As Ash Maurya puts it, “the key to unlocking what’s different about your product is deriving your UVP directly from the number-one problem you are solving. If that problem is indeed worth solving, you’re more than halfway there already“.
So these are the eight steps I recommend to follow to compile a meaningful customer centric competitive analysis:
1- Validate the assumptions about target customers’ problems. This is always the first stage of any business idea validation or new product development process. I usually run a series of qualitative one-to-one interviews (and not online surveys, see here why) in form of informal conversations with customers in which I understand whether the problems I want to solve exist, how big is the pain, who feels the problems the most, what customers do today to solve them, and where did they hear about alternative solutions. If target customers either adopt strategies to solve the problems, put in place a workaround or use one or a combination of competitors’ services as a solution, it’s a very good sign, as it means that they feel so much the pain that they spent energies (and money) to solve it. You can read more about what to ask during customer interviews here.
2- Extrapolate from the meeting notes the top two jobs that customers want to do. This is a difficult exercise, because multiple jobs and related pain points may emerge during 20+ hours of face to face interviews. I personally find that asking customers to complete a ranking exercise at the end of the interview helps me have clarity about what is the most important job they want to do and the biggest pain, and it gives me some hints about recurring patterns. In any case, if the recruitment was not completely random, if the initial assumptions were not completely wrong and I haven’t messed up during the interviews, there will be similarities and the two main jobs to be done and their pains will come out. These will be the two key customer values, or what the target customers care the most when they face the problems that the business idea or new product is willing to solve.
3- Draw a 2×2 matrix on a whiteboard and put each of the key values on an axis. Key customer value#1 on axis Y, key customer value #2 on axis X. The top of the axis Y will be the positive side (I am really good at solving this problem), the bottom the negative one (I can’t solve this problem at all). Same for the axis X, but it will be positive on the right, and negative on the left.
4- Do an extensive research on competitors, either because they have been mentioned by customers during the interviews and because I found them searching on google. I’d visit their websites or better, if I can, I’d buy and try their service myself for a while. The idea here is to make a list of all competitor products’ features that aim to help customers complete the two jobs selected at step 2. All other features, I’d leave them aside for now.
5- Rank competitors for each of the two key customer values. Based on the info collected and on my personal experience after having tried them, how well are competitors’ products solving the two problems selected at step 2? Which one is the best? which one the worst? I’d put them in order, one by one, ranking their performance of how good they are to satisfy the two key values.
6- Now put the competitors names or logos on the matrix, according to the ranking completed at step 5. This is quite straightforward. You will gradually see the matrix being populated with logos in all the quadrants. The reason why I put customer values on the axis, is because during the interviews I’d have found out that these are the two things that matter the most to the target customers when they are trying to do the job. When they will make a choice on what to buy, they will evaluate the products in that way. This is a customer centric exercise, and it puts what target customers want at the core of everything. It’s not an exercise on profitability, or prioritisation based on effort and impact. It’s about what customers care about.
7- Give each logo a size in form of a circle. This is optional tough, but helpful. What defines the size of the circle really depends from the business. It might be revenue or market share if it’s a company, number of downloads if it’s an app, Unique Visitors or Page Views if it’s a website. In case it’s measurable, the best thing is to set a size for each circle based on the perceived “unfair advantage” in the Lean Canvas. In this way I will have visibility on how the my competitive advantage compares to competitors. One thing is really important: the metric used to give a size to each circle in the matrix needs to be the same for all competitors.
8- Now put your business idea or new product on the matrix. This is the moment of truth. How does my business idea sits on the matrix? The thing is: I want to be at the top right. Anywhere else it’s not good enough and it means that either my idea is resolving problems customers don’t really care about, or my competitors are far better then me to solve these customers’ problems. So if I’m not at the top right, I’d have to go back to the drawing board, and define new solutions to solve customers problems.
This is an example of how a customer-centric competitive analysis should look like, using Uber London as an example. This assumes comfortable, safe and easy to use as Customer value #1 and Reasonable Price as Customer value #2 (see the Uber London Lean Canvas example here for details):
After eight steps, here’s a meaningful and customer-centric competitive analysis, grounded on customers’ needs instead of some business objectives detached from reality or obscure criteria that customers won’t care about.
A good starting point, together with the rest of the Lean Canvas (see here how to compile one), to craft a powerful Unique Value Proposition.
Sources for the Uber London competitive analysis example:
– There are 21,000 black cab licensed drivers in London. source wikipedia.
– In 2016 there were 90,000 licensed private hire drivers in London, and estimates suggest the figure will rise to 128,000 by 2018. This number should include also Uber drivers. Source The Guardian.
– In 2017 there are 40,000 Uber drivers in London. Source The Telegraph.