Why you shouldn’t ignore your competitors

This post is written by Marie Prokopets, co-founder of Product Habits and FYI, and features slides presented by her co-founder Hiten Shah at the 2019 Appealie SaaS Conference.

I’ve been told countless times to ignore my competitors.

Don’t waste time thinking about what they are doing.
Don’t look at their latest features.
Don’t worry about them.

Basically, pretend they don’t exist. Instead, I’m told to focus on my customers.

That’s been the common advice for years. Repeated by the likes of Peter Thiel, Sam Altman, Dharmesh Shah and Jack Ma.

Sam Altman on Competitors

This advice made sense in the past. That’s because in the past it was much harder to create SaaS businesses. A lot of the services we can use to make our lives easier, like Zapier, Webflow and Airtable, didn’t exist. There also wasn’t as much competition. The MarTech 5000 only had 150 marketing technology solutions. And of course, people were afraid of creating copy-cat products. They wanted to be different. Have what was called a “unique value proposition.”

Things are much different today.

Competition sprouts up constantly. That includes totally new competitors fresh off the heels of seven and eight figures in venture funding. Plus it’s not uncommon to have new competitors come from companies in adjacent spaces that decide to build something in yours.

There is a constant stream of new competitors. And if you don’t do anything about it, they might eat your lunch.

That’s not to say that you should obsessively watch what your competitors are launching and doing out of fear. Instead, you should have a process to research your competitors in order to get deeper insights on what really matters: your customers.

Customer opinions and desires don’t stay the same. They are constantly changing, molded by the market. That’s why product/market fit scores change over time. Customers expectations change. And you have to change with them.

Ginni Rometty on Competitors

Competitor research is one of the keys to learning about your customers and staying abreast of their problems, wants, needs, and desires.

What can you learn about your customers from your competitors?

Researching your competitors can offer you a deep understanding of your customers. It can be your secret weapon. Or, your painful weakness.

My co-founder Hiten used to ignore his competitors. He didn’t pay attention to them because, at the time, he didn’t realize just how much he could learn about his customers through them. And because of that he made a number of serious missteps with his business KISSmetrics.

But if you limit your research to just your most obvious competitors, you’ll be missing out on valuable insights. There are four different types of competitors that you should be learning from:

Four types of competitors

Direct competitors – These competitors are solving the same problem for the same types of customers as you are or plan to.

Indirect competitors – These competitors don’t do exactly the same thing as you. They service the same customer you do, and offer a solution that is somewhat close to yours, but not exactly the same.

Alternative solutions – Manual solutions that customers use to get the same job your product does done. Think spreadsheets, pen and paper, books, checklists, consultants and contractors.

Multiple tool solutions – When multiple tools are stitched together to solve the problem your product solves. For example, customers could be using tools like Zapier and Airtable to help automate manual processes.

As an example, here’s a breakdown of each of these types of competitors for FYI:

Direct competitors – Products that let you search for documents across all the apps and accounts you use.
Indirect competitors – The document apps themselves, since each app lets customers search for documents within that app.
Alternative solutions – People create wikis with links to all their important documents.
Multiple tool solutions – People who keep multiple browser windows open so they can be signed into different G Suite accounts on each, in order to easily search for documents when they aren’t sure which account they are on.

You can learn a tremendous amount from each type of competitor, and you should be making sure to dig into products and solutions in each of the four categories when you do competitive research.

Competitors and customers

Here’s what competitive research can teach you about your customers (and why you shouldn’t skip it!):

The competitors and alternatives – What products and alternatives are customers using to solve their problems today? Which are they using most frequently? Which are they using least frequently? When do they use each one and why?

Target customers – What types of customers are competitors targeting? Where do they see the opportunity? What types of customers gravitate to each competitor?

Features – What competitor features do customers care about? Why do they care about those features? Are there features customers don’t care about? Are there features that customers want but don’t have?

Customer sentiment – How do customers feel about competitors? Why do they feel that way? What do customers love the most? What do they dislike? What are the specific words customers are using? What are customer expectations? Are competitors meeting customer expectations?

Over a quarter of companies aren’t doing competitor research

I’ll start with the bad news. 28% of companies aren’t doing any formal competitor research. They might glance at a competitor’s tweet or look at their website once a year. But nothing more.

28 percent no competitors research

That means over a quarter of companies are missing out on learning about their customers through their competitors. Ouch.

We asked people who said they weren’t conducting competitive research why they aren’t doing it. The main reasons why fell into 5 categories:

“We don’t have the time to do it.”
“We keep an eye on competitors, but don’t have a clear process for researching them.”
“Competitor research is not a priority.”
“We’d rather focus on our customer’s needs instead.”
“We don’t have much competition.”

For the companies that said they do conduct competitor research, there were a host of challenges mentioned.

The challenges included difficulty finding the right information and getting to actionable insights, trouble knowing which competitors to focus on, the time consuming nature of competitive analysis, and conducting competitive research without a process.

Competitor research challenges

The number one challenge people mentioned was that finding useful information when conducting competitor research was difficult.

“Info is scattered across the web. Most of it is junk. The good data points are behind walled gardens that cost a fortune like Pitchbook.”

Others said they struggle to find actionable insights once they complete the research.

“Knowing what to do with competitor insights. We know things, now what?”

“Discerning the absolute trove of information down to key points”

The majority of companies are doing some form of competitor research

And now, the good news! 72% of the companies we surveyed said they did competitor research.

72 percent do competitors research

Except… they aren’t all actually doing real competitor research.

Even though the majority of companies said they are doing competitive research, much of the research that’s being done isn’t deep or focused enough.

A little Googling here. A quick glance at a competitor’s product. That’s what most people are doing. Very few people are actually talking to or surveying customers.

We asked people to list any and all tools or services they have used for conducting competitor research. Over 50 tools were mentioned:

24% Google/searching the web
11% Signing up for a competitors’ product
7% Customer interviews and surveys
6% Review sites and social media
6% Ahrefs
6% G2
4% Similarweb
4% Capterra

Googling was the number one method used. Meanwhile, only 7% were doing customer interviews and surveys about their competitors. And only 6% were looking at customer reviews on G2.

It’s no wonder the top challenge people have with competitive research is finding useful information. They aren’t actually looking in the right places. Googling and going through a competitor’s marketing site and product will only give you a small sliver of the overall picture. You’ll end up having a skewed perspective of what they are doing and miss out on a lot of learnings about the customer.

The four methods of doing competitive analysis to learn about your customers

There are four key methods to learn about your customer using competitive research.

Interviews & Surveys
Competitor Websites
Competitor Reviews
Customers Switching

We use each and every one of these methods at FYI, and recommend that you use at least two or more. Although you can use only one, using multiple methods will give you a much more robust understanding of the customer.

Interviews & Surveys

This is our favorite way to do competitor research at FYI. Talking to customers about your competitors and getting customer responses to surveys will teach you more than any other competitive research technique.

It is the single most valuable thing you can do when it comes to competitive research.

You’ll learn the exact words people use when talking about your competitors. Why they are using them, if they used them in the past and switched to another solution, and how they feel about the competitors.

At FYI, we start with surveys before we move to interviews. This helps us identify who the competitors are before the interviews. It gives us a baseline understanding of which companies we should be digging into more.

Discovering alternatives

When we first began digging into the document category, we wanted to understand which apps people were using the most. Asking people “What tools are you currently using for creating and sharing documents” helped us discover that G Suite and Dropbox were the two most popular apps.

This survey gave us a baseline understanding of who the indirect competitors were. In our interviews, we got much more color about each of these apps, plus learned about new up and coming apps like Notion that were barely mentioned in the surveys (this was before Notion 2.0 was launched).

Here are a few of the things you’ll want to learn about during customer interviews:

What products and alternatives are customers using?
How do they use different products with each other?
What do customers think of the tools they use and their features?
How are they using them?
Are they using many tools to solve the problem, or just one?
Have they ever switched tools/processes? Why?

Later, we followed up with Net Promoter Score (NPS) surveys to learn more about customer sentiment for each of the popular apps. We made sure to ask not only the 0-10 scale standard NPS question “How likely are you to recommend [product] to a friend?”, but also “What is the most important reason for your score?” This open-ended question gave us rich qualitative information to analyze.

And we didn’t just do these surveys once. We now have NPS scores of our indirect competitors from 2017, 2018 and 2019. This helps us understand how customer sentiment changes over time, and lets us get NPS for newer products like Notion, Airtable and Coda too.

Net promoter score question

In doing NPS surveys, we learned something huge – that the document category has fairly low Net Promoter Scores. G Suite, one of the market leaders, only has an NPS of 35, which means its customers are satisfied, but just barely.