How To Analyse Your Competitive Position When Building Your Value Proposition

You need to understand how competitive you are.

A successful business should have a crisp, clear value proposition that describes why people will prefer to buy a product or service from them rather than someone else. When you have a solid value proposition for your business, it will be the foundation on which great marketing can be built.

If you’re trying to develop your own value proposition, a great place to start is by getting a solid understanding of how potential customers see you.

How do customers decide whether to buy from you or your competitors?

Most people will be proudest of some aspect of their business. But is that aspect the one that their customers care about most?

What’s really important to your customers? Why do some choose your competitors? Why do some choose you?

In this post, I’m going to help you understand how to get that important customer perspective.

I’m going to describe an exercise I often work through with clients. If you’re going to emulate this fully, you’ll want to do this in a group of your colleagues, who each have different roles in your business but who all have contact with your customers.

The Competition Workshop

You’ll need a spreadsheet in which to record your thoughts. I’ll give you one later.

First, talk through with your colleagues all the factors you think your customers consider when making a decision to buy something from you or a competitor.

You will very likely have a deep discussion of who the real decision-maker is in the buying decision. Is it the CEO, the Purchasing Manager, the Operations Manager, or someone else? You’re trying to list the factors that concern that decision maker.

A discussion of how all those people might influence the buying decision is a whole other blog. For this exercise, just try to focus on the principal decision maker.

In this simple example, let’s say they are only concerned about three things:

• Whether their chosen supplier provides a service (or product) that is of high quality
• Whether that service can be provided promptly
• Whether that service is cheap enough

List the factors in your spreadsheet, and then score them to show how important they are to the customer. Does your customer care about quality more than price? Or vice-versa?

You should get something like this. I’ve used a scale of 1 to 5, where 1 is “doesn’t care much” to a 5 meaning “absolutely essential”.

Now score how well you satisfy the buyer on each factor. Let’s say you are truly excellent with regard to a factor. Give yourself a 5. Giving yourself a 1 would mean that you really don’t satisfy the customer on that factor.

Then, do the same for your competitor.

You might end up with this.

We can see what this reveals when we look at the “Competitive Difference” column. There’s a bit of arithmetic in the spreadsheet which results in a positive number when we’re better than the competitor and negative number when we’re worse. The bigger the number, the more significant the finding is.

In this first scenario, we’re able to provide a higher quality service than our competitor, and that’s what our customer is most interested in. So we would feature that capability strongly in our value proposition. We’re at a small disadvantage on pricing, but the customer isn’t sensitive to that, so that’s not a problem.

But what if the customer’s concerns were rated differently?

Here, we’re looking at the same ratings for you and your competitor, but the ranking of the customer’s concerns is different. The buying decision is very price-sensitive, and we’re at a competitive disadvantage.

In this case, we’d need to fix the problem and find a way of being more competitive. Our value proposition would be forced to feature capabilities that are weaker than in the first scenario.

You should end up with many more factors to consider. And you may want to extend the spreadsheet to allow your evaluation to include more than one competitor.

The Result

You’ll end up with something that helps you to understand the view that your potential customer has of the choice between you and your competitors. Powerful stuff!

But this is flawed. No matter how well you’ve done this on your first attempt, there’s more work ahead.

What’s Still To Be Done

Having done this many times with businesses that varied hugely in what they do, how big they are, and a host of other factors, some lessons stand out.

▶︎ Your first pass at this will not give you all the answers. You will need to iterate on this, to really get to the heart of what’s important to your customers, and how good you and your competitors are. These truths are difficult to arrive at.

▶︎ Often, the people I work with in this type of workshop discover that they are less able to articulate and rank their customers’ concerns than they expected. I’ve had workshops where the conversation is petering out just a few minutes in. Admitting to that lack of knowledge spurs most people into doing some serious research in their customer base. “Why, exactly, did you buy from me?

▶︎ Weak knowledge of the offerings of competitors is often revealed too. The participants in the workshop offer what they think their competitors are capable of, but really struggle to describe how customers view those competitors. They often do some deep research in order to make their next iteration more valuable.

▶︎ I have given you a method, and you can follow it by yourself with your colleagues, but I guarantee that you won’t be as successful with it as when I’m in the room. Why? Because I bring an external, challenging viewpoint that makes the results of the exercise much more revealing. I will not let you get away with empty thinking. I will force you to justify what you’re putting forward. It’s a demanding process, but the results are always worthwhile.

Try It!

So, try using this. It’s very, very powerful. See how far you can get with it.

Let me know how well you do. Leave a comment, or drop me a message.

Credit: I am grateful to Zuhair Suidan for some of the thinking that this approach is based upon.