Your competitive ecosystems are vast, and growing

In a recent blog post, we did our best to convince you that you should care about your competitors’ pricing strategies. If you’re reading this post, we were probably successful, and that’s great! If you’re new here, and you’re all-in on competitive analysis, welcome! And if you’re new and you’re skeptical of the value of competitive pricing analysis, you may want to go back and read that post first.

The importance that an organization places on competitors can be a touchy subject in the SaaS market. This is because much of SaaS marketing is about convincing customers that you don’t have any competitors. Poor implementations of this ideology involve creating comparison pages where you list 20 features of your product and then put red “X” marks for your competitors to show how they don’t have any of the same features your product does. Better (and really viable) implementations of this approach involve category design, as outlined by the experts at Category Pirates.

Regardless of the marketing approach, however, your competition exists, is growing rapidly, and is likely becoming an increasing focus across key parts of your organization. Need evidence? Look no further than the 2022 Martech Map, which suggests there are nearly 10,000 software solutions available in the marketing technology (martech) ecosystem. Each of the subcategories in this space is now flooded with competitors.

This is true in our own backyard as well. This Market Research Technology vendor map lists hundreds of solutions in the research space, including market research agencies as well as technology providers. This is an area we play in at XaaS Pricing, and this vendor map doesn’t even scratch the surface of the competitive ecosystem we see. There are many, many market research and consulting agencies that we see in the tech space, including many focused solely on pricing, as well as many other specialized technology solutions for research and data.

This level of competitive proliferation will only continue in the long term, as low-code/no-code application development tools reduce the barriers to entry for launching “as a Service” products. You’ll be faced with tracking an expanding set of competitors with different market positions and value propositions. Increased competition across categories will have direct impact on the pricing environments of those categories, making competitive pricing analysis in particular a critical specialization for your company’s competitive intelligence (CI) team.

So how should you characterize competitors, and then prioritize which competitive categories and specific competitors your firm should care about?

The different types of competitor ecosystems

There are a lot of divergent opinions about which competitors your company should care about. These opinions are rooted in all types of “intelligence”; they can be based on rigorous analysis of win/loss data or emerge from an urgent CEO request after reading about a new vendor in a TechCrunch profile. Some people at your organization likely dismiss all competitors and believe you should focus on “doing what you do best,” while others might want a complete dissection of every competitor that they hear about in their client demos.

Cutting through this noise to find the signal can be challenging. You’re trying to provide value to the organization while pleasing a diverse and large set of stakeholders. Where do you even start?

From our perspective, a good first step is to draw a line in the sand on your firm’s competitive ideology — which types of competitors you are choosing to care about and with what levels of emphasis. This doesn’t have to be static, either. It can evolve as your business evolves and the competitive ecosystem dynamics change. But you need a shared place of understanding to ground you.

That ideology has to organically grow out of your company’s cultural DNA, category makeup and business positioning. We can’t provide a magic formula for your business specifically. If you’re feeling overwhelmed by the enormity of that challenge and grasping for a tactical place to start, you’re not alone. That’s normal. We can help get the ball rolling.

Our first suggestion is to think broadly about competitors at an ecosystem level, not a “this competitor or that competitor” level. To help guide those efforts, here’s a general framework to use in categorizing competitors:

•  Core Competitors: CI leader Patrick Wall of Imperva put this best in a recent LinkedIn post. His core point is that Pareto’s Law applies to competition. There are three or five competitors that you see in 80% of your deals. They are your direct and most relevant competitors.
• Tier 2 Competitors: Outside of the three or five competitors, there are maybe up to five competitors that make up “the rest” that you see regularly, but only in certain deals or situations, likely depending on ideal customer profile, use case, region, vertical and/or other criteria.
• Ankle Biters: Often termed “emerging competitors” or something similar, the ankle biters are a class of competitors that may crop up in the consideration set for certain deals and are likely asked about by executives and/or sales leaders but do not pose an immediate threat in most deals. They often are well covered in the press and typically are effective marketers.
• Everyone Else: This is a big catch-all group for “the rest.” This category includes players that participate in your direct market but are not relevant competitors for your company. This could be because they serve a different customer (persona, segment/size, region, vertical, other), offer different capabilities serving the category, and/or compete with a different value proposition (more on that last one later).
• Aspirational Competitors: Max Altschuler, VP of sales engagement at Outreach, recently summarized aspirational competitors well in a LinkedIn post. We often call this type of competitor a “proxy competitor.” These are companies that your business aspires to emulate and/or compete with in the future. For example, we are often asked by professional IT services companies to benchmark cloud IaaS players (e.g., Amazon Web Services, Azure, Google Cloud Platform); this is because those firms view the hyperscalers as aspirational competitors.
• Category Alternatives: Sometimes your competitor can be tangential, perhaps either another category of software and/or another way of solving the problems that you are helping solve for your customers. Let’s take XaaS Pricing as a tactical example. We offer a data and research product “as a Service.” Given what we cover, we compete with many different (and broad) categories: pricing consultancies, market research firms, conversational intelligence software, usage analytics software, price optimization platforms, and many others. We also compete with alternative ways of doing what we do, such as conducting DIY pricing analysis in Excel. While you are unlikely to build a competitive analysis program around alternatives, it is important to deeply understand them, so you can message how you stand apart.

Taking this framework and putting it into practice will require defining your competitive environment in each of the above categories, and then scoring the importance of each category as well as the players within each category. That scoring should be based on your own projections as well as competitive data, insights and feedback from across your organization. The data sources you tap into for those efforts will depend on your business and what’s available, but we can’t emphasize enough the power of talking to your colleagues and customers.

For those building a competitive analysis program that is focused on or includes pricing, there’s another framework that we really like that can be useful for prioritizing competitors. This framework defines the five possible value propositions a company can have for its product. This ranges from charging less for less (a discount/value player strategy) to charging more for more (premium). If you’re seeking to align and prioritize competitors for pricing analysis, consider mapping them to this framework. If you understand who competes with your company’s value proposition, and where others fit, you can prioritize your competitive analysis efforts around those value propositions that matter for you.

Going through the above exercises will help prioritize your competitive categories. It will also help identify key competitors and/or scenarios to focus on within each of those categories. The next step is to design a competitive program around those priorities, such that you can go deep where you need to and provide broader coverage for the rest. The design and structure of a competitive analysis program is a really important but separate and much bigger conversation, and one we’ll certainly cover in a future post.

Your competitive focus should evolve and broaden with growth

Hopefully we’ve made clear throughout this post that there are no one-size-fits-all approaches to building competitive analysis programs. The same is true for determining what competitors to cover. It comes down to a company’s DNA and the DNA of the category that it plays in. That said, there are some general consistent trends we see in how competitive programs are structured that we wanted to share in case you’re still spinning your wheels on where to start:

• Startups:
  • No dedicated resources for competitive intelligence
  • No budget for competitive intelligence
  • Limited time for competitive intelligence activities
  • Best served by cultivating a deep understanding of how their category overall delivers value to their ideal customers versus obsessing over specific competitors
  • Understand competitive categories and major players within each category at a broad level, with a focus on being able to position against these competitors in selling situations
• Scaling/Growth Companies:
  • Single resources and/or small teams focused on competitive intelligence
  • Some external budget for competitive intelligence
  • Likely to start as a reactive sales support resource
  • With maturity, can usually cultivate a deep understanding of core competitors, and build self-service assets and hands-on competitive support mechanisms for tracking those competitors (i.e., battle cards, positioning decks, landing pages)
  • May have tools in place, such as Klue or Crayon, to track the broader competitive landscape beyond those core competitors
• Established/Mature Companies:
  • Additional resources and budget for competitive intelligence
  • CI function may specialize around particular products, customer types, regions, sectors and/or competencies, such as areas of expertise (e.g., go to market, portfolio, pricing) or internal services provided (e.g., financial modeling).
  • The largest CI functions may have resources serving as competitive champions that are solely focused on single competitors.
  • Large programs with significant assets are in place to track core competitors.
  • Tier 2 and ankle biter competitors may be covered with similar depth as core competitors.
  • Often analyze aspirational competitors in projects supporting specific initiatives

Using these as guideposts, not rules, and combining them with our previous frameworks on competitive categories should hopefully give you the tools you need to start prioritizing the competitors that matter for your business.