# Competitive Alternatives Analysis

Understanding your true competitive alternatives is the essential first step in positioning. Most companies make the mistake of defining competitors as the companies that look most like them. But customers don't think in terms of product categories — they think in terms of solutions to their problems. Your real competitive alternatives include anything a customer might use, hire, build, or accept instead of buying your product.

## Why Competitive Alternatives Come First

Positioning is always relative. "Differentiated" only has meaning in contrast to something else. If you don't know what you're differentiated from, your entire positioning exercise is built on assumptions rather than reality. The alternatives your customers actually consider determine:

- Which features they treat as "table stakes" vs. "differentiators"
- What price they consider reasonable
- How they evaluate and compare solutions
- What switching costs they weigh
- What status quo bias you need to overcome

## The Five Types of Competitive Alternatives

### 1. Direct Competitors
Products in the same category that solve the same problem in a similar way.

| Signal | Example |
|--------|---------|
| Appear in the same analyst reports | Salesforce, HubSpot, and Pipedrive all appear in CRM reports |
| Customers mention them by name in sales calls | "We're also looking at Asana and Monday.com" |
| Sales team encounters them in head-to-head deals | You lose deals specifically to this competitor |

### 2. Adjacent Competitors
Products in a different category that customers repurpose to solve the same problem.

| Signal | Example |
|--------|---------|
| Customers use a general tool for a specific job | Using Notion as a lightweight CRM |
| The tool wasn't designed for this use case but works "well enough" | Using Google Sheets for project management |
| Customers combine multiple tools to approximate your solution | Slack + Google Docs + Trello instead of a dedicated collaboration platform |

### 3. Manual Processes
Human-powered alternatives that don't involve purchasing any product.

| Signal | Example |
|--------|---------|
| Customers describe doing the work "by hand" | Manually compiling reports from multiple data sources each month |
| The process involves one person who "just knows" how to do it | The office manager tracks inventory in their head |
| Work is done in email threads or meetings | Strategic planning happens in recurring meetings with no shared tool |

### 4. Outsourced or Hired Help
Paying someone else to do the work instead of buying a tool.

| Signal | Example |
|--------|---------|
| Customers hire consultants, agencies, or freelancers | Hiring a design agency instead of using a design tool |
| A dedicated employee handles the task full-time | A full-time data analyst replaces a business intelligence tool |
| Customers use a managed service | Using a managed IT service instead of IT management software |

### 5. Do Nothing (Status Quo)
The customer simply accepts the problem and doesn't solve it.

| Signal | Example |
|--------|---------|
| Customers say "we know it's a problem but we haven't gotten to it" | Acknowledging data quality issues but not investing in a solution |
| The pain isn't acute enough to trigger action | Mild inefficiency in onboarding that doesn't cause measurable loss |
| The cost of change seems higher than the cost of the problem | "Switching would take 6 months; we'll just live with it" |

## Customer Interview Scripts

### Interview Setup
Interview 15-20 of your happiest, most successful customers. These are the customers whose experience is most representative of good positioning, because they actually chose you and stayed.

**Selection criteria for interviewees:**
- Have been customers for at least 3-6 months
- Are actively using the product (not dormant accounts)
- Have renewed or expanded (if applicable)
- Represent your most successful outcomes
- Span at least 3-4 different companies/contexts to avoid single-company bias

### Core Interview Questions

**Opening (establish context):**
1. "Tell me about your role and what you're responsible for."
2. "Walk me through how [your product] fits into your daily/weekly workflow."

**Discovering alternatives (the critical questions):**
3. "Think back to before you started using [your product]. What were you using to handle [the job your product does]?"
4. "If [your product] disappeared tomorrow, what would you switch to? What would you do instead?"
5. "When you were evaluating solutions, what other options did you seriously consider?"
6. "Were there other ways you thought about solving this problem that didn't involve buying software at all?"

**Understanding the switch:**
7. "What was the moment or trigger that made you decide to find a solution?"
8. "What was the most painful thing about your previous approach?"
9. "What was the biggest risk you saw in switching to something new?"
10. "Was there anything about [the old way] that you actually miss or that was better?"

**Probing deeper:**
11. "Who else was involved in the decision? What alternatives did they advocate for?"
12. "If a colleague in your role at another company asked you what they should use, what would you tell them? What would you warn them about?"

### Follow-Up Probes
When a customer mentions an alternative, go deeper:
- "Tell me more about how you used [alternative] for this."
- "What specifically didn't work about [alternative]?"
- "What was good enough about [alternative] that you stuck with it as long as you did?"
- "How long did you use [alternative] before looking for something else?"

## Clustering Alternatives

After completing interviews, you'll have a raw list of alternatives mentioned by customers. The next step is clustering them into meaningful groups.

### Clustering Process

**Step 1: List all mentioned alternatives**
Write every alternative on a sticky note or in a spreadsheet. Include the number of customers who mentioned each one.

**Step 2: Group similar alternatives**
Combine alternatives that are functionally equivalent from the customer's perspective:
- Excel, Google Sheets, and Numbers → "General-purpose spreadsheets"
- Trello, Asana, Monday.com → "General project management tools"
- McKinsey, Bain, Accenture → "Management consulting firms"

**Step 3: Rank by frequency**
Order clusters by how many customers mentioned them. The top 3-5 clusters are your primary competitive alternatives.

**Step 4: Note segment differences**
Different customer segments may have different primary alternatives:

| Customer Segment | Primary Alternative | Secondary Alternative |
|------------------|--------------------|-----------------------|
| Enterprise (500+ employees) | Legacy on-premise solution (SAP, Oracle) | In-house custom build |
| Mid-market (50-500 employees) | General-purpose SaaS (Salesforce, HubSpot) | Spreadsheets |
| SMB (under 50 employees) | Spreadsheets or manual processes | Do nothing |

### Output Template

| Alternative Cluster | Type | Frequency | Key Weakness (from customer perspective) | What They Do Well |
|---------------------|------|-----------|------------------------------------------|-------------------|
| Spreadsheets | Adjacent | 12/20 | Error-prone, no collaboration, no audit trail | Flexible, familiar, free |
| Legacy Enterprise Software | Direct | 8/20 | Slow, expensive, poor UX | Comprehensive, trusted by IT |
| Manual/consultant | Outsourced | 5/20 | Expensive, slow turnaround, not scalable | High quality, customized |
| Do nothing | Status quo | 3/20 | Problem persists and compounds | Zero cost, zero effort |

## The "Do Nothing" Analysis

"Do nothing" deserves special attention because it's often the most common alternative and the hardest to beat. Customers don't choose "do nothing" because they're lazy — they choose it because the perceived cost of change exceeds the perceived cost of the problem.

### Understanding the "Do Nothing" Decision

| Factor | Question to Ask | What to Listen For |
|--------|----------------|-------------------|
| Pain severity | "How much does this problem cost you per month/quarter?" | Vague answers suggest the pain isn't acute enough |
| Urgency | "What happens if you don't solve this in the next 90 days?" | "Nothing catastrophic" means low urgency |
| Switching cost | "What would it take to implement a new solution?" | High switching costs favor "do nothing" |
| Risk perception | "What could go wrong if you change your approach?" | Fear of disruption or failure |
| Organizational inertia | "Who else needs to agree to make a change?" | Multiple stakeholders slow decisions |

### Countering "Do Nothing"

Your positioning must address "do nothing" by:
1. **Quantifying the cost of inaction** — "Companies like yours lose an average of $X per quarter to this problem"
2. **Reducing perceived switching cost** — "Live in 2 weeks, not 6 months"
3. **Demonstrating social proof** — "450 companies like yours already made the switch"
4. **Creating urgency** — "This problem compounds over time" or tie to a trend ("as regulations tighten...")

## Competitive Alternative Mapping Exercise

Use this exercise in a team setting to build consensus on competitive alternatives.

### Materials Needed
- Whiteboard or digital whiteboard (Miro, FigJam)
- Sticky notes (5 colors for 5 alternative types)
- Customer interview summaries
- 60-90 minutes of team time

### Step-by-Step Process

**Step 1 (10 min): Individual brainstorm.** Each team member writes down all alternatives they've heard customers mention, one per sticky note. Color-code by type (direct, adjacent, manual, outsourced, do nothing).

**Step 2 (15 min): Share and cluster.** Go around the room. Each person places their sticky notes on the board and explains. Group duplicates and similar alternatives.

**Step 3 (15 min): Customer evidence.** For each cluster, cite specific customer quotes or data. Remove any alternatives that are assumptions without customer evidence.

**Step 4 (10 min): Rank by frequency.** Dot-vote or rank-order the clusters by how commonly customers mention them. Mark the top 3-5.

**Step 5 (15 min): Strengths and weaknesses.** For each top alternative, document: what it does well (from the customer's perspective), what it does poorly, and why customers switched from it to your product.

**Step 6 (10 min): Agree on primary alternatives.** The team agrees on 3-5 competitive alternatives that will be the foundation for the rest of the positioning exercise.

### Validation Checklist

After completing the exercise, verify your competitive alternatives list:

- [ ] Based on actual customer research, not team assumptions
- [ ] Includes at least one non-obvious alternative (not just direct competitors)
- [ ] Accounts for "do nothing" and manual processes
- [ ] Covers the primary alternative for each customer segment you serve
- [ ] Each alternative has documented strengths AND weaknesses
- [ ] The team has consensus on the top 3-5 alternatives
- [ ] You can articulate why customers switch FROM each alternative TO your product

## Common Pitfalls

| Pitfall | Why It Happens | How to Avoid It |
|---------|---------------|-----------------|
| Only listing direct competitors | Founder bias toward products similar to theirs | Always ask "what did you use BEFORE" not "who did you compare us to" |
| Ignoring "do nothing" | Assumption that customers already want to buy something | Track how many deals end in "no decision" |
| Relying on team assumptions | Interviews seem time-consuming | Commit to 15-20 interviews — the insights are irreplaceable |
| Listing too many alternatives | Every possible option seems relevant | Focus on the 3-5 most common. If an alternative is mentioned by only 1 customer, it's an edge case |
| Not updating the list | Competitive landscape changes | Revisit competitive alternatives quarterly or when win rates shift |
