Business markets are complex, with multiple competitors offering similar products or services. They are also abstract; they comprise the business, competitors, and users. What follows is an example using the music industry as the landscape for a business market, in which:

1. A company is identified (to take the position of)
2. A major competitor is identified
3. Major differences between the two are ranked
4. Additional competitors are added

Table of Contents

• The Music Industry
  • Spotify vs Apple Music
  • Differentiating Factors PCA
  • Adding More Services
  • Representing the Data
• Additional Considerations
  • Adding User Density
  • Determining Market Future
  • Components from Competitors

The Music Industry

Spotify vs Apple Music

For the sake of this example, let's say that you're Spotify, a leading music streaming service.

Before looking at the whole market and every player (which would take a long time), you decide to look at one major competitor as a proxy: Apple Music.

Spotify and Apple Music are somewhat similar, competing in the music streaming space.

1. Subscription Pricing: Both services offer similar monthly subscription fees, typically around $9.99 for individual plans.
2. Music Streaming: At their core, both Spotify and Apple Music are music streaming services, providing users with access to millions of songs on-demand.
3. Offline Listening: Both platforms allow users to download music for offline listening, ensuring uninterrupted access to their music libraries.

Differentiating Factors PCA

Spotify and Apple Music, however, are different in their offerings and features. Here are a few key differentiators:

1. Business Model: Spotify offers a freemium model with an ad-supported tier, while Apple Music is a subscription-only service, which impacts user acquisition and revenue streams.
2. Music Library Size: Spotify boasts a larger music library with over 80 million tracks, compared to Apple Music's 90 million tracks, affecting the breadth of content available to users.
3. Platform Availability: While Apple Music is primarily focused on Apple devices, Spotify is available across a wide range of platforms, including Android, Windows, and smart speakers, broadening its potential user base.
4. Discovery and Personalization: Spotify is widely acclaimed for its advanced music discovery and personalization features, such as its popular Discover Weekly playlist, which gives it an edge in user engagement and retention.
5. Podcast Integration: Spotify has made a significant push into podcasts, offering a vast library of podcasts and exclusive content, diversifying its offerings beyond just music.
6. Social Features: Spotify allows users to share playlists, follow friends, and see what others are listening to, fostering a sense of community that Apple Music lacks.
7. Audio Quality: Apple Music offers lossless audio streaming and spatial audio support, catering to audiophiles who prioritize sound quality over other features.
8. ...

Of these, the most important differentiators are platform availability and business model. More factors can be arbitrarily picked, but for the sake of this example (and for easy 2D graph representation), just 2 will be selected. Effectively, these two features have been decided as the most important differentiators in the space of all differences, making them the principal components of the market.

Adding More Services

Now that there are two components on which to compare, more services can be added to the mix. Here are a few more music streaming services and their scores on the two principal components:

Platform Availability:

1. Spotify: 0.95 - Available on virtually all major platforms, including Android, iOS, Windows, macOS, and smart speakers, making it highly accessible.
2. YouTube Music: 0.9 - Available on Android, iOS, web browsers, smart TVs, and some game consoles, providing broad platform coverage.
3. Amazon Music: 0.8 - Available on Android, iOS, web browsers, and Amazon's own devices, but limited integration with non-Amazon platforms.
4. Pandora: 0.7 - Available on Android, iOS, web browsers, and some smart speakers, but with more limited availability on other platforms.
5. SoundCloud: 0.6 - Available on Android, iOS, and web browsers, with limited support for other platforms.
6. Tidal: 0.5 - Available on Android, iOS, web browsers, and some smart TVs, but with a more limited platform reach compared to others.
7. Apple Music: 0.4 - Primarily focused on Apple devices (iOS, macOS, Apple TV, etc.), with limited availability on other platforms.

Business Model:

1. Spotify: 0.95 - Offers a freemium model with an ad-supported tier and a premium subscription tier, providing maximum flexibility for users.
2. Pandora: 0.9 - Offers an ad-supported free tier and a premium subscription tier, similar to Spotify's model.
3. SoundCloud: 0.8 - Follows a freemium model with a free tier and a premium subscription tier, but with a stronger focus on independent and emerging artists.
4. YouTube Music: 0.7 - Part of YouTube's ad-supported model, with a premium subscription tier that removes ads and offers additional features.
5. Amazon Music: 0.6 - Offers a free tier with limited features, as well as premium subscription tiers bundled with Amazon Prime or sold separately.
6. Apple Music: 0.4 - Operates on a subscription-only model, without a free ad-supported tier.
7. Tidal: 0.3 - Subscription-only model, with a focus on high-quality audio and exclusives, targeting a niche audiophile market.

Representing the Data

Each service can be graphed with a point across both components. Note that things are roughly diagonal; real PCA would have simplified this further into just one dimension that captures both components. That makes sense - free services need a lot of platforms to generate revenue, whereas services that err more towards the subscription model can afford to be more targeted. It would be challenging for a company to have one without the other.

Additional Considerations

Adding User Density

The question of what company is winning is a hard question to answer without knowing where the users are. For example, say there's a lot of users on some platforms, but all of them are looking for free services only. That puts Tidal in a tough spot, but SoundCloud in a pretty good spot (from their locations on the graph). Users can be clustered in various locations in reality across all dimensions. Companies can adjust their strategy and offerings to target these clusters.

Determining Market Future

Trends in the market can shift users (or the general market) in a particular direction. For example, say the future was a subscription model on all platforms. Companies that are better able to shift to that model will ultimately come out ahead. This is particularly useful for new entrants in figuring out where to position themselves, often in conjunction with a claim for incumbents' inability to shift.

Components from Competitors

The components were identified by comparison of the target company with a competitor. Changing that competitor can drastically change the components selected. Note that this is a heuristic method, since doing this for every competitor would be time-consuming.

note: I used to teach a number of sessions on ideation in Berkeley's mobile development club. One of the segments involved market analysis; a way of thinking about business markets. This post is that concept. Additionally, the diagram SVG was generated with the use of Mermaid.