Start off with a big-picture view. What’s the market in which your product or service will be sold? The fact is that few products appeal to all people so you will need to break the market down into smaller ‘segments’. Textbooks refer to these as homogeneous groupings of buyers with shared traits, characteristics and requirements. They will all have similar problems and be interested in products that solve these.
It can help to visualise things by putting together some simple 2 x 2 diagrams, putting one variable on the x-axis (e.g. price) and another on the y-axis (e.g. functionality). Even without hard data, it doesn’t take long to overlay the competing products onto this diagram. This gives you a ‘lay of the land’ and can reveal the spaces where competition is strong, or gaps that may signify an opportunity.