Assessing Threats of New Entrants and Substitutes with Consumer Market Research
This skill teaches you how to systematically identify, score, and prioritize the threats posed by new market entrants and substitute products using consumer market research data, producing a scored threat matrix that informs strategic decisions within the Six Forces Model.
Score each potential entrant and substitute on barrier height, switching costs, customer willingness to switch, and capital requirements. Use consumer market research (surveys, behavioral data, patent filings, funding databases) to assign 1-5 ratings per factor, then weight and aggregate into a composite threat score that feeds directly into your Six Forces strategic analysis.
Outcome: You produce a scored threat matrix listing every credible new entrant and substitute, rated on standardized criteria, that directly feeds into your Six Forces strategic synthesis and enables prioritized defensive or offensive moves.
Prerequisites
- Basic understanding of Porter's Five Forces and the Six Forces Model extension
- Familiarity with competitive intelligence sources (SEC filings, Crunchbase, patent databases)
- Ability to design and interpret consumer surveys or behavioral research
- Completed or concurrent data collection for a Six Forces Analysis
Overview
Every established market eventually attracts newcomers and alternative solutions. New entrants bring fresh capital, technology, or business models that erode incumbent margins. Substitutes reshape demand entirely by solving the same customer problem through a different mechanism. Both forces can quietly shift an industry's profit pool before incumbents notice, which is why rigorous consumer market research is the foundation for detecting and quantifying these threats early.
Within the Six Forces Model, the threat of new entrants and the threat of substitutes are two of the six forces that determine industry attractiveness and profitability. While related, they operate through different mechanisms. New entrants compete within the same product category, often with a cost or feature advantage. Substitutes compete across categories by offering a different way to satisfy the same underlying need. Confusing the two leads to misallocated defensive resources. This skill teaches you to distinguish, identify, score, and rank both threat types so the output plugs cleanly into synthesizing Six Forces into strategic recommendations.
The concrete artifact you produce is a threat matrix: a spreadsheet or structured table listing every credible entrant and substitute, scored on factors such as barrier height, switching costs, customer willingness to switch, capital requirements, regulatory hurdles, and time to market. Each factor is rated 1-5 using evidence drawn from consumer market research (surveys, conjoint analysis, behavioral data), public filings, patent databases, and funding records. The matrix includes a weighted composite score and a brief narrative per threat explaining the evidence behind the rating. A well-built matrix turns vague anxiety about competition into a prioritized action list: which threats need immediate defensive investment, which deserve monitoring, and which you can safely deprioritize.
The skill sits between data collection and strategic synthesis in the Six Forces workflow. You need raw data (industry reports, survey results, financial filings) as input, and the scored matrix becomes input for the final synthesis step. Teams that skip this structured scoring tend to either overreact to headline-grabbing startups or ignore slow-moving substitutes until it is too late. The scoring discipline forces explicit evidence checks and makes disagreements productive rather than political.
How It Works
The mental model behind threat assessment is that every market has structural barriers that determine how easily value can be captured by outsiders. For new entrants, those barriers include economies of scale, brand loyalty, capital requirements, access to distribution, regulatory licenses, network effects, and proprietary technology. For substitutes, the relevant dimensions are different: switching costs for the customer, price-performance ratio of the alternative, buyer propensity to switch, and functional equivalence. Your job is to measure the height of each barrier using real evidence, not intuition.
The scoring framework works because it forces granularity. Saying 'the threat of new entrants is medium' is useless for decision-making. Saying 'the threat from venture-backed fintech startups is high (4.2 out of 5) because capital requirements have dropped due to banking-as-a-service APIs, switching costs are low (consumers report 3.1 out of 5 willingness to try a new provider), and regulatory barriers have decreased in 12 states' gives your leadership team something they can act on. The 1-5 scoring scale per factor, weighted by relevance to your specific industry, produces composite scores that are comparable across threats and across time periods.
Consumer market research is the evidence engine. Without it, barrier assessments are just executive opinions. Surveys and conjoint analysis reveal willingness to switch, price sensitivity thresholds, and feature priorities. Behavioral data (churn patterns, trial adoption rates, search trends for alternatives) reveals what consumers actually do versus what they say. Patent and funding databases reveal the pipeline of entrants before they launch. Each data source has blind spots: surveys overstate loyalty, behavioral data underweights future intent, and funding data misses bootstrapped competitors. Using all three in combination produces a triangulated view that is far more reliable than any single source.
The weighting step is where strategic judgment enters. Not all barriers matter equally in every industry. In pharmaceutical markets, regulatory barriers dominate. In consumer apps, network effects and switching costs dominate. You assign weights (summing to 100%) based on which barriers historically predicted successful entry or substitution in your industry. If you lack historical data, use the default equal-weight approach and adjust after the first review cycle. The key insight is that the framework is designed to be iterated: your first pass establishes a baseline, and quarterly updates using fresh consumer market research track whether threats are rising or falling.
One common misunderstanding is treating the two forces as a single bucket. New entrants and substitutes require separate matrices because the barrier dimensions differ. A ride-sharing startup entering the taxi market faces different barriers (capital for driver acquisition, regulatory licensing) than an e-bike subscription replacing short taxi rides (customer habit change, infrastructure availability). Lumping them together obscures which defensive strategies are relevant. Building two parallel matrices, one for entrants and one for substitutes, and then combining the composite scores into the broader Six Forces analysis gives you the clearest strategic picture.
Step-by-Step
Step 1: Define the market scope and customer need
Before you can assess threats, you must precisely define what market you are analyzing and what customer need it serves. , 'coordinating task assignments, deadlines, and progress visibility across distributed teams'). The market definition bounds your entrant analysis. The need statement bounds your substitute analysis, because any product or behavior that satisfies the same need is a potential substitute even if it looks nothing like your product.
Validate both statements against your existing consumer market research: do customers describe their need the same way you do? If your need statement diverges from how customers articulate their problem, revise it using their language, because that language will guide your search for substitutes.
Tip: Pull the need statement directly from verbatim customer quotes in survey data or call transcripts. The closer your language matches theirs, the more accurate your substitute identification will be.
Step 2: Identify credible new entrants
Build a long list of potential new entrants by scanning five sources: (a) venture funding databases like Crunchbase or PitchBook for startups in your market definition that raised rounds in the past 24 months, (b) patent filings in relevant technology classes, (c) job postings from adjacent companies hiring roles that suggest entry into your space, (d) conference exhibitor lists from your industry's top three events, and (e) adjacent-market incumbents with public statements or product launches indicating expansion into your category. For each candidate, record the company name, estimated funding or resources, announced or inferred launch timeline, and their apparent entry strategy (price disruption, feature innovation, niche segment, platform leverage). Filter the list to credible entrants by removing companies with less than 12 months of runway or no discernible product-market fit signal. You should end up with 5-20 credible entrants depending on your industry's attractiveness.
Tip: Job postings are an underused signal. If a large adjacent company starts hiring product managers and engineers with keywords matching your market, they are likely building a competing product 6-18 months before any public announcement.
Step 3: Identify credible substitutes
Substitutes are not competitors in your product category. They are alternative ways customers can satisfy the same underlying need. Start with your need statement from Step 1 and brainstorm every alternative path a customer could take. For the project management example, substitutes might include shared spreadsheets, email threads, physical whiteboards, hiring a dedicated project coordinator, or reverting to no formal process at all.
Then validate each substitute using consumer market research: run a survey asking customers what they would use if your product category did not exist, or analyze churn data to see what churned customers switched to. ' Record each substitute with the percentage of customers who mention it, the apparent reason for switching, and the price-performance comparison to your category.
Tip: The most dangerous substitutes are often not software products at all. A company deciding to 'just hire another person' instead of buying your tool is a substitute. Consumer market research that only surveys software alternatives will miss these behavioral substitutes entirely.
Step 4: Define scoring factors and weights for entrants
Create a scoring rubric for new entrants with 5-7 factors. Standard factors include: (1) economies of scale required (how large must a new entrant get before they can match incumbent unit costs), (2) capital requirements to enter (funding needed for product development, marketing, and distribution), (3) access to distribution channels (can entrants reach customers through existing channels or must they build their own), (4) brand loyalty and switching costs (how attached are customers to incumbents), (5) regulatory or legal barriers (licenses, certifications, compliance), (6) proprietary technology or patents held by incumbents, and (7) network effects that protect incumbents. For each factor, write a 1-5 scoring rubric where 1 means the barrier is very low (easy for entrants) and 5 means the barrier is very high (difficult for entrants). Then assign percentage weights to each factor based on which barriers matter most in your specific industry.
If you lack historical data on which barriers predicted entry in your industry, start with equal weights and adjust after your first quarterly review.
Tip: Calibrate your rubric by scoring one well-known recent entrant that you already know the outcome for. If a startup entered two years ago and is now struggling at 2% market share despite heavy funding, your barrier scores for that entrant should be high. If the rubric scores them low, your rubric needs adjustment.
Step 5: Define scoring factors and weights for substitutes
Create a separate scoring rubric for substitutes. The factors differ from the entrant rubric because substitutes compete across categories rather than within them. Standard factors include: (1) switching costs for the customer (financial cost, learning curve, data migration, habit change), (2) price-performance ratio of the substitute relative to your category, (3) functional equivalence (how well does the substitute satisfy the same customer need), (4) buyer propensity to switch (revealed by consumer market research, churn analysis, or conjoint data), (5) availability and accessibility of the substitute, and (6) trend momentum (is adoption of the substitute growing or shrinking). Score each factor 1-5 where 1 means the substitute poses a very low threat on that dimension and 5 means a very high threat.
Weight the factors based on your industry. In consumer markets, buyer propensity and price-performance typically dominate. In enterprise markets, switching costs and functional equivalence tend to carry more weight.
Tip: Use conjoint analysis data from your consumer market research to score buyer propensity objectively. If you lack conjoint data, churn destination data (where do customers go after canceling) is the next best proxy.
Step 6: Score each entrant and substitute
Work through your lists from Steps 2 and 3, scoring each entrant and substitute on every factor using the rubrics from Steps 4 and 5. , 'Scored 4 on capital requirements because Company X raised $85M Series C per Crunchbase, removing capital as a barrier'). This evidence discipline prevents scores from drifting toward gut feelings during group discussions. If you are scoring collaboratively with a team, have each person score independently first, then discuss disagreements.
Focus discussion on cases where scores differ by 2 or more points, as those disagreements usually reveal different assumptions about the data. Calculate the weighted composite score for each entrant and substitute by multiplying each factor score by its weight and summing.
Tip: Score independently before discussing as a group. When teams score collaboratively from the start, the most senior person's opinion anchors the room, and composite scores compress toward the middle, masking real threats.
Step 7: Build the threat matrix
Compile your scores into two matrices (one for entrants, one for substitutes) in a spreadsheet or structured table. Columns include: threat name, each factor score with evidence note, weighted composite score, estimated timeline to impact (months), and a brief narrative (2-3 sentences) explaining the overall threat picture. Sort each matrix by composite score descending. The top-ranked threats are your strategic priorities.
5 (low threat, revisit quarterly). This matrix is the primary artifact of this skill and the direct input into synthesizing Six Forces into strategic recommendations.
Tip: Include a 'confidence' column (high, medium, low) for each threat to flag where your evidence is thin. Low-confidence, high-score threats need research investment before strategic action.
Step 8: Validate with frontline intelligence
Before finalizing the matrix, validate your top-5 threats with people who have direct market contact: sales teams, customer success managers, channel partners, and industry analysts. Share the threat name and your composite score, then ask two questions: 'Does this match what you are hearing from customers and prospects?' and 'Is there anything we missed that should be on this list?' Frontline teams often detect entrants and substitutes months before they appear in databases, because customers mention them in calls and negotiations. Update your matrix with any new threats or adjusted scores. Document what changed and why, since this creates an audit trail that makes future updates faster and more trustworthy.
Tip: Frame validation conversations around specific customer quotes or anecdotes, not abstract threat scores. Sales reps respond to 'Have any prospects mentioned Company X?' far better than 'Do you agree with a 3.8 threat score?'
Step 9: Establish a monitoring cadence
A threat matrix is a snapshot, not a permanent truth. Set up a quarterly review cadence. At each review, re-score the top-10 threats using updated consumer market research, check whether any new entrants or substitutes have appeared, and archive threats that have either materialized (and are now addressed through the industry rivalry assessment) or faded (and can be dropped to a watch list). Assign an owner for each red-tier threat who is responsible for tracking signals between reviews.
Define the specific signals that would trigger an out-of-cycle review: a major funding round by a tracked entrant, a regulatory change lowering barriers, a sudden spike in customer churn to a substitute, or a public product launch announcement. Document these triggers in the matrix alongside each threat.
Tip: Set Google Alerts for each red-tier entrant company name and for each substitute product category. These automated signals cost nothing and often surface news within 24 hours of publication.
Examples
Example: B2B SaaS project management tool (mid-market)
A 200-person SaaS company offers project management software for 10-200 person teams in North America. They have $15M ARR and compete with well-known players like Asana, Monday.com, and Basecamp. The VP of Strategy wants to understand whether new entrants or substitutes threaten their position over the next 18 months. The team has access to a recent 500-respondent customer survey and Crunchbase data.
' They scan Crunchbase and find 8 startups that raised Series A or B rounds in the past 18 months targeting similar keywords. They also identify 3 adjacent incumbents (a CRM vendor, a communication platform, and a document collaboration tool) whose job postings and product roadmaps suggest PM feature expansion. For substitutes, the customer survey reveals that 28% of churned customers reverted to shared spreadsheets, 15% hired a dedicated project coordinator, and 12% switched to a Slack-based workflow without formal PM software. The team builds an entrant rubric with 6 factors (scale economies, capital, distribution, brand loyalty, regulatory, network effects) weighted toward brand loyalty (25%) and distribution access (25%) because mid-market buyers rely heavily on trusted brands and integration ecosystems.
The substitute rubric weights switching costs (30%) and buyer propensity (25%) highest. 1 (high threat) due to existing distribution through a massive sales force and low capital requirements since they can cross-sell. 6 because switching costs are near zero and 28% of churners already take this path. The team color-codes the CRM vendor and spreadsheet substitutes as red, assigns owners, and sets up quarterly re-scoring.
The matrix feeds directly into the Six Forces synthesis, where the VP uses it to justify investing in deeper integrations (raising switching costs) and a customer loyalty program (raising brand barriers).
Example: Direct-to-consumer meal kit brand
A DTC meal kit company with $40M annual revenue operates in the US market. They have seen customer acquisition costs rise 35% over the past year and suspect new entrants and substitutes are fragmenting demand. Their consumer market research team recently completed a 1,200-person conjoint analysis study on meal preparation preferences.
' Entrant identification surfaces 6 new meal kit startups (4 funded, 2 bootstrapped), plus 2 grocery chains launching their own meal kit lines using existing store infrastructure. Substitutes identified through the conjoint study include grocery delivery services with recipe suggestions (mentioned by 22% of respondents), restaurant meal prep subscriptions (18%), and simply eating out more frequently (14%). The entrant rubric weights distribution access (30%) and capital requirements (20%) most heavily because fulfillment logistics are the primary barrier in this category. 4 on entrant threat because they already have distribution, cold chain, and brand recognition, reducing capital requirements to near zero for the kit extension.
9 because switching costs are minimal (consumers already have grocery delivery apps) and the conjoint data shows that 22% of respondents rated the substitute as 'equally satisfying' for their underlying need. The team marks the grocery chain entrants and grocery-delivery substitute as red tier. The strategic response includes pursuing exclusive supplier relationships (raising costs for grocery chain entrants to replicate recipes) and deepening the 'cooking experience' brand positioning to differentiate from the transactional substitute of grocery delivery.
Example: Small fintech startup targeting underserved banking segment
A 30-person fintech startup offers mobile banking for gig workers in the US. They have $2M ARR and recently closed a Series A. The CEO needs to understand whether larger banks or other fintechs will crowd the space before the startup can reach scale. The team has limited budget for consumer market research but has access to 3 months of churn data and a 200-person survey of gig workers.
' Substitutes from the gig worker survey include staying with a traditional bank and just tolerating the friction (41%), using multiple cash apps for payments without a formal bank account (19%), and relying on employer platforms that offer built-in payments (15%). The entrant rubric weights regulatory barriers (25%) and network effects (20%) highest because banking licenses create hard barriers and gig-worker referral networks drive organic growth. 8 because it already has a license and massive capital, but its score is moderated by low network effects in the gig community (gig workers distrust large banks, per survey data). 0, making it the single largest threat, because switching costs are real (direct deposit changes, new account setup) and 41% of the addressable market already takes this path.
The CEO uses the matrix to prioritize reducing onboarding friction (attacking the substitute's advantage) and building community referral programs (strengthening the network effect barrier against entrants) in the next two quarters.
Example: Enterprise cybersecurity vendor in a consolidating market
A $200M ARR cybersecurity company provides endpoint protection for enterprises with 1,000+ employees. The CISO advisory board has flagged concerns about platform vendors (Microsoft, CrowdStrike) absorbing endpoint functionality into broader suites, and the strategy team needs a structured threat assessment. They have access to Gartner reports, 300-respondent buyer survey data, and a competitive intelligence subscription.
' Entrant identification focuses on platform consolidation: Microsoft Defender for Endpoint (already live but gaining share), two cloud-native startups with AI-driven detection (Series B and C funded), and a major networking vendor adding endpoint capabilities through acquisition. Substitutes include managed security service providers that replace in-house tools entirely (mentioned by 16% of survey respondents) and relying on operating system built-in security and accepting higher risk (8%, primarily at the lower end of the enterprise segment). The entrant rubric weights switching costs (25%), brand trust (20%), and regulatory compliance certifications (20%). 5 because it bundles endpoint protection with existing E5 licenses, eliminating incremental cost for customers who already pay for Microsoft 365.
Switching cost barriers are inverted: staying with the incumbent vendor is harder to justify than switching to a bundled solution. 3, meaningful for budget-constrained enterprises. The strategy team uses the red-tier Microsoft rating to justify accelerating product differentiation into advanced threat hunting and compliance automation features that Microsoft does not yet bundle. They also initiate a pricing restructuring to compete with the 'free with E5' bundling by demonstrating total cost of ownership savings through superior detection rates, supported by original benchmark data from their consumer market research on enterprise buyer priorities.
Best Practices
Score confidence independently in writing before any group discussion, because shared discussion anchors ratings upward and compresses the spread of scores. When scores converge artificially, you lose the ability to distinguish genuinely dangerous threats from moderate ones. If your team's scores rarely differ by more than one point, your process has an anchoring problem.
Separate entrant and substitute matrices completely, because the barrier dimensions differ and combining them obscures which defensive strategies apply. An entrant requires you to raise entry barriers (patents, scale, distribution lock-in). A substitute requires you to increase switching costs or redefine the customer need. Mixing the two leads to unfocused strategic responses.
Use at least three data sources per score to triangulate. Consumer market research (surveys, conjoint) reveals stated preferences, behavioral data (churn, trial rates) reveals actual behavior, and competitive intelligence (funding, patents, job postings) reveals intent. Any single source has predictable blind spots, and triangulation catches them before they distort your matrix.
Weight factors based on your specific industry, not a generic template. In a regulated industry, regulatory barriers might deserve 30% weight. In a consumer app market, network effects might deserve 30%. Using equal weights as a permanent default understates the forces that actually determine entry success in your market. Review weights annually or after a significant industry structural change.
Include behavioral and non-product substitutes in your analysis. A customer choosing to do nothing, hire a person, or revert to a manual process is a substitute. Consumer market research that only surveys software or product alternatives misses these behavioral substitutes, which often account for 20-40% of churn in B2B SaaS markets.
Date-stamp every evidence note and score. Consumer market research loses relevance quickly; a switching-cost score based on a survey from two years ago may not reflect current sentiment. When scores carry dates, reviewers can immediately see which ratings need refreshing, and quarterly updates become faster because you only re-research stale data.
Archive and version your matrices rather than overwriting them. Keeping historical snapshots lets you track whether threats are accelerating or decelerating over time. A threat that rose from 2.0 to 3.5 in two quarters is more urgent than a stable 3.5, and you can only see that trend if you preserved the earlier version.
Tie each red-tier threat to a specific strategic response before closing the assessment. A scored matrix without actions is an academic exercise. Even if the response is 'monitor more closely and revisit next quarter,' writing it down creates accountability and prevents the matrix from becoming shelf-ware.
Common Mistakes
Conflating new entrants with substitutes and lumping them into a single list
Correction
This happens because both forces involve external threats to incumbents, so they feel similar at a glance. The problem is that entrants and substitutes require fundamentally different defensive strategies: raising barriers to entry versus increasing switching costs. If you spot a single combined list during review, split it into two matrices with distinct scoring rubrics. Entrant factors focus on structural barriers (capital, regulation, scale).
Substitute factors focus on customer behavior (willingness to switch, functional equivalence, price sensitivity). Maintaining two matrices doubles the clarity and halves the risk of misallocated defensive investment.
Scoring barriers based on executive intuition rather than consumer market research data
Correction
This happens when teams rush the assessment or when leadership assumes they know the market well enough to skip the evidence step. The tell is a matrix where every evidence note says 'team consensus' rather than citing a survey result, churn figure, or funding record. Intuition-based scores systematically overestimate barriers (executives believe their moats are deeper than customers perceive them). Fix this by requiring at least one external data citation per score.
If a factor cannot be scored with evidence, mark it low-confidence and schedule targeted research before the next review.
Ignoring non-product substitutes like manual workarounds, hiring, or doing nothing
Correction
This occurs because analysts naturally search for product-shaped alternatives and forget that customers can satisfy the same need through behavior changes. In B2B markets especially, 'hire an intern to do it manually' or 'just use a spreadsheet' captures a significant share of would-be demand. You can catch this gap by including an open-ended question in consumer market research: 'If this product category ceased to exist tomorrow, what would you do?' Responses that describe behaviors rather than products are your missing substitutes. Add them to your substitute matrix and score them like any other alternative.
Treating the threat matrix as a one-time exercise rather than a living document
Correction
Teams often invest heavily in the initial assessment, then file the matrix and never update it. Within two quarters, funding rounds shift, new products launch, and customer preferences evolve, rendering stale scores misleading. The signal that this is happening is when strategic plans reference threat scores that are more than six months old. Prevent this by assigning an owner for each red-tier threat, setting calendar reminders for quarterly re-scoring, and defining out-of-cycle triggers (major funding event, regulatory change, churn spike) that force an immediate review.
Assigning equal weights to all factors permanently without adjusting for industry context
Correction
Equal weighting is a sensible default for a first pass, but leaving it in place permanently distorts your composite scores. In a market where network effects dominate (social platforms, marketplaces), regulatory barriers might deserve 5% weight while network effects deserve 30%. If you keep equal weights, a startup that clears the regulatory bar but cannot break network effects will be overscored as a threat. After your first assessment, review the historical record of successful and failed entries in your market.
Increase weights on the factors that most often predicted outcomes and decrease weights on factors that did not discriminate between successful and failed entrants.
Failing to validate the matrix with frontline teams before finalizing
Correction
Analysts who build the matrix from databases and survey data sometimes miss threats that sales teams encounter daily in competitive deals. The symptom is a finalized matrix that surprises a sales leader when presented. Add a validation step where you share the top-10 list with 3-5 frontline people and explicitly ask what is missing or mis-ranked. Frontline intelligence is qualitative and anecdotal, so it does not replace structured scoring, but it consistently surfaces blind spots that desk research misses, particularly bootstrapped entrants and word-of-mouth substitutes that do not appear in funding databases.
Other Skills in This Method
Selecting Tools and Templates for Six Forces Research
How to choose and configure market research tools, visualization software, and scoring templates to streamline and standardize a Six Forces analysis.
Mapping the Complementary Products Force
How to identify, evaluate, and analyze the sixth force—complementary products and services—that distinguishes the Six Forces Model from Porter's Five Forces.
Collecting Data for a Six Forces Analysis
How to design and execute a structured market research process—including surveys, secondary sources, and industry databases—to populate each of the six forces with reliable data.
Synthesizing Six Forces into Strategic Recommendations
How to combine findings from all six forces into a cohesive strategic positioning map that guides investment, partnership, and competitive strategy decisions.
Conducting an Industry Rivalry Assessment
How to systematically research and evaluate the intensity of competitive rivalry within an industry using both qualitative and quantitative market research methods.
Evaluating Buyer and Supplier Bargaining Power
How to gather primary and secondary market research data to assess the bargaining power of buyers and suppliers as distinct forces shaping industry profitability.
Frequently Asked Questions
How do I assess threats of new entrants when my industry has very few public funding records?
Shift your intelligence sources from funding databases to hiring patterns, patent filings, and conference participation. Job boards like LinkedIn and Indeed reveal companies hiring for roles in your market segment months before public announcements. Patent filings in relevant technology classes surface R&D investments. Industry conference exhibitor and speaker lists identify companies positioning themselves as players. Supplement these with consumer market research: ask your customers and prospects directly whether they have been approached by or evaluated any new vendors in the past 12 months.
How long should the initial threat assessment take for a typical mid-market company?
Plan for 3-5 hours of focused work spread over 1-2 weeks. The calendar spread matters because Steps 2 and 3 (identification) benefit from letting your subconscious process between sessions, and Step 8 (frontline validation) requires scheduling conversations with sales and success teams. If you already have recent consumer market research and competitive intelligence subscriptions, you can compress to the lower end. If you need to commission new survey data, add 2-3 weeks for fielding and analysis.
Should I assess entrant and substitute threats before or after evaluating buyer and supplier power?
The [Six Forces Model](/methods/six-forces-model) does not require a strict sequence, but most practitioners find it efficient to assess buyer and supplier power first because those analyses surface data you will reuse here. For instance, buyer power research reveals switching cost perceptions that directly feed your substitute scoring rubric. If you run entrant and substitute assessment in parallel with [evaluating buyer and supplier bargaining power](/skills/evaluating-buyer-and-supplier-power), share switching cost data between the two workstreams to avoid redundant research.
Why does my threat matrix keep showing every entrant as 'medium' threat with scores clustered around 3.0?
Score compression usually indicates one of two problems: either your rubric definitions lack sufficient granularity (the difference between a 2 and a 3 is ambiguous), or your team scored collaboratively and anchored on the first suggestion. Fix the rubric by writing specific, observable criteria for each level, such as 'Score 1 means less than $1M funding and no distribution partnerships. Score 5 means over $100M funding and existing access to 50%+ of target customers.' Fix the anchoring by having each scorer submit ratings independently before group discussion.
How do I incorporate consumer market research into entrant threat scoring when the entrant has not launched yet?
Use concept testing and willingness-to-switch survey questions. Describe the entrant's likely value proposition (based on their funding pitch, job postings, and patent filings) without naming the company, then ask your customer panel how likely they would be to evaluate such a product on a 1-5 scale, what price point would make them consider switching, and what features would need to be present. This gives you proxy data for the switching cost and buyer propensity factors in your entrant rubric even before the competitor has a live product.
What is the minimum sample size for consumer market research to make threat scores credible?
For B2C markets, aim for at least 300 respondents per segment to get statistically meaningful results for switching propensity and feature preference questions. For B2B markets where your total addressable market is smaller, 50-100 respondents from your ICP can be sufficient if the sample is well-targeted. The key is not just sample size but sample quality: respondents must be actual buyers or users in your market, not general population panels. If you cannot reach minimum sample sizes, supplement survey data with behavioral data (churn analysis, trial rates) and qualitative interviews (10-15 deep interviews can surface patterns that surveys miss).
How often should I update the threat matrix after the initial assessment?
Quarterly updates are the standard cadence for most industries. At each quarterly review, re-score the top-10 threats using any new consumer market research, funding announcements, or product launches that occurred since the last review. Between scheduled reviews, monitor for predefined triggers: a major funding round, a regulatory change, a spike in customer churn to a specific alternative, or a public product launch by a tracked entrant. Any trigger should prompt an out-of-cycle update to the affected rows in the matrix. Markets undergoing rapid disruption (AI, crypto) may need monthly reviews until the landscape stabilizes.