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Beating the Competition using Competitive Intelligence techniques

A competitive intelligence process – which helps you to compete effectively – starts with identifying who those competitors are.

You may think that your competition consists only of companies that sell the same product or service as you. However, the definition of "competitor" is broader. It focuses on the underlying needs of the customer, rather than on a specific product or service. If other companies try to satisfy the same customer needs as you, those companies can be considered competitors, regardless of how different their products or services are to yours.

There are three general guidelines to help you identify your competitors:

  1.     adopt different perspectives when considering what types of companies to count as your competition
  2.     check your customers' perceptions of who your competitors are
  3.     prioritize key competitors that pose the greatest threat


You should also consider competition that comes from companies in the same category as yours and from those offering potential substitutes for your products or services.

Direct competitors are your biggest source of competition because they sell the same – or similar – products or services as you.

Competition could emerge from companies whose products or services fall into the same category as your own. Because a category is broader than just a single product or service, you'll probably have more category competitors than direct competitors.

Substitute competitors offer products that satisfy the same customer need that you're trying to fulfill, but through products or services that are different to yours.

Customer budgets can also act as a competitive force – especially when customers have limited financial resources. In this case, your competition can come from unrelated products.

You may face competition as a result of what competitors' organizations can offer customers over and above specific products or services. Customers may also favor a competing organization if they have a long-standing and trusting relationship with that organization.


Customer perceptions

Your customers' perceptions are a major force that shape their purchasing decisions. Knowing who your customers consider your competitors to be can help you determine your customers' price sensitivity.

Customers have their own perceptions about your company, regardless of how you rate your market position. If they regard you as a low-price company, they'll compare your products to other low-price products. And if they consider your products or services to be more expensive or exclusive, they'll compare your products with other high-end products.

If you deal in consumer products, you can use consumer data to help you determine who customers perceive as your competitors. Consumer data includes demographics information about customers. You can purchase this type of data from organizations that monitor consumer behavior.

You can also research customer perceptions by conducting focus groups and customer interviews, as well as having discussions with your own sales staff.

Using a focus group involves gathering a small group of customers and inviting them to discuss various aspects related to your product or service – including their perception of who your competitors are and how you fit into the market. Typically, a professional moderator prompts and manages the discussion, and the marketing staff observe. Focus groups can provide insights into the concerns, needs, and motivations of customers.

You can conduct personal interviews with buyers or customers, focusing on their perceptions of your organization's position in the market and that of your competitors.

You can ask frontline sales staff or customer relationship managers about their experiences with customers. Because these individuals interact with customers every day, they can provide valuable insights into customer perceptions, including who customers perceive as your competitors.


Prioritizing competitors

It's not feasible to keep a close watch on all your competitors. You need to prioritize competitors based on the level of threat they represent. It can help to categorize competitors according to the level of monitoring they'll need.

You'll likely need to monitor certain competitors very closely, and study others only periodically. You may also earmark potential competitors, choosing to monitor them only if they enter your market.

When categorizing your competitors, you should consider all types of competitors – not just direct competitors. When necessary, move competitors to different categories, add new competitors, and remove those who are no longer in the market.

You can use a number of methods to help you identify your most important competitors. You can determine these competitors based on industry, market – or customer need being serviced – or business strategy.

In the industry method, you consider only direct competitors. Limiting your range to such a specific type of competitor is valuable because your biggest competitors are often those that offer the same or similar products or services as you.

In the market method, your guiding criterion is customer need. Your main competitors include all companies whose products or services fulfill the same customer need that you're trying to fulfill. This method is useful because it broadens your perspective of competitors, allowing you to pick up potential threats that may otherwise escape your attention.

The strategic grouping method is complex because it deals with your competitors' business strategies, which aren't always easy to figure out. In this method, you identify your main competitors as companies that apply the same business strategy as you. Like the market method, this method is useful because it helps you to pick up competitors that you may otherwise overlook.

The first step in competitive intelligence is identifying who your competitors are. You should adopt a very broad perspective, taking note of direct competitors, category competitors, and those offering potential substitutes for your products or services.

Another guideline is to check your customers' perceptions of who your competitors are, which can be done by acquiring consumer data, conducting focus groups or customer interviews, and discussing matters with your sales staff. You should also prioritize competitors according to the level of monitoring they require. You can identify your most important competitors based on industry, the market, or their business strategies.

Getting ahead of the curve using competitor Information

The competitive intelligence process culminates with the analysis of the information gathered in the previous steps. This information may include such things as the characteristics of the companies and their organizational needs and strategies, financial data, expansion records, performance statistics, and future plans. Your analysis will enable you to use this information when developing competitive marketing strategies for your own company.

A potential problem with a competitive intelligence process is that it can generate a huge volume of data, but little useable information. Reams of detailed data about your company's competitors won't be helpful if there's little way to compare the competitors or make sense of what the data implies. This is why it's important to analyze the data. Doing this involves extracting particular information, structuring it, and making sense of it.

You can structure a competitor analysis using three main steps. You can compare your competitors to one another and to your own company, you can use particular techniques to help determine the competitors' next moves, and you can create competitor profiles.

It's useful to compare your competitors with one another to determine their relative positions in the market. You can do this by creating a positioning map, and by comparing the competitors' strengths and weaknesses.

You can create a positioning map that plots which market segment each competitor is in and what consumers they are mainly aiming their products and services at. This will give you a better idea of who your direct competitors are.

Strengths and weaknesses will differ between competitors. One way to make it easier to compare competitors' strengths and weaknesses is to use a table. You can then assign scores to each of the companies in a particular market segment, to indicate their relative strengths in particular areas.

As well as comparing competitors, it's useful to determine what your competitors' next moves may be, based on an analysis of their previous behavior and strategies. Anticipating what each competitor is likely to do next and how it's likely to react to particular situations can help you keep your company one step ahead. Techniques you can use to establish competitors' likely actions include role-playing and using a matrix.

To use role-playing to get an idea of what a competitor might do, you first study the competitor's previous behavior and identify any patterns. Then you can assign a team to play the role of the competitor in a specific scenario. The members of the team attempt to adopt the competitor's perspective and typical approach, reacting to the fictional situation and making business decisions as if they were members of the competing company.

You can use a matrix to categorize competitors according to how they typically react to competition. You might use a matrix to mark which companies typically react aggressively, those that are slower to react, and those likely to imitate any deals or promotions that your company initiates. This can help you determine which companies are likely to pose the biggest threats to your company's initiatives.

The third way of analyzing information about your competitors is to create competitor profiles. A competitor profile can be as detailed or as simple as you like. It can be kept and constantly updated so that managers can refer to it whenever they need to analyze competitors' likely responses to particular business decisions.

Typically, a competitor profile should include concise descriptions, outline key areas, and emphasize distinguishing aspects of a competitor.

A competitor profile should contain concise descriptions so that it's easy to review relevant information about the competitor at any point. You can choose what information to include based on your needs.

You should outline the key areas where a competitor's strengths and strategies lie. This can alert you to areas where your company needs to develop if it's to surpass the competition, and areas that shouldn't be the basis for its competitive marketing strategies.

You should highlight the aspects of each competitor that distinguish it from other companies. These distinguishing factors are usually potential sources of competitive advantage.

After identifying competitors and gathering information about them, you need to analyze the information. This involves extracting information that's relevant, structuring it, and interpreting it. You can then use the information to inform your company's competitive marketing strategies. To analyze competitor information, you can compare competitors, use specific techniques to determine their likely next moves, and create competitor profiles.

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