In case you were wondering, this is not a blog about spying. This is how to gather intelligence on your competition without hiring James Bond to do it! Competitive intelligence is important because it helps businesses understand their competitive environment. From this you can analyze the opportunities and challenges this environment presents. If you do this well, you can win big, both at strategic and tactical levels.
Some organizations do not gather any intelligence on their competition. Other organizations underuse the insights they get from competitor analysis. Indeed it takes some wotk to get competitor data, and some analysis to create insights. The reward is when you start to put these insights to work. Do not forget to reward yourself.
I segment competitive analysis into three buckets.
The first bucket is general competitive intelligence. You can use this to better understand your market environment.
The second bucket focusses more on a particular market segment or customer class. You can use this to gather competitive intelligence in relation to customer needs.
The third bucket is for quantitative competitive analysis on product level.
Let’s take a look at the various ways of doing competitive intelligence.
General competitive intelligence: market analysis.
This is an analysis you do when you want to better understand your market environment. An important part of that is to understand the competitive dynamics in your market. There are many ways to gather intelligence on competitors. You can find data from public reports and websites. You can study their product portfolios. You can study the sales force and their customer base. The section below has some questions for you to start with. Evaluate your competitors as thorough as you can. This way you can take advantage of any opportunities they present, and handle any threats they pose.
Questions you can ask to get you started:
1. Against whom do we usually compete? Who are our most intense competitors. Who are the makers of substitute product?
2. Who are the potential competitive entrants? What are the barriers to entry? Is there anything that can be done to discourage them?
3. What are the competitors objectives and strategies? What is their level of commitment? What are exit barriers?
4. What are competitive cost structures?
5. What leverage points (eg our strategic weaknesses) could competitors exploit to enter the market or become more serious competitors?
Do you want a little more structure to this general analysis of competitive dynamics in your market? Try a SWOT analysis. This analysis looks at strengths, weaknesses, opportunities and threats. You analyze how to deal with strengths of your competitors. You plan to capitalize on their weaknesses. You organize to take advantage of any opportunities they present. Last but not least, you consider how to handle any threats they pose.
Conducting a SWOT on your competitors can be difficult, so consider asking the following questions:
- What does your competition do really well?
- What are they known for?
- What attracts customers to them?
- Why do customers ultimately end up purchasing from your competitors?
- What do your competitors’ customers regularly complain about?
- What problems have you experienced when you “shopped” with them?
- What products or services should they offer but don’t?
- Are your competitors doing anything that presents an opportunity for your small business?
- Have they stopped carrying any products?
- Have they changed any of their services?
- Is your competition doing anything that presents a threat to your business?
- Have they lowered their prices recently?
- Are they offering new products or services?
Competitive intelligence using customer needs
In this method you look at specific customer needs rather than at the whole market. You compare how well competition and you meet these needs. The method comes from the Design for Six Sigma approach to product development. You can use it to understand competition when developing a new product. You can of course also use it with existing products.
To make this method work, you have to have analysed the needs of the customers you are targeting. Let’s assume you sell scissors to hairdressers. Typical needs could be sharp scissors, scissors that stay sharp for long, durable scissors, and easy to handle scissors.
These customer needs are on the left (see figure).
You now select up to 4 of your fiercest competitors in this particular segment. In the example of the scissors, you log 4 competitors that also sell scissors. You log your own current solution and the max 4 competitors who have solutions on the top. Now you rate yourself and each of those competitors on each customer need. You can use a scale from 1 to 5, with 1 being poor, and 5 being excellent. If you want more granularity, use a scale from 1 to 10. In general though, 1 to 5 works well, as this is a qualitative analysis.
This completes the analysis. Where you score low (eg 1), and competitors score high (eg 4), you have to play catch-up. If you do this with a new product, it means you are only becoming as good as competition, so no real benefits.
When all scores are high, you and everybody else is meeting that customer need. There is not much opportunity for new products that address this particular customer need.
When all scores are low on a customer need, there is an opportunity. Develop a new product that scores higher on that need and outshine competition.
Competitive intelligence on requirements
This third method of competitive analysis is granular and quantitative. The principle is that you take a parameter that quantifies the customer need. This sounds abstract so let’s look at an example.
One of the customer needs for the scissors for hairdressers was durability. Let's assume there is a device that can measure scissor durability. The number of times a scissor opens and closes before it breaks, defines the durability. You use this device and find that your scissor breaks after 100.000 open and close cycles. You now measure the same for scissors of competitors. They break anywhere between 60.000 and 70.000 cycles - see the table below..
Not only can you claim better durability, you can also prove it with a test. It shows your durability is at least 30% better than competition!
This method gives you valuable quantitative insight. You can now also make quantitative, supportable claims about your product!
In this blog I gave you three ways to assess competition.
You can map the competitive landscape with simple Q&A or a SWOT analysis.
You can delve into customer needs to assess to what extent you and competitors are meeting those.
And you can quantify your own and your competitors strength by measuring requirements. Now there is nothing in your way to do some true competitive intelligence that would make James Bond jealous!