Competitive Analysis

A useful tool in understanding your business is in understanding your competitors.  More importantly, you must understand how your customers perceive you vs. how they perceive you competitors.  This can be done by evaluating which characteristics consumers value in your type of product and service for both you and your competitors.

I’m going to take a quick tangent and remind you about customer segmentation.  Different segments of customers will value different things.  For example, my commuter car is comfortable and safe but all I care is that it gets me where I’m going as inexpensively as possible since I put on a significant number of miles each week.  While reliability is important, I am more concerned about price and mileage.  I have at least 140,000 miles on it and will probably double that before I think about replacing it.  A friend of mine was driving back from a later event with her three small children in her car.  The car broke down completely unexpectedly.  This was back before everyone had a smartphone.  She was stuck in the middle of nowhere with her kids for a long time before someone pulled over and offered to call AAA for her.  Even then, she was nervous about the stranger in the middle of no where.  She values reliability over everything else.  There was no way that she was going to be in that situation again….. ever.  She has purchased a new car every three years, regardless of how well she may love her current one.  She also won’t consider an entry price point car because she perceives them as less reliable.  Two different segments.  Me, ok I’m cheap.  My friend, Ms. Reliable.

Back to competitive analysis.  Start by compiling a list of different functions, features and attributes about your product and your competitors’ products.  Keep in mind that you want to understand the consumer perception of the products.  For example, if product quality is a key differentiator and you could put your product up against a dozen competitors in a third party lab and prove without a hesitation that your product’s quality is superior but the consumers have a perception that the competitors are of higher quality than you, you lose that comparison.  Common attributes include performance, price, quality, convenience, reliability, etc.  Don’t forget that even if you are providing a product, the delivery process is part of the consumers’ perception.  Therefore, you may need to include things like knowledge sales associates, return policy, hours of operation, etc.

A survey works well for creating what some call an importance-performance analysis.  For each attribute for each product you want to test, you need to have the respondent provide two points of data.  First, how does this specific product deliver against the attribute.  For example, on a 7 point scale rate how product A satisfies each of the following attributes: price, delivery, reliability, quality, etc.  Additionally, you need to know how important each of those attributes are to the customer.  Back to the car’s, I would rank price as more important than reliability while my friend would be the reverse.  In this case, I suggest force ranking the attributes.  That is, if you have six attributes you are measuring, have the respondent rank them in importance.  Importance of feature can be an excellent method for segmenting your customers.

Once you graph the result, you can see which areas you are superior and inferior to your competitors AND you can tell how important each of those areas are.  Good rule of thumb, the more important the attribute, the more you want to be better than your competitor.  The less important the attribute, the less it matters.

Customer (Market) Segmentation

Customer segmentation, also called Market segmentation, is classifying your customers into different segments based on similarities or differences in their need.  To segment, you need to collect as much data as possible about how your customers are using your product, which features they value and where are they in relevant point in life statistics.

Relevant point in life statistics means understanding where customers of your product generally are in their life.  For example, if you are selling products to new mothers, the relevant point in life you are most interested in is that they just had a baby.  Additionally, you may consider segments as pregnant women, couples seeking adoption and new grandparents.

A simple example is a service that provides roofing to home owners.  In a town with 100,000 residents, there may only be 20,000 owner occupied residences.  That is one rather large segment.  Depending on the business, this segment can also be divided by neighborhood, considering that most homes within a neighborhood are not only of similar age but the owners are generally in similar income brackets.  Another large segment could be owners of rental homes.

Market Research and the role of the Marketing Manager

The Marketing Manager focuses the business on getting the right goods and services to the right people at the right place and time with the right price through the right combination of promotional activities.

In other words, the four P’s of marketing: Product, place, price and promotion.  If the Marketing Manager has absolute knowledge, aligning the company’s P’s with the customer’s needs is a very easy task.  Unfortunately, the four P’s are filled with uncertainty.  Uncertainty is why companies fail.

This is where marketing research comes in.  Through marketing research the Marketing Manager gains insights on the customer’s unsatisfied needs, when and where the customer will need the product or service, what the customer is willing to pay and the how the customer should be contacted.

Marketing research is all about understanding the customer.  Even researching competitors is about understanding how they are relating to their customers . . . . . and perhaps how you can steal their customers away.

Marketing research simply reduces the uncertainty inherent in the Marketing Manager’s role.  While it is impossible to completely remove uncertainty even improving decisions by as little as 10% can have a significant impact on the company’s profitability.  Imagine pricing your product at $60 instead of $50 with minimal loss in unit sales because you were able to better understand what your consumer was willing to pay.

The market is constantly changing.  Customers gain and lose interest.  Competitors move into and out the market.  Technology requires adjusts the customers needs.  This means the marketing research is a necessity at all times.  The Marketing Manager must continually gather new information and test old knowledge.

How big is the market?

The second question is, “how big is the market?”  If you have done the steps in determining if there is a market, you will already but a long way towards understanding how big the market is.  There are three directions one can take to understand the market size and I recommend doing at least two of them if market size is a potential issue for you.

The first method is simply researching existing data on the size of a market.  There are many public and private sources that estimate market size.  Be careful to not over estimate YOUR market size based on the overall market size.  For example, one company I spoke with made high end tile light switch plates.  Their market is not the entire light switch category, which is dominated by $1 and $2 dollar plastic plates.  Their portion of the market is just the high end switches.  You can slice a larger market estimate into more manageable estimates by combining these larger markets with one of the following methods.

The second method is determining consumer demand.  This can be done through a variety of means, although surveys and focus groups are the most common.  Here you are looking for the % of your target demographic/psychographic would be interested in purchasing your product within the next year.  Be sure to discount the results of either method as customers who are not expected to actually open their wallet are more interested in everything.  Extend the amount of people (discounted of course) by the amount they would purchase on an annual basis.

The third method is estimating competitor size.  Use all the information you gathered in determining if their is a market and extend by level of investment your competitors appear to put into your concept.

How do you know if there is a market for your product or service?

So the first question is, “Does a market exist?”  There are a number of ways to understand if a market even exists and get a rough idea of how big the market potential is for you.

The easiest first step is simply to google your idea.  Check the relevancy of results.  Are there competitors already providing your product or service.  Perhaps there are websites dedicated to enthusiasts already created.  Make a list of any relevant websites and run them through a traffic estimator such as WebCompanyInfo:  Run a number of different relevant websites through the estimator.  This will not only tell you the number of people who are looking for something like your product or service, it can tell you important information such as key words and geographic concentration of searches.

Next, run a key word search estimator such as AdWords.  This is another simple tool for understanding the rough volume of people searching for content related to your product or service as well as for understanding related consumer needs.  Run a variety of closely and less closely related term through the search estimator.  Pull the list of related key words from the traffic estimator and run each of those separately through the search estimator.

Another important step is to research your competitors.  Here you are looking for several things.  First, how many competitors are there.  From your first two steps you will likely have discovered a number of different either direct or indirect competitors.  (What’s an indirect competitor?  An indirect competitor is something different than the product but still gets the job done or minimizes the need for the product.  For example, at Samsonite, I used to say that cardboard boxes and garbage bags were indirect competitors for luggage.  That would usually start an argument, at least an impassioned discussion until I traveled with a number of Samsonite executives.  I made them wait a long time at the luggage carousel and I pointed out each box and bag a traveller used instead of luggage.  That was a long time ago and I don’t think garbage bags are so acceptable to TSA anymore).  Wander through each of their websites, noting where it appears they are trying to draw the consumer’s attention.  How significant is your concept relative to their entire market.  If they have a “sort by popularity” feature, use it.  Run a number of different searches and then sort each of them by popularity to see which products their customers seem to value.  Go to your competitor’s stores.  Go anywhere where their product may be sold.  Notice what adjacencies your competitors have selected to be around your product.  Finally, run each of your competitors through a tool like  Manta has estimates of the business size for most registered businesses.  While their estimates can be very wide, it will give you an idea of just how big your competitors are and your prior visits to their website and stores will give you an understanding of how important your concept is to each of them.

I haven’t forgotten the consumer.  You can run your concept through focus groups or a survey.  Even something as simple as asking your current customers related questions during their shopping experience.  You may chose to not ask the customers directly if your product is sensitive or will take you a long time to develop but you will be able to ask related questions.

Of course, there is an easier way.  Instead of developing a concept and then seeing of their is a market, work with your customers to understand their unmet needs and then develop a concept to service that need.  Seeking unmet needs should be part of your customer service.  It isn’t good enough to simply satisfy their current need.  Investigate what more you can do to make your customers’ lives easier at all times.

The three questions of marketing new business

1.) Does a market exist?

Basically, are there customers willing to pay for your product or service.  Most products and services are an extension of something that already exists, so you know that a market exists.  This question becomes even more important as if you are offering a disruptive product or service.

2.) How big is a market?

Basically, are there enough people who are willing to pay for your product to sustain your business.  You must also consider at this point how many competitors are there and how entrenched are they.  For example, if there is a million dollar business but there are already a dozen competitors, there will not be a lot of unmet demand.  Then your business will have to out perform enough of the established businesses to squeeze into the market.

3.) Is the market concentrated?

Basically, how spread out is the market.  It you are providing a service where you have to be present but your customers are spread across a 250 mile strip, it may not be a workable scenario.  With the power of the internet, it is significantly easier to service a  market that isn’t concentrated.  You may have to structure your business differently depending on how and where your customers are located.

Myth of Social Media

Recently the Wall Street Journal wrote about social media and a related Gallup Poll.

Basically is the survey shows that the majority of respondents claim to not be influenced by social media postings by brands. This is even true of millenials.  It appears that brands are using traditional methods in a new media space. They broadcast en mass hoping for a few listeners.

Simply put social media is not an easy path to instant new customers. It can have great potential but only if it is aligned with other channels of communication and reality. To make social media work for the company, brands should use it to enable their loyal customers to avocade on their behalf. No form of communication replaces relevant services excellently executed.

Is More Data Helpful?

Is More Data Helpful?.

good article on some of the limits of more data. I also add that the need for more data is frequently used to delay important decisions and that while people are more likely to act when you measure them, there are frequently unintended consequences. That is what people do when you measure them is not necessarily what you wanted them to do.


Top Five Tips To Effective Surveys

  • 1.) Have a specific objective
  • 2.) Do your homework
  • 3.) Survey your target customers
  • 4.) Run a sample test
  • 5.) Be open to the survey results

Have a specific objective

Clear and concise objectives lead to straight forward unambiguous surveys.  Evaluate all questions against the objective.  If a question does not fit the objective, it doesn’t belong in the survey.

Do your homework

Before you do a survey, understand all that is already known.  Have past surveys addressed similar objectives?  What does other data already available tell you?

Survey your target customers

Survey the segment of people you want to learn about.  If you are offering a service to renters, home owner opinions will not help you.  They may even lead you astray.  In certain situations, it may be helpful to see how your target customers’ opinions vary from the population in general.  If that is your situation, survey a larger population but be sure to be able to segment your target customers in the analysis.

Run a sample test

It is impossible to foresee exactly how people will respond to every question.  The best way to see if their responses are helpful is to run a small test or two.  First have a small group of your internal team take the survey to work out any obvious kinks.  Then run your survey through a small section of your target audience.  Perhaps 10% of your list or even just 100 people.

Be open to the survey results

It is easy to try to use the survey results to support your predetermined position.  Don’t.  Be open.  Listen to your respondents.  Analyze their responses without judgement.