Internet brands such as Amazon.com, eBay, E*TRADE, and Yahoo created major disruptions in their respective markets. They changed forever how customers transact and acquire products. Time and again, I’ve seen senior management narrow their competitive view only to those companies selling their exact product through the same old channels. This is often a significant strategic miscalculation. I call it “competitive myopia.”
In my experience, companies rarely consider their full competitive array. I’ve seen only one example of a company talking about all its competitors. The reason was simple: Customers left them no choice. It was a high-involvement product in which even satisfied consumers used multiple suppliers and constantly tested new ones. Customers were always telling the company which competitors they were trying.
By not taking the consumer’s perspective into account, companies adopt an ostrich approach to marketing. It makes them vulnerable to competitive attacks from new and existing players with interesting new value propositions.
I once worked with a firm that only considered direct competitors in Internet and direct mail channels. Internally, no retailer was ever mentioned, despite the fact traditional brick-and-mortar chains had substantial market share. Consequently, the firm missed a significant competitor: Costco. Costco delivered immediate benefits against which this company couldn’t compete.
By not considering retailers, the company never developed effective potential competitive strategies to extend its relationship with its best customers, who often purchased from multiple suppliers. Talk about sticking your head in the sand!
Speaking with senior executives of the third-largest firm in an online information segment, I was struck by how adamantly they insisted they only compete against the dominant firm in their niche. Comparable public measurements show the top two players have a similar number of unique visitors, while the third trails by over 50 percent. Although all three extend existing businesses online, the second player defines delivery differently, enabling it to capture market share below the radar.
To combat competitive myopia, define your competition broadly. This doesn’t mean including every e-tailer. Rather, think strategically about your offering from the viewpoint of your customers, competitors, suppliers, and distributors.
From a strategic perspective, analyze your competition as outlined below.
Lay a Strategic Foundation by Answering Specific Questions
- Consumers. If you aren’t sure how customers would answer, get input through surveys or customer feedback.
- What are your customers’ perceived needs, and are they being met?
- How do customers view your offering? Where do they see your relative strengths and weaknesses?
- What do they see as close substitutes for your offering? Are the substitutes readily available to them? Who do your customers see as alternative suppliers of your product? How do your products, brand, and pricing compare? Remember these products or channels may differ from yours. For example, an avid book reader may be a heavy library user; but most booksellers don’t consider libraries competitors.
- Has consumer behavior changed in a way that affects your product or marketing? Has technology created new options for your customer?
- Market dynamics.
- How are your immediate target segment and the broader market growing or changing?
- Have you kept up with the latest trends, styles, and fads? How will they affect your company (e.g., if you target teens, their tastes change in short time spans)?
- Is your product format changing?
- Are there opportunities to enhance your offering, markets served, or increase profitability? Some firms whose primary product lines have high margins reject secondary offerings without the same high margins. This happens even though the profit margin is above average and sales are truly incremental.
- Who do you view as your competitors? Have you defined the market broadly enough without including everyone?
- How does your offering compare in terms of product, quality, brand, price, marketing, and other factors?
- Do your competitors use the same suppliers or distributors?
- What percentage of their business do you affect? Do they have excess capacity, causing them to look for new distribution outlets?
- How does the pricing you receive compare to their other customers? How does it contribute to their profitability?
Get Further Information on Competitors
- Download Alexa to compare your competitors.
- Use search engines to monitor competitors. Check relevant keywords on search engines to see which companies appear.
- Scan the media to see what’s said about your competitors in trade and general publications.
- Watch competitors’ activities and Web sites. Shop at them to understand their processes. Check their presentation, promotion, marketing, and pricing.
Develop a Competitive Analysis
- Compare the companies you uncover across the attributes relevant to your business, including pricing, product offering, markets served, and needs met. Map your competitive landscape to help guide strategy. I find a simple grid to map competitors to capabilities works best. This format allows you to easily spot gaps and opportunities.
- After compiling this information, look at your business drivers. If something pops, it may be an area current or potential competitors are considering.
Always think about and consider testing possible line extensions, new distribution channels, and target market opportunities. I use this type of competitive analysis to help companies refine their strategic approach by uncovering untapped opportunities. Since new approaches often run counter to existing and accepted business models, change may be difficult to sell to senior management. Don’t let that stop you. It won’t stop your competitors!
The only constant in marketing is change. It’s up to you to leverage marketplace dynamics to create new opportunities and avoid emerging threats to your business.
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