Once you’ve gathered all of the competitive data you have been able to locate, it’s analysis time. You should analyze to determine product information, market share, marketing strategies, and to identify your competition’s strengths and weaknesses.
You should know from your sales staff and customer feedback what product features and benefits are most important to your customers and potential customers. A product’s or service’s competitive position is largely determined by how well it is differentiated from its competition and by its price.
Here's how to go about a product evaluation:
Start with a List
Start by making a list of product features and benefits in order of importance, and prepare a table to show whether or not each of your competitors fulfill them.
Indicate with a check mark which of your competitors has which features and benefits. Features are fairly straightforward, either a product has it or it doesn’t. Benefits, on the other hand, are not as simple and should only be recorded based on customer feedback.
Now, use this table to evaluate your competition’s product or service.
How does your product compare to your closest competitor’s?
What features and benefits are unique to your product? To theirs?
The more unique features and benefits your product has, the stronger your market position will be.
Evaluate your competitor’s price. If your price for a similar product is higher than your competitor’s, then your market position is weaker; and if it’s lower, then your competitive position is better. As a side note: look for trends in pricing rather than momentary rises and falls.
Other Factors to Consider
Customer preference of products is only part of the analysis. Some other factors to consider:
- Financial resources — Are they able to withstand financial setbacks? How are they funding new product development and improvement?
- Operational efficiencies — Are they able to save time and cost with clever production and delivery techniques?
- Product line breadth — How easily can they increase revenues by selling related products?
- Strategic partnerships — What kinds of relationships do they have with other companies in terms of product development, promotion or add-on sales?
- Company morale/personnel — What is the motivation, commitment and productivity level of the employees?
The most widely used measure of sales performance is market share. A competitor may not provide the best product or service; however, if they generate a significant amount of sales to the market, they may:
Define the standards for a particular product or service.
Influence the popular perception of the product or service.
Devote resources to maintaining their market share.
To determine your company’s market share on a percentage basis, the following formula should be used:
Current Market Share = Company sales / Industry sales
You should then compute each of your competitors’ market shares.
Competitive Objectives and Strategies
For each competitor in your analysis, you should try to identify what their market objectives are and determine what types of strategies they are using to achieve them.
Are your competitors trying:
To maintain or increase market share?
To maximize short-term or long-term profits?
To introduce technologically improved products into your market?
To establish themselves as the market leaders?
To protect their market share under attack by strong competition?
To develop new markets for existing products?
Once you have identified what your competitors are trying to achieve, you will need to determine what type of strategy they have employed so you can eventually counteract with a strategy of your own. Some possible strategies your competitor’s may be employing are:
Reducing their prices.
Advertising in new publications, or advertising more frequently.
Buying out a competitor to increase market share and customer base.
Improving a product with a new innovation.
Identify the Competitions Strengths and Weaknesses
In order to develop effective competitive strategies, you need to make a realistic assessment of your competitors’ strengths and weaknesses, as viewed by the market.
You need to ask yourself what each of your competitors do very well, better than your own company? Then, ask yourself in what areas are each of your competitors weak. You should construct a simple chart that summarizes this information.
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Determine Your Competitive Position in the Marketplace
By now it should be fairly clear to you if you are a: market leader, one of several followers, or new to your marketplace. Once you have identified and analyzed your competition, and understand your competitive position, you are ready to do the following:
Identify and discuss key areas of competitive advantage and disadvantage. Review the competitive environment for your product or service. Comment on both similar and substitute products or services.
Summarize the major problems and opportunities facing your firm which may require action. Issues which should be considered include types of market penetration, distribution coverage, product line needs, price revisions and/or cost reductions.
Integrate your analysis of the competition with demographic analysis of your market to develop and implement a marketing strategy that will strengthen your market position.
What Means are Available to Limit and Control the Competition?
Now that you understand your position, how can you limit and control your competition?
To start, marketers of different brands of products will often pursue a particular market segment. Segmentation allows you to focus attempts to limit and control the competition on a smaller target. There are however, a broad range of strategies a business can employ in a competitive environment — from price changing and new packaging to improving customer service and new product development.
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Remember, in order to crush the competition, you must first know the competition!
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