I play competitive squash. It’s a tough physical and mental sport, but the competition is unambiguous. The rules of the game are clear. In every moment of the game, I know whether I’m leading or not. In the end, there is no doubt who is the winner. Life is simple.
Business, however, isn’t that simple. We all face competition from direct, indirect, potential, future, and replacement competitors. They seek to acquire our customers, take away our prospects, and capture our market share, which could adversely affect our business, financial situation, and results of operations.
All markets are dynamic and characterized by rapid changes in technology, customer requirements, industry standards, and frequent new product introductions and improvements.
We should anticipate continued challenges from existing competitors, which in some cases are more established and enjoy greater resources than us. We need to also anticipate new entrants in our industry segments that could make our offerings obsolete in no time.
But how do you stay apprised of what is changing in your market and competitive landscape? Before answering this, let’s first investigate how competitors get ahead of us. In this article, we’ll look at some ways your competitors may have a competitive advantage over you, and then discuss what you should be doing to counter that. Let’s begin.
Types of Competitive Advantage Your Competitors Can Have Over You
Earlier in my career, I often used to wonder how larger companies managed to stay ahead of their competitors. With time and experience, I now have an answer to my question. Let me share what I’ve learned.
- Diverse product and service offerings
Larger companies usually have more diverse product and service offerings. They can leverage their relationships with existing distribution partners and customers based on other products. They can also incorporate functionality into existing products to gain business in a manner that discourages users from purchasing their competitors’ products or services. For example, by selling at zero or negative margins, product bundling or offering closed technology platforms.
- Broader product lines and market focus/greater resources
Larger competitors often have broader product lines and market focus and/or greater resources and may therefore not be as susceptible to economic downturns or other significant reductions in capital spending by customers. Similarly, certain companies may use marketing strategies that enable them to acquire users more rapidly or at a lower cost, or both.
- Significant investments in research and development
Larger companies that are making significant investments in research and development may introduce products that have greater performance or functionality, are easier to implement or use, or incorporate technological advances that their competitors have not yet developed or implemented, or may invent similar or superior products and technologies that compete with their competitors’ products/services.
Larger companies periodically and strategically acquire businesses that allow them to offer more competitive and comprehensive solutions. As a result of such acquisitions, these companies are able to accelerate the adoption of new technologies that better address customer needs, devote greater resources to bring these products and services to market, initiate or withstand substantial price competition, or develop and expand their product and service offerings more quickly than their competitors.
- Developing unique use cases for products and services
Large companies evolve use cases for their products and services that are outside the contemplation of their competitors, and may accordingly tap into customer bases that their competitors may not otherwise consider.
Now, imagine one of these larger companies is your competitor. They already have more resources than you, and they may also establish cooperative relationships among themselves or with third parties that may further enhance their resources. These competitive pressures in your market or your inability to compete effectively will result in fewer orders, reduced revenue and gross margins, and loss of market share.
Further, you may face increased competition due to changes to your competitors’ products and services, including modifications to their terms, conditions, and pricing that could materially have an adverse impact on your business, results of operations, and overall financial condition in future periods.
In addition, such large competitors may have entirely different pricing or distribution models. Increased competition could result in fewer customer orders, price reductions, reduced operating margins, and loss of market share.
If you are unable to sufficiently differentiate your products or services from those of your competitors, you may begin to see a decrease in demand for your products or services.
You may be thinking that substantial additional investments in research, development, marketing, and sales can help you respond to such competitive threats, but how would you know where to invest? Will it guarantee positive results and success over your competitors? Unless and until you’ve got actionable insights into your competitors’ continuous moves, this can be an uphill battle. This is where market and competitive intelligence (M&CI) comes into play.
Using Market and Competitive Intelligence to Counter Competitors’ Moves
Nothing encapsulates the absolute necessity of M&CI more than the above quote. Market and competitive intelligence can help you drive your strategy, aid you in planning for the future, and give your company a competitive edge. This requires mounting an operation and wringing key insights or data points from reluctant sources.
What should you know about each of your competitors?
Competitive intelligence isn’t just data collection. What you need is relevant business information on your market and competitors, out of which you’ll extract insights that can help you plan, strategize, and counteract your competitors’ continuous moves. You should look at these questions when conducting competitive intelligence:
- How does the competitor position itself in the market? For example, is it positioned on domain expertise, total cost of ownership, unsurpassed customer service?
- What are each competitor’s value proposition and differential advantage?
- What are the competitor’s strengths and weaknesses?
- Do they have a strong channel or direct sales team?
- Do they have a unique set of suppliers that enable them to be more competitive?
- Are they new to the market segment or do they have very well-established referenced customers?
- Do they have flexible or rigid terms and conditions?
- What is their reputation?
- Do they have strong advocates within the targeted segment/account?
- Are there impending events within your competitor’s organization that could help or hurt you?
- Are they going through a merger, an acquisition, a change in management?
Why Should You Use A Competitive Intelligence Tool?
You’ll get the answers to the above questions, and other relevant questions pertaining to your market and competitors only after careful collection, organization, and analysis of business data. This is practically impossible to do manually. The amount of data on the internet hit 40 zettabytes (one zettabyte is equal to a trillion gigabytes) in 2020, and it’s only increased since then. Trying to extract relevant data from this abyss manually is not recommended. Then there’s the problem of organizing and storing this information somewhere where it can be accessed by all the stakeholders. Unfortunately, in a large number of organizations, this valuable information lies unused in silos.
The way out of this conundrum is by using a market and competitive intelligence software or tool, which can automate data collection, and then organize and store the collected information in a centralized repository, and then distribute it to all the stakeholders in their preferred formats. Usage of an AI-powered market and competitive intelligence platform like Contify is recommended. Click here to watch a demo of Contify, the Market and Competitive Intelligence platform.