The competitive analysis is a summary of what might be pages (or even files) of information compiled from published and internal sources. Annual reports, newspaper articles, trade shows, salespeo- ple, government and trade association reports, and informal conver-
Figure 5.2 Segmentation Factors Demographic
Application/use of product
Benefits (possibly beyond the product itself)
Age, sex, race Income Family size Family life-cycle
stage Location Lifestyle
Frequency of purchase Size of purchase How product is used
Desired benefits of product Psychological benefits Service
Intensity of need
Industry (SIC or NAICS) Geographic location Company size Functional decision
maker Profitability Risk categories Application
Importance of purchase Volume
Frequency of purchase Performance
requirements Support service Desired features Service requirements
Type of Factor Consumer Business-to-Business
Product-Market
sations with customers can provide much of the necessary informa- tion. However, to analyze customer perceptions of the competitive strengths and weaknesses, some type of marketing research is neces- sary. (See Worksheet 5.2.)
Competitive intelligence is an important part of a product man- ager’s job. Part of the responsibility is to understand a product’s com- petition so that threats can be minimized. Start with the most easily obtained data, including published information. Financial reports, pub-
Figure 5.3 Segmentation by Key Buying Factors
Common purchase- decision criteria
Price Quality/features Delivery Installation Marketing/
engineering support Sales coverage Size and share
Average order size
Segment A
• “Category killers”
• Standard products
• Large purchases
• Strong price negotiators
• • • •
•
• • •
•
•
• •
$89 million 13%
$1,500 Industry: $15,000
Segment B
• Large customers
• Very price- sensitive
• Standard products
• Large purchases
• • •
• •
• •
•
• •
• •
$113.4 million 31%
$6,998 Industry: $5,000
Segment C
• Medium-size customers
• Modified standard products
• Medium-size lots
• Fairly price- sensitive
• •
• • •
• •
• •
• • • •
• • •
$69.3 million 30%
$2,345 Industry: $2,000
Segment D
• Any-size customer
• Nonstandard motors
• Small lots
• Price often secondary
•
• • • •
• •
• •
• • • • •
• • • • •
$66.6 million 25%
$923
Industry: $1,100
Key to importance of buying factors:
1 2 3 4 5
• • • • • • • • • • • • • • •
Least important Most important
Worksheet 5.2 Competitive Analysis
Division: Group: Product Line: Market:
Your
Product Product A Product B Product C Product D Sales volume
(units)
Sales revenues ($) Profit
Market share Target market(s) General product strategy Product differentiation Customer image General price strategy Average/list price General promotion strategy
General distribution strategy
Sales force size Sales force strengths
lished price lists, competitive ads and promotional materials, product spec sheets, and trade articles can provide a wealth of information if analyzed. The financial reports can provide clues about future strate- gies; the ads can suggest how the competitor is positioning the prod- uct; and the specification sheets can help in benchmarking.
General Information for Fy___
If the competition is a privately held company or a division of a larger company, subscribe to the local newspaper where the product is manufactured. Or subscribe to an on-line search service to monitor the main competitor.
In analyzing information, do not stop with the current, static data.
Look at the data over time to study trends and changes that might help develop assumptions about competitive marketing strategies.
Identifying possible competitive marketing strategies provides the information necessary to predict future actions or reactions to tacti- cal maneuvers.
Competitors and Competing Products
Maintaining your product’s competitive edge requires a continuous updating of competitor intelligence. For specific tips on gathering this type of information contact the Society of Competitive Intelligence Professionals at www.scip.org.
1. To which competitors have you lost business and from which have you gained business? (This is the competition from the customer’s perspective.)
2. Where (in what regions, applications, industries, etc.) is competition the strongest? Why?
3. What are the corporate competencies of the companies that own competing products? What is the relationship between the competencies and the products?
4. What are the list prices of the competing products? The actual prices?
5. What is the market perception of the competing products?
Awareness level? Customer loyalty?
6. Are there any specific product features that are “best-in-class,”
against which your product should be benchmarked?
7. Is the competing product a small percentage of its company’s business, or is it the main product of the company? How important are the sales to the competitor, and how much is the company willing to invest to protect these sales?
Worksheet 5.3 Performance History
Division: Group: Product Line: Market:
Industry volume (units) Your volume
Percentage of industry volume
Industry sales ($) Your sales
Percentage of industry sales Product sales as percentage
of company sales Cost of goods sold Gross margin Gross margin ratio
Controllable costs Promotion Field sales costs Other marketing costs Misc. controllable costs Total controllable costs Net profit contribution Quality index New product sales Target account sales Price index
Sales per salesperson Product / line strengths Product / line weaknesses
20___
Plan Actual
20___
Plan Actual
20___
Plan Actual
Performance History
The performance history looks at how well a product performed over time and relative to plan. It focuses attention on the market share and financial and other numeric or statistical indicators of performance.
In addition, answers to product mix questions like the ones listed below provide qualitative data that could highlight problems and opportuni- ties to be addressed in the marketing plan. (See Worksheet 5.3.)
Existing Customers
Although most of these questions were raised during the market analy- sis, revisiting them helps avoid overlooking opportunities or challenges that need to be addressed:
1. Is there a group of heavy users of the product(s)? What percentage of the purchasers do they constitute?
2. Is the primary target market growing, stable, or declining?
3. Under what circumstances do customers purchase the product(s)?
4. How and why is geographical coverage limited?
5. What percentage of customers are national accounts?
International?
6. Are most customers new or repeat buyers?
7. Are the customers the end-users? If not, what information is available about the end-user?
8. Are your customers progressive? Traditional? Passive?
9. How sensitive have customers been to past price changes?
10. Does the customer base consist of a few large customers or many small buyers?
The Product
Data on the sales and profitability of the product is most likely rou- tinely provided by your accounting department, but the analysis should go beyond quantitative statistics to include qualitative variables:
1. What does the name of the product imply? Can it be branded?
2. Which of the features are distinguishable by the customer?
3. For each feature, ask “So what?” to identify the benefits from the customer’s point of view.
4. Is the product supplied through intermediaries (e.g., dealers)? If so, the analysis of features/benefits should be handled in two steps.
5. If a numeric rating were given to the product quality (with 1 being low and 7 being high), what would that rating be?
Would the rating be the same from the customers?
6. What does each item in the product line contribute to sales and profits? To customer satisfaction? Can some of the products be pruned?
7. How does the product line rate of return compare with the company’s overall rate of return?
8. Is the product design conducive to an efficient manufacturing process?
9. What are the engineering costs for product development, product engineering, and manufacturing engineering?
10. What is the unit break-even sales for the product?
11. Are product guarantees competitive?
12. What would happen if the products were more standardized?
More customized?
13. What is the company’s attitude toward private labeling?
The Sales Force
Even though product managers typically have no authority over the salespeople, an examination of sales force effectiveness can highlight potential opportunities or problems that need to be addressed in the marketing plan:
1. Is the current sales force structure appropriate for achieving the product objectives?
2. Are the target customers being reached in the most effective manner?
3. How effective has the product/sales training been?
4. What sales tools do the salespeople actually use to sell the product?
5. Has the sales force been taught how to help customers visualize the benefits of the product?
Pricing
The “right” price covers all relevant costs, is positioned appropriately given the competitive value of the products, and takes into account customer perceptions. The product manager should assess whether company policies enable that to happen.
1. Have significant amounts of business been lost because of product prices?
2. Are errors frequently made in pricing?
3. What is the perceived cost of buying the product/service?
4. Is the company a price leader or a price follower?
5. What is the pricing policy of the company?
6. What types of discounts are offered? How does that compare with the competition?
The Promotional Campaigns
Promotional campaigns should be part of an integrated marketing com- munications effort, with the product manager pushing for a consistent message to customers.
1. What is the current image customers have of the product? Is it consistent with the advertising?
2. Did prior advertising strategies work? Why or why not?
3. What nonadvertising promotion has been tried? How well did it work?
The Distribution Strategy
The sales force and distributors may be the most important face-to-face contacts with customers. The effectiveness of these contacts cannot be left to chance and should be built into the marketing plan.
1. What is the company’s relationship with intermediaries (e.g., distributors, agents, retailers, etc.)?
2. What are the channels of distribution? What percentage of the product sales are through each type of intermediary?
3. What are distribution costs as a percentage of sales?
4. How does the company’s policy for distributor/retailer margins compare with those of the competition?
5. What has been the recent history of stock-outs, substitutes, and back orders?
Support Services
To complete the full cycle of customer value, installation and repair services should be considered in the marketing plan.
1. Has the value of repair services changed (due to cost increases, repair person efficiency, or any other reason)?
Trend Dynamics
An examination of trends and their dynamics relative to a product’s success is the final part of the background analysis. External trends have a direct bearing on market potential even though they are a less tangible part of the analysis. In answering the following questions, select major events that are likely to affect the company, the competi- tors, the product, and markets served by the company:
1. What technological changes are likely? How might they impact product sales within the next several years?
2. What have been the industry trends in the following areas:
• Product changes
• Price levels/policies
• Distribution changes
• Mergers/acquisitions/divestitures
• Power shifts in the channel
3. What leading indicators correspond with product sales?
4. What are the basic trends and changes in the economy?
5. Are there regulatory or political forces that could impact product sales? What are their trends?
6. What is the probability of the above trends occurring?
7. What impact do these have on the product(s)?