The most important reason to do competitive analysis is to find your differentiation. Every company must have an edge – must be different from competitors, in a way that matters to prospects. If your company does not meet customer needs better than other available choices, there is no reason for the customer to choose to buy from you.
Without a reason to buy from you, you have no business! Customers will not buy, and bankers will not lend. Bankers will lend only to those companies who seem to be different in a way that matters to customers when they are choosing a supplier.
So your company has to be different. It must enable customers to meet their needs better than if they bought from others. But there is also this other idea – “different in a way that matters.”
What Matters to Customers when Choosing Suppliers?
Figuring out what matters to customers – their buying criteria – starts with understanding who your target market is, and then understanding their thinking about what they need in your product. For example, when someone is thinking about buying an e-reader, their choices include Kindle or Nook or a tablet computer with an e-reader app, and perhaps a few other less well-known e-readers. How do they decide what to buy?
They think about (make a mental list of) what the e-reader must deliver. For example, they will want a glare-free display, color display, large library of books (maybe children’s books or textbooks?), a reliable unit with decent battery life, a reputable supplier, easy book ordering, protection if things go wrong, and of course an attractive price considering the value received. For some, other features may be more important than some of those listed above, such as text to speech (“read-to-me”).
Humans cannot assess products on dozens of factors. Five to seven is our limit, and maybe seven is too many! Thinking like a customer in your target market group, organize these buying criteria into priority order, and stop at 7 (or 5). You may want to group some items into a broader category such as “ease of use”. This becomes your test list.
Now you will want to talk to some of these target customers and see if you guessed right. Note: don’t ask current owners; they know too much! Ask people who tell you they are considering buying an e-reader but have not done so yet. Find them at locations where the units are sold, and strike up a conversation. Maybe you can find such research on the internet, or pay for your own survey or focus group.
Once you have a reasonable set of buying criteria in priority order, then you can assess how well the competitors meet each of these criteria. For those criteria where no one meets them well (no competitor is rated “high”), that is where you must be high – this will be your differentiation.
Summary of the Process
There is a logical train of thought here:
- You define your target market so you can think like them about their buying criteria.
- Then you assess competitors on those criteria and find your differentiation.
- It is something that matters to prospects because ideally it is one (or two) of their top 5 to 7 buying criteria.
- Having this differentiation, you have a reason to be in business!
- Next you must figure out a “positioning” slogan: how you want the customer to think of your company. It will relate to the differentiation, but expresses customer benefits in a catchy style.
- Once you have your positioning, you can develop your marketing program (the 4Ps), where every tactic must support this positioning.
Have you ever found an easier way to do competitive analysis and find your differentiation?
Tom Gray helps owners save and grow their companies. He is a management consultant focused on small business and telecom, a Certified Turnaround Professional (CTP), a Certified Business Development Advisor, and a Certified SCORE Mentor. He can be reached at 630-512-0406 or email@example.com. See www.tom-gray.com