IF YOU ASK any business executive to name a few direct competitors, the chances are they will rattle off at least three or four with no trouble at all. But then ask the same person what differentiates their company from the competition and the answer will usually be far less definite.
In reply, you may get an abbreviated version of a standard sales pitch, or a few improvised thoughts inspired by half-remembered figures or a couple of points repeated from a recent management pep talk. The answer, though, will almost certainly contain a large element of wishful thinking based on “what we like to believe”, and not so many verifiable facts that stand up to further scrutiny.
This happens because while companies perform all kinds of surveys and detailed analysis to understand their customers, they frequently make only perfunctory efforts to find out more about the competition.
What results is a situation where companies operate in a partial vacuum; perceiving potential threats too late and knowing less than their clients do about what the competition is up to.
Whatever the history or however close the relationship, customers will always judge your business by how well you compare to the competition. Their assessment of product, service, value for money and everything else depends not on what you say or what you have done in the past, but on how you shape up right now. To come out ahead, it is essential to keep track of your rivals, while remembering that long-term success is built on attention to detail and the knowledge that nothing ever stands still for long.
To do things properly, you will need to gather, organise, analyse and act on information about direct, indirect and potential competitors. This inevitably entails a considerable amount of work, but there are a number of good reasons for committing to it, namely:
- You will be able to adjust business and marketing strategies more quickly to suit changing circumstances
- It will prove easier to pre-empt actions and initiatives that might otherwise cause you to lose key clients or revenue
- There will be greater scope to learn from the successes and the mistakes of others and, thereby, avoid some unforeseen pitfalls
- It will ensure you maintain an approach to your business that focuses on customer needs and keeps pace with market changes
- You will be able to benchmark your own business and measure progress by monitoring each competitor’s sales activities and advantages
It is also vital to realise that the essence of competitive analysis is not about studying historical data, collecting annual reports or presenting last year’s market shares in colourful pie charts. The real purpose is to sharpen your thinking and develop a mentality that constantly questions long-held assumptions and naturally identifies each competitor’s comparative strengths and weaknesses.
This, of course, underpins the ability to anticipate change, shape strategy, outthink, outwit and survive in the world of business. Initially, one of the best ways to gain insights into your main competitors is by analysing your points of parity, and points of difference.
Points of parity
Broadly speaking, these are elements essential to the business, which most or all of your competitors also have. In other words, they are not unique attributes and not expected to be.
Enterprises within the same general band in any industry will have numerous points of parity, and the range is likely to shift and expand continuously. For example, in the financial services sector Citigroup and HSBC both have a recognised brand, global reach and advanced technology infrastructure. In the automotive industry, Honda and Toyota offer not just cars in the showroom, but also strong after-sales support. And customers of Microsoft, SAP or Oracle automatically assume that what they buy will offer security, reliability and scalability.
While the points of parity offer limited chance to differentiate, they cannot be ignored. On the contrary, they soon come to represent a required standard or a basic minimum, and failing to deliver will crucially undermine the likelihood of success. Thus, any luxury car is now expected to have air conditioning, airbags, leather seats and GPS. Without that – and indeed much more – a manufacturer cannot even claim to be part of that market. Besides features needed just to be in a certain category, companies must also adjust whenever a direct competitor raises the bar.
This has the effect of creating new customer expectations that become the norm. For instance, if a beverage company introduces a new fruit drink that proves to be a hit, others will be more or less obliged to follow suit. Having this “me too” product may not have been part of their grand plan, but it becomes necessary in order to maintain the overall points of parity.
In such cases, it is best to assume the customer’s market instincts are at least as good as yours. It is easy to downplay a competitor’s initiatives, making them out to be of little value or substance, but the customer is the final arbiter and will ultimately determine who comes out ahead.
Clearly, matching the competition in all the usual areas is just a starting point. If a business is to thrive, it must also consciously develop clearly distinct features. Some of these come about, in a sense, without even trying. Boards and management teams approach opportunities in their own way. Availability of funds may influence decisions. And partnerships can dictate which marketing strategies are pursued. All that leads to:
Points of difference
Lasting success in business requires that you stand out sufficiently from the competition and that customers know where you excel. Remember, though, that for every positive difference you claim for yourself, there might be a corresponding negative distinction noticed by clients and exploited by rivals. So, while you are stressing high-quality products, they may be seeing exorbitant prices or patchy follow-up service.
Logically, the way forward is to focus on your positives, while anticipating the possible negatives, thus forestalling typical criticisms and, ideally, making them appear like points of parity.
When deciding on, or reviewing, your company’s key points of difference, it helps to ask yourself a series of questions to test their merit. These might include what the presumed difference means to the customer; whether you can consistently deliver; how it will affect costs and pricing; whether it is truly distinctive; and what may happen to other parts of the business.
If you are unsure about such things, then it is better to pause, think again and find a course that allows you to differentiate your business or product more effectively.
As examples of companies with clear points of difference, consider the reputation for service of Singapore Airlines, the engineering of a BMW, Wal-Mart’s supply chain, and the sheer inventiveness of Apple.
The companies stand out because they can offer something desirable, deliverable, relevant, distinctive and, in most cases, which customers believe is better than the competition. In any industry or product category, there is really no limit on how or where you can establish points of difference. The important thing, though, is to focus on developing and explaining real differences that people will notice and remember. Good marketing can play a part in this – just consider how Starbucks goes to great lengths to highlight the quality of its coffee beans – but customers are astute enough to see what really makes a difference and will choose accordingly.