Understanding the Design and Function of Competitive Intelligence

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Competitive intelligence is an ongoing process which identifies competitors and their actions to allow you to look at current and future market activities and respond accordingly. In a broad sense, competitive intelligence encompasses every aspect of what a business does. Within your business, this can include gathering the following information about you and your competitors:

  • Analyzing financial data
  • Addressing production and distribution capabilities
  • Assessing the corporate structure and the performance of the people filling each role
  • Evaluating marketing and competitive threats

Each of these elements benefits from different kinds of expertise. For our purposes, we will look at how to gather and apply competitive intelligence to direct marketing and strategic efforts. The process relies on collecting information and data to better understand the strengths and weaknesses of competitors. This includes understanding the similarities and differences among what other companies do in the market. Following the collection and analysis of competitive intelligence, you can create your action plan to capitalize on your knowledge of marketplace conditions.

This article will focus on the first half of the marketing and competitive threat equation: how to identify, gather, and utilize market intelligence. Strategic analyses and decisions should stem from this intelligence, but compiling and understanding the right data comes first. In particular, we will focus on the following areas:

I. How to gather competitive intelligence

II. How to asses the competitive market

III. How to organize competitive intelligence

IV. How data points yield insights into market trends

V. Avoiding Analysis Paralysis

VI. How to move forward on competitive intelligence

How To Gather Competitive Intelligence

Gathering this competitive intelligence requires an understanding of the tools that are used to collect it.  Companies gather competitive intelligence through both quantitative and qualitative methods. Qualitative methods are frequently used before quantitative and are often used to determine attitudes and feelings about a product, service, or industry.  Quantitative intelligence is based on collecting enough data to draw statistically significant observations about the market.  Analyzing market volume trends, sales trends, or market shares are examples of quantitative intelligence.  On the other hand, qualitative intelligence relies less on collecting vast quantities of information and more on observations and descriptions. Naturally, both are valuable – providing insights upon which organizations can act on in different ways.

 

Qualitative Intelligence Gathering

As mentioned above, qualitative intelligence typically involves understanding the behaviors, usages, and attitudes of the target market.  Therefore, more probing and in-depth research methods are used. Since the results are used to help guide the direction of quantitative intelligence, qualitative information is typically gathered before quantitative research. Some of the ways to gather qualitative competitive intelligence include the following:

  • Focus groups (In person or Online)
  • Dyads and triads
  • In-depth individual interviews
  • Observational research
  • Online communities

In all of these, the data come from descriptive and observational information with a skilled moderator or administrator and a relatively small number of respondents. Due to the dynamic and in-depth nature of this information, collecting massive amounts of qualitative data is unreasonable.  You will use it to focus on grouping and organizing the data into a coherent narrative. For example: Interviewing potential customers about previous shopping experiences provides individual stories and observations; grouping the information gleaned from dozens of these interviews can build a compelling story to apply to future marketing efforts.

Quantitative Intelligence Gathering

Some common examples of quantitative consumer research include the following:

  • Segmentation
  • Performance driver assessment
  • Mystery shopping
  • Attitude, awareness, and usage (AAU)
  • Equity assessment
  • In-market tracking
  • Positioning
  • Pricing impact
  • Concept testing
  • New product evaluation
  • Barriers research
  • Product optimization
  • Communications/Advertisement development and evaluation
  • Package testing

Each of the above examples has its own time and purpose for using it.  How you utilize these methods depends on your depth of knowledge about your product or service and your market position. The way you apply quantitative data will determine your success. Selecting the correct research method means identifying the challenge and matching the quantitative method to that challenge. Targeted selection and use remain key to building an effective competitive intelligence strategy.

To get the best results, gathering both quantitative and qualitative data goes hand in hand. It should almost never be an either/or approach to looking at the market. Instead, using the tools available in different ways can create a robust, holistic approach to understanding the competitive market.

How To Assess The Competitive Markets

Self-Assessment

Before you can identify your competitors, you need to be clear on the following question: In what industry do you operate? This is a stage of self-assessment that helps define the scope of a competent, competitive intelligence effort.  Questions such as the following set the stage for self-assessment:

  • What is the broad industry in which you operate?
  • Is your focus on products, services, or both?
  • What are your core functions?
  • What might be missing from your core function
  • Who will your product/service serve?

While identifying the industry represents the initial step in building out a competitive profile – understanding the industry focus must follow as a second step. A company focused on automotive service, for example, is in the same general industry as a company that sells automotive parts. But the two serve different customer bases; the former sells to those looking for someone to perform vehicle repairs and maintenance, while the latter sells to people who want to complete repairs themselves. While they may ultimately serve the same end customer (i.e. someone whose car needs maintenance), they will seldom compete directly.

Market Assessment

Once a self-assessment is complete, you should begin your market assessment. To start that process, identify your addressable market. If the available market means all customers for a particular good or service, the addressable market is the subset of that market that a company can realistically reach. Every company faces limits of some kind, whether tied to geographical reach, size, scale, available resources, time, etc. The types of customers also limit the scope of whom a company can reach; some customers maintain loyalty to particular brands or stores, while others focus on price points or features available. An auto parts store may have an available market of all drivers, but its addressable market will be those with the combination of vehicle knowledge and available time to perform their own repairs and maintenance.

Importantly, the addressable market is not a fixed target. As you implement your corporate strategy, it may grow and expand its reach over time, it may gain the capability to introduce a new product or service, or the demographics and overall population in an area could change. Part of the continuous process of assessing competitive intelligence involves flexibility and recalibration of the scope and definition of the field of play, not only for you, but also the market in which you compete.

Identifying Direct Competitors

The ongoing process of self-assessment and market assessment will allow you to reach a realistic sense of who your actual competitors are: those organizations that seek to sell similar products or services to the same set of customers. Market competition is not a zero-sum game; market differentiation allows companies to both find individual niches within a market and expand their market. Still, companies will always compete for individual customers, and those that contend most efficiently will thrive where other businesses fail. Identifying the relevant market competitors thus becomes critical to success.

How To Organize Competitive Intelligence

When you identify your addressable market and the relevant competitors within it, you can use this information to best address the areas that matter. An in-depth understanding of the market requires looking at multiple layers of what the market provides, as well as gaps in the market. The more you build out your competitive intelligence, the more effectively and thoroughly you can respond to their findings. Previously, we examined the steps necessary to build a thorough competitive analysis. More broadly, however, you can begin your competitive analyses with these avenues of investigation:

1) Start Big

For many, a starting point for gathering competitive intelligence is at the industry-wide level. While this goes beyond the aforementioned addressable market, it may give a more complete picture of what other companies are doing. Starting industry-wide can create value by identifying activities and trends that may not have reached a particular segment, but with which companies should expect to contend later. Identifying effective advertising or an appetite for other products in the broader category can lead to insights even without a direct correlation to the end product or service you provide. Casting a wide net can give you a head start by helping identify the seeds of potential future trends. For example, by looking at early adopters, companies can understand the purchase drivers, use cases, and possibly even demographics of a group of consumers that will ultimately buy a product – even if that product has yet to reach the mainstream.

2) Geography

Understanding trends in a geographical area provides immediate insight into how the market is likely to behave within that area. In a brick and mortar environment, prices tend to vary by geographic location, and understanding those metrics allows companies to balance profitability with competitiveness. Using trends trends of similar demographics across your other target markets can help you understand how consumers might behave in a new geographical area. Further, if you have the resources such as PRIZM, Mosaic, or VALS,  metropolitan regions can be sub-divided into neighborhood-level demographics, attitudes, and trends, rather than providing uniform geographic blocks to study as a whole. Successful selling in the right place depends on multiple factors and understanding how attitudes and beliefs differ across an area can make a tremendous difference. Marketing approaches that work well in one neighborhood can fall flat in another. Geographic competitive intelligence allows you to see where other businesses succeed and falter and provides actionable information to guide their own efforts.

3) Demographic

Demographic differences can also provide critical information. Consumers of particular generations, ethnicities, or genders respond differently to competitor products or services. This may lead to gaps your company can fill, or may help narrow the target market for your products or services. Your company can glean information from these differences to build a marketing strategy. Understanding who is purchasing which products/features and each demographic’s purchase drivers can lead to impactful messaging to target groups. Competitive intelligence that focuses on the not only the “who” of a market’s demographics, but also the “why” of each segment can serve as a meaningful driver for your efforts. You can use their research data to segment your customers into your  best demographic groups.

 4) Core Offerings

Finally, competitive intelligence that looks into the differences among products and services available in the market allows for direct comparisons between your core offerings and those available elsewhere. This can focus on customer satisfaction, product or service effectiveness, or a host of other kinds of information. This analysis of competitive features is addressed in depth in Element 3 in our article: Competitor Analysis: 5 Elements To Unraveling Your Competitor’s Strategy. Of course, the better you understand what the competition offers to the market, the better you can analyze and assess your own offerings.

Data available in the competitive intelligence arena can get as granular as you want to go. Each of these broader categories provides for layers of information that in turn break into hundreds of smaller areas of study. The key, as always, is to stay focused and collect relevant data that you have the resources to analyze and use to help further your business goals.

How Data Points Yield Insights into Market Trends

There are some common problems companies have when collecting data in different areas:

  • The sheer quantity of information might be overwhelming
  • The information may no longer be relevant by the time you start to analyze it
  • It may be an anomaly that does not represent the actual market conditions

These changes need not relate solely to the particular product, service, or geographical area in which you operate. Similar trends in other segments can inform the understanding of present circumstances. As with any comparison or effort to understand the future based on the past, this process will not be perfect. Still, taking the time to gather an appropriate amount of information and track its changes over time yields information about patterns that successful businesses effectively use for their own strategic planning.

Avoiding Analysis Paralysis

Today’s wealth of data expands daily and can make gathering competitive intelligence a full-time pursuit. Indeed, the process is never-ending, with market conditions changing all the time and competitors entering and exiting different markets. Successful companies must know when to collect additional information and when to act on the information at hand. There is a real danger of getting stuck in a rut.

Still, the value of in-depth analysis is just as real. Collecting the information above will help you you move beyond obvious information to more fully understand the market. This will help you gain an advantage over your competitors—so long as you use the insights you’ve uncovered. This requires a dual approach.

How To Move Forward on Competitive Intelligence

Identifying and analyzing the right competitive intelligence isn’t a cookie cutter process. Begin by looking within: define the company’s needs and wants, look at the market that currently exists, and determine what data will connect those needs to the market. The process and the information gathered must fit the organization’s specific needs. And this process itself can change over time; as a company grows or evolves, its needs change.

Once you begin the process, it should be a continual effort. To be effective, competitive intelligence can never be a one-shot proposition. Gather information over time and recalibrate as needed to ensure the information remains connected to what matters. And as the data develops, can create a set of strategies to respond to the evolving picture that data trends create.