Though we've only a grainy film to guide us, it is likely that Neil Armstrong took a very deliberate approach before making his "one small step for man, and one giant leap for mankind" when he stepped onto the moon's surface in 1969.
For those in business, it's a parable that rings true today. Before entering a new market or taking on new competition, it's critical to be as deliberate as Armstrong was before taking that first stride. In my experience working with several B2B companies faced with this challenge, a deep understanding of the market and competition, along with an appreciation of the most appropriate revenue model, is essential to a company's tentative steps in uncharted territory.
According to research conducted by Crayon, nearly 94 percent of businesses planned to invest in competitive intelligence this year, a good sign that many companies understand the value of strategy before execution.
At its essence, a solid competitive analysis takes into account the strengths and weaknesses of competitive offerings. It identifies attractive opportunities where the competition is lagging, and an opening exists for your company.
At a minimum, your competitive analysis should address questions such as:
- What are the competitors' products and services?
- How are they perceived in the market? What do their customers think of them?
- What markets have they targeted?
- Are these competitors profitable, expanding, or scaling down?
- What are their marketing strategies? What is working well, and what is not?
- How do they do in terms of price, quality, value, name recognition, market share, customer service, partnerships, and more?
The indirect competition can have a significant impact but is often overlooked and should be addressed in your analysis.
Competitive analysis tools like Crayon, coupled with market and win/loss analysis, can provide a complete picture.
While a company’s product may be well suited for several markets, it is best to prioritize and focus on the most attractive ones. For example, while Tesla has taken the world by storm for its electric vehicles, its superior battery technologies have created a secondary market through its Tesla Powerwall, which is quickly becoming the gold standard for home energy storage.
In weighing your move to a new market, ask the following questions:
- How large is the market?
- What factors created the market, and what is driving present-day growth?
- What are the barriers to entry?
- How are you better than the competitors in these markets? Have others kept away or tried and failed? Why?
- Are your products well-suited to these markets? Will they need modification? How much?
- Are there any compliance directives of which you can avail?
- Will you access these markets with existing sales channels or need to create new ones?
- Are you adequately resourced to compete in this segment?
A personal example: While I worked on the executive team at a technology company, the FDA issued a new regulation for the pharma market. Though some might be apprehensive about a compliance directive, it offered a ready-made selling opportunity for us. Our product enabled pharma companies to meet these regulations quickly and provided them a strong ROI. As a result, we grew our business in the pharma market by 400 percent in one year!
Similar insights are required when considering a new or updated product in your existing marketplace. Did you know that in 2005, Cheetos introduced a flavored lip balm? Don’t worry -- I didn’t either. In fact, few people were interested in this cheesy approach to oral health, and the product quickly vanished.
To avoid leaving a bad taste in your customers’ mouths, here are some points to ponder:
- How are your products and competitive products perceived by the market(s)?
- How do your product features and benefits compare with your competitors’ products in order of importance?
- What features and benefits are unique to you?
- What gaps do customers see in your and competitors’ products?
- How well are you and the competition meeting current and evolving market needs?
- Will the buyers and the buying process be the same as for existing products? If different, is Sales on board?
At another company, a new acquisition’s product and primary market complemented its offering and market, but the buyers and buying process differed. The salespeople understood the value proposition, buyers, and buying process for the existing products very well. They were reluctant to establish relationships with the new buyers, even though they were often in the same organization as the current buyers. The parent company had to dedicate salespeople for the new product. The approach worked well but was more expensive and didn't leverage the planned-for synergies.
Of course, your offering, no matter how well-planned, may struggle mightily with customers and adversely impact your bottom line if the revenue model is not the right one, given the market and competition.
Your revenue model should incorporate the value proposition and fit with the business offering, buyers, buying process, and price point. There is a wide range of revenue models today. Subscription models are used today for software products like Salesforce as well as men’s shaving needs via the Dollar Shave Club. Adobe licenses its software, LinkedIn focuses on advertising revenues, eBay on transaction fees, Amazon and Walmart.com use markups, and Foursquare sells consumer location data to retailers.
The competitive revenue models and their reception in the marketplace provide excellent data points for developing your company’s revenue model.
Ready to step boldly into unexplored frontiers? Make today the day you pledge to ask the tough questions about your marketplace and competition and develop a winning business strategy that will launch you into a new orbit.
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