Lesson 21: Analyzing the Competition and Yourself

Analyzing the Competition and Yourself

You must have a plan that sees you exceed the competition, and you will need to take an honest look at your operation in order to do this. We can hide all kinds of things in an analysis to make things look better than they are. Be honest with yourself to protect the integrity of your business.

Some of the questions you will want to ask include:

• What are your advantages?
• What are your core competencies (the things you do well)?
• What are your weaknesses?
• Where are your shortcomings?
• What can you do to capitalize on your strengths?
• What can you do to exploit the competition’s weaknesses and shortcomings?

SWOT Analysis

We recommend that you use a SWOT analysis to address each question in the list above. SWOT stands for strengths, weaknesses, opportunities, and threats. It is a method of analyzing external factors (opportunities and threats) and internal factors (strengths and weaknesses) in a methodical way. (See Session Four for more information.) In addition to using SWOT analysis to answer the questions about your company, you will repeat the process to consider your competition.

Next Steps

Once you have gathered your information, there are several ideas that you can use to help lessen the impact of the competition. For example, perhaps you have eliminated barriers that the competition has not been able to minimize for themselves. If you have partnered with a great distributor and the competition is struggling to get their product out to stores, you have eliminated a barrier.

As you decide what makes your product stand out from the competition (your unique selling proposition, image, or brand), you can decide how to position your product. You also need to create a name for what you have, because names stick in people’s minds. For example, when Apple Computers was ready to evolve, their product was called a Macintosh. They have moved from fruit branding to making their items personal through their “i” branding and products like the iPod, iPhone, and iPad. We’ll discuss branding in more detail in Session Eleven.

Analyzing Distribution Channels

There are plenty of options for getting your product to your customer. Deciding which ones to use will have an impact on pricing, profit margins, servicing, and timing. There are plenty of options available, and in choosing yours you may need to consider what your goals are and how many layers of people are involved. 

In a product that is typically used by an individual purchasing in a retail store, the product can go from your production facility to a wholesaler, and then to smaller distributors to be sold to a retailer. Each step in the process has to produce a profit, just as it does when you sell a service. In a complex system, you may be surprised at how many people are involved. The flow below is common:

At each stop on the chain, the participant does something that adds value to the product (packages, labels, or advertises, for example) and earns a profit.

Creating a Marketing Plan

Your marketing research gets applied in a marketing plan based on the P’s of marketing: product, price, place, promotion, and packaging. All of these P’s influence the sixth P: the positioning of your product (how your product compares to similar products from other companies).

Product

Marketing your product includes differentiating it from other products in the marketplace. There are lots of ways to do this, and you will want to pick a few that make sense. Some ideas:

• Capabilities
• Style
• Warranties/guarantees
• Service
• Labeling
• Size

For example, when Lululemon was first established, they were looking for a name that was attention-grabbing and that people would remember. They also wanted something that had appeal around the globe. Their made-up word, with three l’s, helped them to stand out.

Price

Even a non-profit or not-for-profit company has to make a certain amount of money in order to continue. If you own a for-profit company, you’ve got to be making money. This means that no matter who you are, you need to understand every aspect of your business when establishing price. If you forget to allow for certain costs and sell the product at a loss, your stakeholders won’t stand for it.

On the other hand, some products are deliberately priced at a “deal” price (also known as a loss leader) to draw people in to the store where they will be sold other products. A car can be priced below cost, but by the time the extended warranty, roadside service, fabric protection, and chrome package are added, there is no loss for the company any longer.

Psychological pricing is what has stores using prices that end in 95 or 99 cents. The idea is that people will pay R39.99 for a product they won’t pay R40.00 for.

In a competitive market, you will see marketing strategies that will meet or beat a competitor’s price in order to gain (or regain) market share. If you pick up a flyer and see the phrase, “We will match any competitor’s advertised price and beat it by 5% on all our products,” you are witnessing meet or beat competition in action.

Price and quality are things that must always be considered in pricing services and non-tangible products. If you have a service and price it very cheaply, people may not value what you offer in terms of the knowledge and expertise that is required to develop that service.

Penetration refers to introductory pricing that is deliberately low in order to gain market share. The idea is to price products at a low per unit amount and then sell a high number of units with the objective of gaining recognition in the market.

Place

This is all about how you will distribute and provide your product. Your analysis of distribution channels will help you flesh out this part of your plan. Will you be a wholesaler, distribute products through a franchise, have brick and mortar retail outlets, or be an online-only store? You can also choose several methods to create a big presence.

Promotion

Promotion refers to the way that the market sees your product. It is very difficult to get shelf space in a retail store, so you have to decide how you will draw your potential purchasers’ attention. Pizza shops might send staff members to stand on the corner with a sandwich board describing this week’s deal. Cupcake stores might have someone dressed in a giant cupcake costume waving to passersby. Coupons, flyers, newsletters, and special deals are also part of a promotion strategy.

Public relations campaigns are another form of promotion. Internet marketing is another form of promotion that can use programming and keyword techniques to ensure that a search for products like yours will lead to your company’s website.

Packaging

The esthetic value of your packaging can draw a customer’s eye or can turn them away. Designers and marketing firms aim to create the best packaging possible to attract consumers or at least create some kind of reaction. In addition, items must also be packaged in a way that protects the contents. Cardboard boxes, protective materials (like Styrofoam), labeling, color, and appeal must all be considered to present your product appropriately and protect it from damage.