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Profiling The Competition

It's so easy to do, and so useful, that it's amazing more companies don't do it.

If you are the manager of a successful football team drawn to play against a top European side in a vital match, how would you plan your campaign to win the match? Naturally you would ensure your men are at the peak of physical condition. But that alone would not be enough. You would need to know as much as possible about the opposing team - their strong and weak points; their characteristic attacking and defensive strategies; you would undoubtedly consider the skills and playing styles of each member of the team separately. You would now be in a position to plan your own game. Your players could be forewarned what to look out for; counter strategies could be worked out in advance. And how would you obtain all this background? You would take the trouble to watch one of their fixtures. You and your team would study videos of their matches. You would call managers of teams you know that have played them. You may go out of your way to get inside information from a player who has recently left the side. All these sources are easily accessible, perfectly legitimate and absolutely essential in order to obtain a competitive advantage.

In industry the competition is no less fierce than on the football field and yet the majority of companies act as if they are operating in isolation. Many can, if pushed, recall the names of their major competitors and tell an anecdote or two about them. A few may keep files in which they collect competitors' brochures and press cuttings. Still fewer however produce dossiers on the competition which are regularly updated and contain marketing implications and recommendations for action. Business is about beating the competition for an even larger slice of the cake. This does not mean to say communications with competitors should be strained and warlike; quite the reverse. Every effort should be made to understand the way the competition ticks and there is no better way of doing this than constant contact with them. (And it is surprising how willing to talk most competitors are!).

Profiling the competition plays an important role in four decision making areas: product planning, setting future strategies, pricing and acquisition policy.

Product planning. In determining the product range the marketing director needs a detailed knowledge of all competitors’ products and their prices in order to make comparisons and determine options for improvement. This must, of course, be undertaken in conjunction with the technical and production departments who will wish to say what they think can be produced efficiently. However, it is the marketing department that gives the guidelines on what will sell and for how much. Knowledge of the competition’s new products before they are launched strengthens every marketer's arm. This information need not be so difficult to obtain if the sales force is alerted to keep their eyes and ears open for news of products out on test.

Strategic planning. There is no point drawing up fancy marketing plans which show an increase in market share unless you can show where the extra share will come from. And you cannot make those judgements without understanding the strengths and weaknesses of the competition.

Pricing policy. This is an area where most companies have some knowledge of their competitors. There are, nevertheless problems in making comparisons if heavy discounting takes place or if no price lists are published. In these circumstances it is important to treat with caution the glib assertions of buyers that your prices are 10 per cent higher – they are very likely exaggerating the price differential for their own ends.

Acquisition policy. Market share can be built up the long hard way by fighting the competition or, alternatively, it can be bought through acquisitions. Building up a list of potential acquisitions needs more information than can be found in financial statements. The image of a competitor in the eyes of the users and the relationship it has with its staff and distributors could materially influence whether or not it is a suitable candidate for a take over.

You don't have to be devious to obtain information on the competition. Sources abound which are legitimate, cost little to tap and are usually easy to find – if you know where to look and what to look for.

A good starting point is the customer. The customer received calls from competitors - some will be suppliers, others may only be courting. Most buyers will discuss alternative suppliers believing it to be in their best interest to foster competition. Buyers are amongst the first to hear of new products, they have free access to competitors’ prices, they frequently have visited competitors’ works and may have seen their production lines in operation. Over a period of time buyers develop an image of the competition and form views on their strengths and weaknesses.

The biggest problem most managers face in tapping customers as a source of information is the fear of asking questions. Of course there is a right and a wrong way to pop the question. Representatives who have built up a good relationship with their customers need to use diplomacy when seeking data on competitors: a brash approach could offend. A formal market research survey is a tried and tested method but clearly it requires a programme of interviews and is therefore costly. A sales force that is asked to report regularly on critical questions would not perhaps produce the objectivity of an independent survey but it would provide free information and arm the representatives with information helpful in their selling effort.

Here are four questions about competitors reps should regularly ask their customers:

  • What are their current prices, discounts and offers?
  • What are their deliveries (promised and actual)?
  • What news is there of any new products or services?
  • How does the buyer rate the quality and design of their existing products?
  • Between companies in a similar industry there is much job mobility – especially amongst sales, marketing and general management. These people carry with them a wealth of information on competitors – and often they do not realise the depth or significance of their knowledge until it is drawn out of them. Ex-employees of competitors are very much a hit and miss source of data as they may have worked there many years ago and, even within short time scales, memories can prove unreliable. It is important, therefore, that whenever the opportunity presents itself to talk to an ex-employee, they are questioned and the data committed to file.

Customers and ex-employees are valuable sources but are likely to generate haphazard snippets and not always at the time which suits you. Sometimes it is necessary to formally set out to seek data on a competitor. In these circumstances different approached must be used.

General directories such as Kompass show companies' addresses, product ranges, approximate size (in number of employees) and management structure. There are, however, a hundred and one specialist directories which can be consulted to find the name of the parent and subsidiaries (Who Owns Whom), financial background (Dun & Bradstreet) or specific details on products (one of the many trade directories).

Having established the basics it now becomes necessary to measure the performances of the competition. This requires a visit by yourself or your agent (e.g. Extel) to Companies House where for the payment of a small search fee you can examine microfiches of any one of the limited liability companies registered in England and Wales.

Unless you require immense detail from the accounts (as would be necessary for an acquisition study) it is enough to restrict the data to a summary profile showing five years figures of total sales, exports, net profit and net assets. In this way a trend can be seen of all the key operating statistics and ratios. Because most companies derive their revenue from many sources, the total sales turnover- may be too broad to be of use. An estimate of sales in the particular field of interest may provide a measure which can be cross checked against those derived from other sources. It is always worthwhile studying a microfiche in some detail - especially the accounts of earlier years.

Financial accounts are an excellent guide to company performance but they suffer from being out of date (two years is not unusual) and they cannot provide that all important "feel" for the company. This can often be obtained from promotional material.

Brochures, catalogues and web sites are essential reading since they provide information on products and sometimes vital background data as well. A survey of the threading die market was helped considerably by a statement in a manufacturer's catalogue that said "our company has been manufacturing high speed steel and carbon steel threading die blanks for the past nine years, starting with a production of 250 per week to its present output of 8, 000 per week".

House journals are an incredibly useful source of inside information. They frequently refer to contracts which have been won and prospects for the future. A survey of the market for mechanics’ hand tools was made very much easier for me when I obtained a house journal from Snap-On Tools - the market leader - in which was published the turnover of everyone of their dealers for the year to date.

Getting hold of brochures and newsletters does not require the aid of a super sleuth. A straightforward request by letter to a company will generate a response nine times out of 10. These enquiries are, after all, usually dealt with by a junior clerk who is most unlikely to realise the request is from a competitor. Exhibitions provide an ideal opportunity to collect an armful of brochures but it cannot always be assumed an exhibition will come up just when you need it.

It is a constant surprise to see how companies are prepared to publish the most detailed and sometimes revealing information on their web sites. As companies vie one with another to fill their sites with data, vital information may be leaked to the business researcher who can make 1 + 1 = 3.

In a similar way a diligent researcher can piece together a wealth of data on a company by searching databases or hard copy of the trade press for news releases and articles which may contain background. The local papers should not be ignored, especially if the company is a large employer in a small town. A few hours spent in Yeovil library thumbing through back issues of the Western Gazette, once paid many dividends in a survey which set out to profile Westland Helicopters.

With so many inexpensive and easily available sources of data on the competition, there can be no excuse for ignorance.

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