On this page you’ll find information about:
- Why your biggest competitors are not necessarily the companies that appear to be
- How to discover your true competitors and outsmart them
- How to quantify the impact of each competitor
Recap: On the SMARTech Journey so far…
- The Lifecycle of the Marketplace determines the volume of potential customers and the way to approach them.
- The cost of customer acquisition is currently rising because customers control the buying process. This is the reason why SMARTech Convergence aims to eliminate as many variables in customer acquisition as possible.
- To reduce customer acquisition costs, companies can identify specific geographic locations where the marketplace is expanding. This is an opportunity to attract customers who are most receptive and most aligned with the company’s value proposition.
Why evaluate the Competitive Forces?
Competition can sometimes have a positive impact on the business because it drives innovation and it challenges companies to continuously delight their customers by outperforming their competitors.
While a healthy amount of competitors can be somewhat beneficial, Competitive Forces certainly create a negative impact on the company’s bottom line and they need to be considered when forming a business strategy. Competitors raise the cost to acquire customers, they drive up the cost of marketing and they drive down the margin on sales.
The problem that businesses face today is that the Competitive Forces have a larger negative effect than ever before. As technology is evolving and customers are leveraging the Internet to make their own buying decisions, companies are spreading themselves too thin to cover all geographic locations, devices, platforms, etc. Marketing budgets are inflating to be able to outpace all competitors on a global scale and, unfortunately for most companies, this doesn’t translate to business growth.
Competing with all companies on the marketplace can be too expensive, ineffective and unnecessary.
That is why, within the boundaries of the SMARTech Convergence methodology, we identify the Competitive Forces that are truly a threat to the success of your organization.
Your true competitors
At Step 2 of the SMARTech Journey, we mentioned that the expansion, stagnation or contraction of a marketplace rarely happens at the same speed globally—it happens locally. Companies can take advantage of this fact and focus on specific market segments where awareness is growing and customers are aligned with the company’s value proposition. As a result, these organizations can drive down the blended cost of customer acquisition because they are only investing in areas where it makes most business sense to invest.
The same approach can be used to fight the competition cost-effectively.
When following the pathway to SMARTech Convergence, your company examines the Competitive Forces within the specific sub-markets that are most profitable or potentially profitable and it identifies the competitors that can realistically take away your market share.
This exercise reveals your company’s true competitors. For example, it might turn out that the biggest company on the marketplace, “the 800-lbs gorilla”, poses no significant threat while the much smaller company, “the 300-lbs gorilla”, is silently taking a large piece of your company’s sales in a specific sub-market. In that case, investing all resources in fighting the “the 800-lbs gorilla” can be detrimental to the business because it will not address the true adversary.
That is why, at Step 3 of the SMARTech Journey, a company’s goal is to understand who the most desirable prospect is and then understand the Competitive Forces within that space. In doing that, your company will be able to determine what these prospects mean to the business financially and allocate funds to protect its market share or gain market share wherever it makes most sense.
How to evaluate the Competitive Forces
The following statement used to be true:
“Our biggest direct competitor is ACME Corp.”
Companies that provide the same products or services are not necessarily true direct competitors.
To paint a realistic picture of the Competitive Forces, you organization has to be able to answer these two questions:
“Why is this competitor a threat to us?”
“How are they impacting our business?”
And then, ideally, it would be able to provide precise information, like so:
“In this marketplace, our direct competitors are these companies. Our biggest competitor is such-and-such company because, last year, they introduced this product on the marketplace and it is now taking away 30 percent of our sales. As to the other marketplace we’re operating in, our competitors there are not a significant concern because it’s a new market for us and it’s not a load-bearing revenue stream.”
When a company is able to reveal this much detail about its rivals, it can understand with specificity who and why is a hazard to the business. This company is then able to determine why and whether it’s important to focus on certain competitors as opposed to others and to strategically define value propositions for each sub-market.
In consequence, the business is able to invest its resources in fighting competitors that have a detrimental impact on revenue or brand recognition and it is able to refrain from fighting competitors that do not impact the business.
SMARTech Convergence + The Competitive Forces
The problem with Marketing nowadays is that it is the opposite straightforward.
It becomes straightforward when you use a methodology like SMARTech Convergence because SMARTech Convergence enables you to make sense of all of the different ways that you can begin to reach out, acquire and retain happy customers. In doing so, companies can eliminate all of the possibilities to waste money trying to enter a market, to protect their market share and, unfortunately, in a contracting marketplace, have next year be less bad than this year.
The Competitive Forces, as viewed within the SMARTech Journey, help frame where companies should pay attention, how much attention they should pay, and how vital it is to be able to secure, at all costs, X percent of what the larger marketplace is.
Finally, the preparation that we have done so far enables your company to define what its unique value proposition should be as it relates to your most relevant, direct competitors.
Next: Setting Realistic Business Goals
It’s time to capitalize on the knowledge about customer needs, Life cycle of the Marketplace, Marketplace Awareness and Competitive Forces. The next step on your SMARTech Journey is setting viable business goals.