Knowledge Is Power

Take Advantage of Competitors during Recessions

”John A. Quelch, the Lincoln Filene Professor of Business Administration at Harvard Business School, offered eight suggestions in his March 3, 2008 blog posting “Marketing Your Way Through a Recession.”  We applied some of his suggestions to monitoring your key competitors our March 20, 2008 blog entry, “Are Your Competitors Taking Advantage of the Recession?  But his suggestions also apply to organizations seeking to take advantage of competitors during down economic periods.

 

Again, here is Quelch’s list:

 

1. Research the customer

2. Focus on family values

3. Maintain marketing spending

4. Adjust product portfolios

5. Support distributors

6. Adjust pricing tactics

7. Stress market share

8. Emphasize core values

 

Adjust product portfolios by discontinuing poor performers, but also scour the marketplace for complementary products or services that can be acquired cheaply.  Small firms may not have access to funding during today’s tight credit market and need to sell part of their product line or sell the business itself.  Larger firms may be pruning their product portfolio as well and your lemonade business might leverage their lemons better than they can.

 

You—along with rivals—are reviewing your distributors and salespeople for effectiveness and dropping your weakest ones.  But some of your competitors’ salespeople could be worth hiring and their distributors could be interested in offering another line of products during slowdowns.

 

This is also the time to recruit the best finance managers from peers.  Why?  Because controlling costs is key during times when buyers seek lower prices.  You need to truly understand your cost structure to determine which products are truly profitable and which are really lost causes.  Good finance managers can not only control costs, but also help analyze the most cost effective approach to spending.  Ask them to assist you in figuring out your competitors’ cost structures to determine their likely reaction to your price moves and if they employ any best practices that you can adopt.

 

Plus a strong finance executive can manage the home front while the CEO visits customers, both your own and your rivals.  The visits will help keep your customers from being stolen by competitors while initiating or deepening relationships with those who buy from others.

 

Many organizations prosper during recessions.  Make sure that yours is one of them.

 

For more of Quelch’s observations on marketing, visit his blog at http://discussionleader.hbsp.com/quelch/.

Are Your Competitors Taking Advantage of the Recession?

John A. Quelch, the Lincoln Filene Professor of Business Administration at Harvard Business School, offered eight suggestions in his March 3, 2008 blog posting “Marketing Your Way Through a Recession.”

1. Research the customer
2. Focus on family values
3. Maintain marketing spending
4. Adjust product portfolios
5. Support distributors
6. Adjust pricing tactics
7. Stress market share
8. Emphasize core values

As a CI professional monitoring your key competitors, which ones should you be watching for?

First, maintain marketing spending while emphasizing family values. According to Quelch, “It is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times.” Research how your competitors reacted during the last downturn and then probe to see if they may respond similarly during this downturn. If history is not a good predictor of their competitive behavior, then check your sources for changes in spending on advertising and promotions.

What Quelch means by Family Values: “When economic hard times loom, we tend to retreat to our village. Look for cozy hearth-and-home family scenes in advertising to replace images of extreme sports, adventure, and rugged individualism.”

Are your competitors changing their advertising from cutting edge corporate imaging to home-based and/or value approaches? Have any of them put their accounts up for review to obtain a fresh message and campaign? Changed their media mix for their advertising?

Any of these signs could indicate one or more rivals seeking to grab some of your market share. Protect yourself by increased monitoring of your competitors’ advertising.

For more of Quelch’s observations on marketing, visit his blog at http://discussionleader.hbsp.com/quelch/.

Boston SCIP Workshop on Presenting CI for Maximum Effect

Join your CI colleagues to exchange best practices in how to maximize the impact of your communications of CI findings and recommendations to your management. This new workshop is based on the workshop developed by SCIP board president Martha Matteo, “Sharing your Experience: A Workshop for Presenters” which received excellent feedback from attendees at SCIP06. We are fortunate to have Martha in Boston to introduce the workshop process to us. This workshop approach has been used in Ohio and Connecticut recently with excellent feedback. Experienced CI professionals will help develop the effectiveness of members new to the CI community while polishing their own skills. Attendees new to CI will receive excellent suggestions while applying their non-CI experience to their new field. This event will be an excellent networking opportunity for all attendees and the first in a series of best practices workshops.

Dr. Martha Matteo recently retired as the director of knowledge management and research and development (R&D) planning for Boehringer Ingelhein Pharmaceuticals where her 25 year career included experience in research, project and knowledge management, and R&D planning. Matteo holds a doctorate in biochemistry and was a tenured associate professor/researcher at the University of Massachusetts Boston (UMass). Following UMass, she led a research effort at the corporate research laboratory of Union Carbide Corporation (now part of Dow). Active with SCIP and in competitive technical intelligence (CTI) since 1989, she is currently president of SCIP’s board of directors, after having served as the board’s vice president and chair of the CI Foundation board of trustees. She frequently speaks and writes on CTI.

To register, go to Event Calendar on www.scip.org and click on March 29 to find the meeting.

Do You Offer Veblen or Giffin Goods?

These are both economic terns that refer to products whose demand increases when their prices increases according to current web lore. But when I was studying for my economics degree, a Giffin good was defined as a less desirable product which was purchased when income dropped. In other words, a Giffin good is a cheaper substitute for the product actually preferred by the consumer. My father was paid monthly and at the end of the month, we often ate spaghetti and hamburger instead of roast beef.

Demand for Veblen goods increases as their prices increases because the higher prices convey a perception of desirability. Marketers know that many people believe that higher price equals higher quality or exclusivity.

Veblen and Giffin goods both violate the classic perception that demand declines as price increases and vice versa.

Does your organization produce Veblen or Giffin goods? Do any of your competitors? Both Veblen and Giffin goods may have pricing power. Veblen goods do because of their images and Giffin because they may still be cheaper than the preferred products.

As a CI professional, how do you predict pricing changes by competitors who product Veblen and Giffin goods? You do that by understanding the value perceptions of competitive products in the marketplace. Of course, price changes by competitors have many factors, but this classification is a useful tool for analyzing future competitive actions.

Who Has More Web Traffic—You or Your Competitor?

Good question. Turns out no one knows for sure. According to an Oct 23, 2006 article in BusinessWeek Online “Web Numbers: What’s Real?” the major web traffic estimating sites all have methodology issues that raise questions about their numbers.

“For advertisers, the problem is that while any one method of measurement may capture certain Web technologies or demographics, it misses others. An alternative to counting page views, for instance, is to measure reach, which is a calculation of each site's usage as a percentage of all Net traffic. Alexa, which tracks Web surfers through a downloadable search toolbar, combines that approach with counting page views. But Alexa is limited because it compares reach only among the sites its users visit. Results also appear to skew more toward sites favored by techies rather than the wider Web, says Ed Sim, managing director of VC firm Dawntreader Ventures. Niall O'Driscoll, Alexa's vice-president of engineering, says the company doesn't believe that's the case.

Web outfits seem to agree that Alexa is flawed, but they continue to rely on it because the data are so addictive. Since Alexa's numbers are free and available online, they can easily be plugged into a PowerPoint presentation or onto a blog, providing a quick-and-dirty way to get a competitive snapshot. Blogs cite Alexa as gospel, and its graphs are part of nearly every startup's pitch to investors. ‘It's a giant pain,’ says George Zachary of Charles River Ventures. ‘If someone came up with something better, I'd fund them."

Venture capitalists are making million dollar decisions based on numbers which they know are flawed????? Well, these are the same folks that funded Internet start-ups which existed only in an entrepreneur’s mind and on the paper of a business plan.

None of the other methods for web traffic measurement discussed in the article are viewed as more accurate. So if you are trying to compete against another web based business, how do you know how you are doing if you cannot obtain reliable measurements? You have to fall back on the age old measurement of success: money. If you are generating more revenue and profits than your competitors, you are doing better even if your financial success is based on a superior ability to convince advertisers that your web traffic is higher.

Are You Wasting Time on Today’s CI?

Many projects are analyses of history or snapshots of the competition at a specific point in time. Neither of these approaches are bad; they are necessarily, but not sufficient. You should NOT be focused on a rival’s past or even its present. You need to constantly predict the competitor’s future actions. If you obtain information about its product’s real capabilities or pricing, you can revise your product development plans to counter its benefits. But wait, what is your rival doing? Improving its product or service, of course. So betting your future on a rival’s present means that you are constantly behind. You can probably respond faster to your rival’s pricing, but again, you could be behind your competitor.

Use your competitors’ past only to establish patterns which can predict future behavior. Use information about your competitors’ present strategy and capabilities if you can respond quickly. But every project should include predictions about future competitor moves that could impact your organization. Be prepared.

Uncreative Microsoft?

A leading technology company unable to innovate? Yes, Microsoft according to Alice LaPlante, editor of the InformationWeek Daily Newsletter, who suggested this exercise in the May 9, 2006 edition:

“1) List all the things that Microsoft has invented. I think you'll find it hard, even impossible, to think of anything significant. Copied, oh yes. Improved upon, yes (sometimes brilliantly). But actual hard-core innovation? It's just not in Microsoft's DNA. Microsoft's hallmark? An inexorable, glacier-like grinding of competitors to dust. Fierce competitiveness. Also ruthlessness. Not necessarily admirable, but (until now) very very effective.

2) Now think of what Google has invented. Better grab a pencil—you probably won't be able to remember all the things you'll come up with. Those folks in Mountain View can really jam. And although Google’s vulnerabilities have been examined through a variety of microscopes, the company's sheer creativity and passion for innovation—as quirky as they seem sometimes—are never in question.”

Did you think Microsoft was creative and innovative? I did, at least I thought Microsoft was somewhat creative and innovative. She’s right; Microsoft’s brilliance lies in its business tactics, not its products.

Apply this exercise to your key competitors. List all the product and service innovations that were developed at each competitor and then rank them on innovation. Does the reality match the image? If not, how can you take advantage of this disparity?

Reptile or Mammal?

Do your competitor’s sales approaches resemble reptiles or mammals? This question is posed by Jonathan Byrnes in his monthly column for Harvard Business School’s Working Knowledge web site (www.hbsworkingknowledge.hbs.edu). Reptiles’ cold blooded systems must constantly seek warmth from external sources such as the sun. On the other hand, cold blood does not require as much food to support the life and health of the creature. In contrast, mammals have energy-intensive bodies to maintain and must constantly seek food to survive.

Both need food and the sun, but in very different proportions. Reptiles, according to Byrnes, are opportunistic and cast a wide net to catch few prey. He characterizes them as transaction oriented and at the mercy of their environments. A reptilian sales approach contacts a large number of prospects to find the few ready to buy.

Mammals control their environments more to survive since they must eat more frequently. A mammal like sales strategy involves investing in building relationships with customers to produce a steady stream of orders.

Do your competitors resemble mammals or reptiles? Both sales approaches may be successful depending on the strategy of the competitor. But as Byrnes says, “...beware of not choosing. This dooms a company or individual to the worst of both worlds, not the best. While most companies necessarily have elements of both strategies, the key to success is to have clarity on the basic operating mode, and to drive all buyer-supplier activities toward consistency with this core operating vision.”

Too Much CI?

Are you and your organization over investing in competitive intelligence on competitors’ new products? You could be in the consumer product space since the vast majority of new products are failures, according to industry watcher Information Resources, Inc. “According to IRI’s chief executive officer, Scott Klein, only 20 percent of products introduced in the consumer packaged goods category reach revenue of $7.5 million or more. Less than 1 percent of new product in the category, which includes everything from soft drinks to trash bags, reach annual sales of at least $100 million.” (“Best Selling New Products: And the Winner is….,” Reuters, March 1, 2006)

Ah, but you say that you do not know which products will be the 1% so you have to watch all of them. After all, how could you know more than the company introducing the product about its success? Especially your firm will affect the success of the new product with its competitive responses. You still might want to prioritize competitors and new products by analyzing such factors as the competitor’s success rate, imitative or innovative qualities, overlapping target markets, etc. Assign points to the importance of each category and establish thresholds for levels of CI effort. While there is effort involved in doing the initial evaluation, it will help you prioritize and perhaps limit your expenditures on monitoring new products.

Truth vs. Facts

William Faulkner wryly commented, “Facts and truth really don’t have much to do with each other.” Unfortunately, he was often correct. Different truths can be divined from a single set of facts. Or as I have seen many times in my career business, truth can be divined from a single fact or set of facts. We believe facts are facts, that is, they are concrete, measurable, consistent, and confirmable. But remember the phrase, “Lying with Statistics” or hearing that the wording of questions on a survey slanted the answers? As a CI professional, you have to obtain agreement on the facts before you and your organization can even begin to derive the truth from them. As researchers, we always attempt to obtain confirmation from multiple sources for important data to insure its factual validity. We also check our data points from different sources for consistency. Only then can we analysis the facts for truths or conclusions about a competitive situation. Only when agreement is reached on the facts, can truth be established. And only with an agreed upon truth, can action be taken to improve your competitive standing in your marketplace.