What is a market analysis?

A market analysis provides insights into potential customers and your competition.

The core components of the market analysis are:

o Industry analysis: Assesses the general industry environment in which you

compete
o Target market analysis: Identifies and quantifies the customers that you will be
targeting for sales
o Competitive analysis: Identifies your competitors and analyzes their strengths
and weaknesses

The exact way in which you choose to organize this information is up to you. As long as
you include all the basic facts, there are a number of outline forms that can work well.
Just keep the purpose of your plan in mind and highlight or expand the sections that
have the greatest application to what you're trying to accomplish.

It's also important to realize that, as you go about planning a business startup or
expansion, you should be doing a lot of research and learning an enormous amount
about the marketing environment of your business.

Your business plan is not intended to include everything you've learned. It will just
summarize the highlights in a way that shows the reader that you understand your
industry, the place in which goods and services are sold, and how you will be a
successful business

Industry analysis

The industry analysis is the section of your business plan where you demonstrate your
knowledge about the general characteristics of the type of business, you're in.

You should be able to present statistics about the size of the industry, such as total U.S.
sales in the last year and industry growth rate over the last few years. Is the industry
expanding, contracting, or holding steady? Why? Who are the major industry
participants?
While you might not compete directly against these companies (they are likely to be
large national or international corporations), it's important that you can identify them,
and have a good understanding of their market share and why they are or aren't
successful.

You should also be able to discuss the important trends that may affect your industry.
For example, significant changes in the target market, in technology, or in other related
industries may affect the market's perception of your product or your profitability.

This kind of information is often available for free from the following sources:

o Trade associations and industry publications

o Government databases: e.g., Census Bureau, Bureau of Economic
Analysis, Bureau of Labor Statistics, state trade measurements
o Data and analysts' opinions about the largest players in the industry (e.g.,
Standard & Poor's reports, quotes from reputable news sources)
o Industry reports from such publishers or from aggregators such as
Marketresearch.com
o Research company filings: Look at your competitors’ filings with the Securities &
Exchange Commission and other regulators

Target market analysis

How do you determine if there are enough people in your market who are willing to
purchase what you have to offer and at the price you need to charge to make a profit?
The best way is to conduct a methodical analysis of the market you plan to reach.

Understand your customers

You need to know precisely who your customers are or will be.

For example, if you sell to consumers, do you have demographic and other information
that paints a picture of who they are?

o Age, generation/life stage, gender

o Average income ranges
o Typical education and occupations
 o Geographic location
o Family makeup
o Lifestyle information (e.g., hobbies, interests, recreational/entertainment
activities, political beliefs, cultural practices, etc.)

Additionally, consider the market size and your target consumers’ motivations and
purchasing potential.

You may very well sell to several types of customers. For example, you may sell at both
retail and wholesale, and you may have some government or nonprofit customers as
well. If so, you'll want to describe the most important characteristics of each group
separately.

It’s likely that your product has appeal outside your target demographic, but a market
analysis can help you focus your sales and marketing efforts on the audience segments
that matter most so that you earn a higher return.

Use industry data

Directly surveying your current customers can be expensive. For planning purposes, it's
acceptable to substitute published industry-wide information; for example, "the average
U.S. electric vehicle owner is between the ages of 40 and 55, has graduated from
college, and earns more than $100,000 per year".

Once obtained, this type of information can help you in two very important ways. It can
help you develop or make changes to your product or service to better match what your
customers are likely to want. It can also tell you how to reach your customers through
advertising, promotions, etc.

Competitive analysis

Gathering competitive intelligence is the practice of discovering and analyzing useful

information about your competitor’s business. Competitive intelligence is important
because it helps businesses understand their competitive environment and the
opportunities and challenges it presents.

Basic information every company should know about their competitors includes
 o Each competitor's size and market share, as compared to your own
o How target buyers perceive or judge your competitors’ products and services
o Your competitors' financial strength, which affects their ability to spend money on
advertising and promotions, among other things
o Each competitor's ability and speed of innovation for new products and services

There may be a wealth of other facts that you need to know, depending on the type of
business you have. For example, if you're in ecommerce, you'll want to know how fast
your competitors can fulfill a typical customer's order, what they charge for shipping and
handling, and so on.

Company data from competitors may be available by interviewing competitor company

executives, attending industry trade shows, and asking the right questions from industry
"experts". They may be unaffordable as consultants, but willing to direct you to free
databases that you would not ordinarily know of or have access to.

And don't overlook your competitor's suppliers. They can be excellent sources of
information to aid your research.

Be very focused in your competitive research

In the industry overview section of your business plan, you may have identified the
largest players in your industry. Not all these businesses will be directly competing with
you, however. Some may be in geographically distant locations, and others may have
pricing or distribution systems that are very different from those of a small business.

Therefore, in your competition analysis, focus on those businesses that directly

compete with you for sales — the specific companies or brands that are solving the
same problem as you and targeting the same customer base.

You may also want to include in your analysis some competitors who offer similar
products in a different business category or who are more geographically remote. Study
their ads, brochures, and promotional materials. Drive past their location. And if it's a
retail business, make some purchases there, incognito if necessary.
Analyze your competitors' online presence
What type of content do they publish online and on social media?

Also, check out their online reviews — both product reviews on their website and
independent reviews on Google, Yelp, Bing, and other online review listings.

Continuously monitor your competitors

Keeping an eye on how your competitors adapt to market conditions, develop their
products, and evolve their brand can help you stay competitive.

Putting it all together: Tips for writing your market analysis

o Include a summary.
o Add graphics. Charts and graphs are great ways to show metrics and statistics.
o Be concise. Get to the point early, and avoid repetition and fluff. Plan several
rounds of edits or have someone else review it.
o Keep everything in the context of your business. Make sure all the statistics and
data you use in your market analysis relate back to your business. Your focus
should be on how you are uniquely positioned to meet the needs of the target
market.

What is Competitive Dynamics?

Competitive dynamics is a term used to define a gamut of actions as well as reactions
of companies taking part in a competitive business environment comprising of multiple
rivals and stakeholders. Competitive actions taken by companies define competitive
dynamics as each firm takes decisions and actions to strengthen its competitive position
relatively in the market.

Competitive dynamics is not straightforward as competition between or 2-3 companies

in a market. This includes a continuous process in which multiple rivals are trying to
gain competitive edge over other through a series of actions and responses.
In this article:

 Importance of Competitive Dynamics

 Competitive Dynamics Example

Importance of Competitive Dynamics

The main motivation for studying this stems from the fact that strategy cannot be static
which is something that Porter’s model often makes one believe given the importance
given to industry forces determining the performance of firms. However it is often
agreed now that business factors matter as much, if not more in determining how firms
perform in any industry condition.
Each firm takes certain actions which elicit responses from competitors which are then
again countered leading to the competitive dynamics field. However competitive
dynamics needs to be differentiated from competitive rivalry which exists when two or
more firms try and garner favorable market position.
Competitive dynamics is often analyzed by understanding one’s competition.

Competitive Dynamics Example

One of the best examples to study competitive dynamics is the current smartphone
industry where the life cycle of products has become very less and each competitor is
pushed to take competitive actions in response to others or become irrelevant in the
market place.

Industry and market analysis can both help you plan your company's future. A good
analysis can show you the condition of your industry and the steps you need to take to
compete for customers. The market and industry definition is different and so are the
market and industry analyses.
Industry analysis looks at your industry: trends, growth and the main
competitors. Market analysis focuses on your potential customers, looking at their
demographics, spending patterns and budgets.
INDUSTRY VS. MARKET EXAMPLES
Whatever the sector and industry, the same difference between industry and market
exists.
 If you make laptops, you're in an industry that includes Apple and Microsoft. Your
market might be businesses that use computers, consumers that use them at
home or both.
 If you publish fantasy novels, your industry includes giants such as Baen Books
and Tor Books. Your market is fantasy readers.
For many companies, the market is smaller than all potential consumers — for example,
"fantasy readers who like Harry Potter" or "laptops for people who do graphic design". A
key part of market analysis is identifying and understanding your target market.

ANALYZING YOUR INDUSTRY

Industry analysis and market analysis both help you understand the challenges and
opportunities facing your company. The difference between industry and market
analysis is that the former looks at your competitors, while the latter looks at the
customers for whom you're competing.
Industry analysis helps you understand your position in the industry — for example,
scrappy up-and-comer, established player or upstart with a new way of doing things.
There are three classic approaches to industry analysis:
 Competitive forces model. This looks at factors such as the bargaining power
of your suppliers, the level of competition in the industry and the risk of new
players entering the industry.
 Broad factors analysis. This looks at the big picture. How do the economy and
politics affect your industry?
 SWOT analysis. What strengths, weaknesses, opportunities and threats do you
see?
Industry analysis can show you the conditions under which you're operating. If, say,
you're in a growth industry with lots of opportunity, you'll want a different strategy than if
growth has stalled and everyone is fighting over a shrinking customer pool.
UNDERSTANDING YOUR MARKET

The difference between industry and market analysis isn't absolute. Industry analysis
may consider the industry's customers, and market analysis may consider the
competition. Despite the overlap, market analysis focuses much more on your
customers than your competition.
 Who are your potential customers?
 What's their demographic for age, wealth, number of kids and so on?
 What are their shopping habits?
 How many potential customers are there?
 How much would they be willing to pay for your product?
If you're writing a business plan to show investors or lenders, they'll expect you to
provide a detailed market analysis. Even if you haven't reached that point, conducting a
market analysis can challenge some of your assumptions. A market analysis of how
many people might buy your product and how much they'll pay may show that your
assumptions about your business success are optimistic.

Market research
Market research is an organized effort to gather information about target markets and
customers: know about them, starting with who they are. ] It is an important component
of business strategy] and a major factor in maintaining competitiveness. Market
research helps to identify and analyze the needs of the market, the market size and the
competition. Its techniques encompass both qualitative techniques such as focus
groups, in-depth interviews, and ethnography, as well as quantitative techniques such
as customer surveys, and analysis of secondary data.
It includes social and opinion research, and is the systematic gathering and
interpretation of information about individuals or organizations using statistical and
analytical methods and techniques of the applied social sciences to gain insight or
support decision making.
Market research, marketing research, and marketing are a sequence of business
activities; sometimes these are handled informally.
The field of marketing research is much older than that of market research. Although
both involve consumers, Marketing research is concerned specifically about marketing
processes, such as advertising effectiveness and salesforce effectiveness,
while market research is concerned specifically with markets and distribution. Two
explanations given for confusing Market research with Marketing research are the
similarity of the terms and also that Market Research is a subset of Marketing
Research. Further confusion exists because of major companies with expertise and
practices in both areas.

Market research for business/planning

Market research is a way of getting an overview of consumers' wants, needs and
beliefs. It can also involve discovering how they act. The research can be used to
determine how a product could be marketed. Peter Drucker believed market research to
be the quintessence of marketing. Market research is a way that producers and the
marketplace study the consumer and gather information about the consumers' needs.
There are two major types of market research: primary research, which is sub-divided
into quantitative and qualitative research, and secondary research.
Factors that can be investigated through market research include:

 Market information: Through market information one can know the prices of
different commodities in the market, as well as the supply and demand
situation. Market researchers have a wider role than previously recognized by
helping their clients to understand social, technical, and even legal aspects of
markets.[16]
 Market segmentation: Market segmentation is the division of the market or
population into subgroups with similar motivations. It is widely used for
segmenting on geographic differences, demographic differences (age,
gender, ethnicity, etc.), technographic differences, psychographic differences,
and differences in product use. For B2B segmentation firmographics is
commonly used.
 Market trends: Market trends are the upward or downward movement of a
market, during a period of time. Determining the market size may be more
difficult if one is starting with a new innovation. In this case, you will have to
derive the figures from the number of potential customers, or customer
segments.
 SWOT analysis: SWOT is a written analysis of the Strengths, Weaknesses,
Opportunities and Threats to a business entity. A SWOT may also be written
up for the competition to understand how to develop the marketing and
product mixes. The SWOT method helps to determine and also reassess
strategies and analyze a business' processes.
 PEST analysis: PEST is an analysis about external environment. It includes a
complete examine of a firm's Political, Economic, Social and Technological
external factors, which may impact firms' objectives or profitability. They may
become a benefit for the firm or harm its productivity.
 Brand health tracker: Brand tracking is way of continuously measuring the
health of a brand, both in terms of consumers’ usage of it (i.e. Brand Funnel)
and what they think about it. Brand health can be measured in a number of
ways, such as brand awareness, brand equity, brand usage and brand
loyalty.
Another factor that can be measured is marketing effectiveness. This includes:

 Advertisement research
 Audience research
 Choice modelling
 Competitor analysis
 Customer analysis (Segmentation of target customers)
 Marketing mix modeling
 Product research
 Risk analysis
 Simulated test marketing

Data collection
Main article: Data collection
"Rigorous sampling methodologies combined with high-quality data collection" is what
the magazine Advertising Age considers the backbone of market research. Data
collection can be done by observing customer behavior through in-situ studies or by
processing e.g. log files, by interviewing customers, potential customers, stakeholders,
or a sample of the general population. The data can be quantitative in nature (counting
sales, clicks, eye-tracking) or qualitative (surveys, questionnaires, interviews, feedback).
Aggregating, visualizing, and turning data into actionable insights is one of the major
challenges of market research and today, text analytics affords market researches
methods to process large amounts of qualitative information and turn it into quantitative
data, which is easier to visualize and use for formalized decision making. Data
collection can use larger audience samples than the few hundred or thousand typically
used in market research. Also required is the (at least passive) cooperation of those
being surveyed; trust is also helpful.
Some data collection is incentivized: a simple form is when those on the road contribute
to traffic reporting of which they are consumers. More complex is the relationship
of consumer-to-business (C2B), which sometimes introduces reliability problems Other
data collection is to know more about the market, which is the purpose of market
research.

International influence from the Internet[edit]

The international growth of available research both from and via the Internet has
influenced a vast number of consumers and those from whom they make
purchases. Although emerging global markets, such as China, Indonesia and Russia
are still smaller than the US in B2B e-commerce, their internet-fueled growth factor is
stimulated by product-enhancing websites, graphics, and content designed to attract
corporate and consumer/B2C shoppers. Estimates for 2010 show between US$400
billion and $600 billion in revenue was generated by this medium.
A report titled "Global B2C E-Commerce and Online Payment Market 2014" indicated a
decrease in overall growth rates in North America and Western Europe, even as
absolute growth numbers rose.
The UK Market Research Society (MRS) listed the top social media platforms primarily
used by millennials are LinkedIn, Facebook, YouTube and Instagram.

Research and market sectors[edit]

Regarding details for worldwide corporate market research, "most of them are never
written about because they are the consumer research done by the country's
manufacturers."
Market research data has loss prevention aspects; that less than 60 percent of all
proposed modifications and new products are deemed failures. When information about
the market is difficult to acquire, and the cost of "going ahead with the decision" to offer
the product or service is affordable, the research cost may be more profitably used "to
ensure that the new line got the advertising send-off it needed to have the best chances
of succeeding."
As measured in revenue, USA based Amazon is the worldwide E-Commerce leader.
Market research for the film industry
The film industry is an example where the importance of testing film content and
marketing material involves:

1. Concept testing, which evaluates reactions to a film idea and is fairly rare;
2. Positioning studios, which analyze a script for marketing opportunities;
3. Focus groups, which probe viewers' opinions about a film in small groups
prior to release;
 4. Test screenings, which involve the previewing of films prior to theatrical
release;
5. Tracking studies, which gauge (often by telephone polling) an audience's
awareness of a film on a weekly basis prior to and during theatrical
release;
6. Advertising testing, which measures responses to marketing materials
such as trailers and television advertisements;
7. Exit surveys, that measure audience reactions after seeing the film in the
cinema.[31]

Insights industry
Market research is an industry that overlaps with and is often referred to as the
"insights” industry. However, the distinctive methods and techniques of market research
not always correspond to the digital-first approach of insights vendors. The emergence
of insights focusing on data analytics rather than fieldwork is competing with market
research for managerial attention and funding. Current research with market research
practitioners shows two pressing concerns for the industry: online data commoditization
and the increasing distance between market researchers and top management within
client organizations. Both concerns boil down to the risk they perceived of market
research becoming a legacy activity of the marketing department rather than the
cornerstone of business strategy.
Market research aims to produce so-called "actionable knowledge" that firms find useful
in their operations:

1. Framing managerial anomalies: an anomaly is a puzzle or a perplexing

situation that the market research report is meant to solve.
2. Loading instruments with meanings: translate observations of
commonplace social practices into the marketing ontology.
3. Signposting prescriptions: guide an intended reading to reduce
interpretive flexibility.

Small businesses and nonprofits

Small organizations and non-profits can derive needed information by observing the
environment of their location. Small scale surveys and focus groups are low-cost ways
to gather information from potential and existing customers and donors. While
secondary data (statistics, demographics, etc.) is available to the public in libraries or on
the internet, primary sources, done well, can be quite valuable: talking for an hour each,
to twelve people, two apiece from six potential clients, can "get inside their minds. get a
feel for their needs, wants and pain. You can’t get that from a questionnaire."

1. Meet your target market’s challenges with solutions

A good way to get more participants is to address and solve their challenges.
By mapping out the challenges your audience faces and
truly satisfying and solving these challenges, you will be able to stand out in the
crowd of providers.
Let’s look at an example.
It is becoming increasingly popular to eat less meat and follow a more plant-based diet.
For those who are used to eating a lot of meat, getting a nutritious, tasty and varied diet
without meat can be a challenge.
Matkurs.no addresses this challenge by offering vegetarian cooking courses. During
the course, the participants do not learn how to make just one, large meal (as is
traditionally the case for cooking courses), but instead learn how to make 20 plant-
based snacks. They also learn about the body’s need for nutrients and vitamins, how
they can create a varied diet without meat, as well as various cooking techniques for
vegetables. The participants are thus equipped with what they need to get started with a
plant-based diet.
Thus, Matkurs.no does not offer an ordinary cooking course, but a starter kit for those
who want to transition from a meat-based diet to a plant-based diet. Hence, they solve
the challenge for their target market.

2. Find and use your USP

USP stands for Unique Selling Point and essentially involves highlighting the unique
factors you offer to differentiate yourself from competitors. Why should anyone
choose to attend your particular training instead of someone else offering the same, or
similar, training? What strengths do you have to play on that your competitors do
not have? The more difficult your USP is to imitate, the greater your competitive
advantage is.
Do you find it difficult to reach your Unique Selling Point? Ask your previous
customers! Why did they choose youin particular? What were they mostsatisfied with
after completing the training? This can give you a good idea of what is unique about
your training.
Your USP is ideally suited for a well-formulated and enticing slogan. Make sure you
use your USP consistently in your marketing communications, making it easy for
courseseekers to separate you from your competition when they are in the search
process.
Need some examples? Surprisingly, it was difficult to find examples of this in the
training industry (which means you really have the opportunity to stand out). Therefore,
we are highlighting two, more well-known, yet brilliant, USP’s:
 3. Stand out visually
Us humans constantly capture visual impressions, both consciously and
subconsciously. The visual aspect often makes for deeper and/or longer lasting
impressions than words themselves. By distinguishing yourself from your competitors
visually (for example through a creative logo or an intriguing design on your own
website), you will stand out in the crowd and make sure your potential
participants remember you as they move towards the end of the assessment process
and is ready to choose you as a provider.

4. Highlight good customer reviews

Your customer reviews are unique, and no business can steal these from you. Make
sure to collect customer reviews from your participants, so that you can highlight the
very best ones on your own website and other places you advertise your courses.
Nothing is more credible than reviews from previous participants.
An example of a good customer review:
“I have attended a number of different courses in social media, but none that beat this
one. Here, I learned not only the basic tools, but the course leader was also generous
in sharing his “magic” secrets and helpful tips with us. The  leader was available to us
after the course ended, so that those who wanted more specific help with their own
social profiles got exactly that”.
5. Provide the best customer service
Providing good customer serviceis not only important for customer satisfaction,
customer retention and additional sales, but also for attracting new customers. Do
not underestimate the effect of Word of Mouth! Satisfied customers often become good
ambassadors and recommend your training to others!
Unfortunately, good customer service is in short supply. Fortunately for you, this opens
up the opportunity to provide such good customer service that you can stand
out amongst your competitors.
But how do you provide good customer service? TheBalance provides you with ten tips
on how to improve your customer service. This site reveals, among other things, how
important it is to keep your promises, to follow up on your customers, and to go
the extra mile.

6. Be innovative
Innovation is all about creating something new. Being innovative can be
both unpredictable and risky, yet also one of the smartest ways
to differentiate yourself. If you manage to offer something brand new, something
that no other providers offer, you can really hit the nail on the head (or miss completely
if you’re unlucky).

7. Be visible
Distinguishing yourself from your competitors does not mean trying to avoid being
compared to them.
To be able to stand out in the crowd you must also be present.It does not help to stand
out from your competitors if your potential participants do not find you when they are
looking for training. Be sure not only to be present on your own profiles and channels
(Website, Facebook, LinkedIn and the like), but also on common platforms for training
providers and seekers.

“How to Gain a Competitive Edge”

Examine your business and its key operations, policies and relationships with
customers to determine what you should work on to compete more effectively.

WHAT TO EXPECT

This Business Builder will help you to become more competitive by identifying the
features of your operation you should focus on to maximize your efficiency and your
product’s appeal.

WHAT YOU SHOULD KNOW BEFORE GETTING STARTED [top]

By accurately identifying and analyzing your firm’s target market and its relative
competition, you may recognize potential opportunities for success in selling your
product or service. These opportunities, which your competitors may have overlooked,
will provide your firm with the vision to develop marketing mixes far superior to your
competition.

To ensure your firm’s market staying power and survival in today’s marketplace, it is
important for you to gain and maintain a competitive differential advantage in your target
market.

The state of the economy has a profound impact on your customers’ buying habits.
Twenty-first century customers have become more concerned with repaying their debts,
lowering capital expenditures, and reducing costs by concentrating on products or
services that satisfy their basic needs. Although not willing to lower their standards, both
individuals and corporations are more selective in identifying products or services to
satisfy their needs.

Before getting started you will need to familiarize yourself with some basic terminology
as it relates to customers and their markets.

The first step is to analyze your competition. What type of competition exists in your
target market, and what impact will it have on the firm’s ability to gain a competitive
edge?
The uniqueness of your firm’s product or service, the number of competitors, the size of
your competitors, the overall demand and the price will all be key factors in your gaining
the competitive edge.

There are four basic forms of competitive structures that differ based upon the number
of competitors, relative ease of market entry, types of products and knowledge of the
market. These structures are defined as follows:

1. Monopoly.

A firm that produces a product or service with few or no substitute products or services.
The company that has absolute control over the price in the market is considered a
monopoly. An example would be your local utility companies.

2. Oligopoly.

This structure exists when a few sellers of products or services control the supply of a
large proportion of your market. These firms tend to set similar prices and create more
difficult barriers for entry into the market. The steel industry is a classic example of an
oligopoly.

3. Monopolistic Competition.

This structure consists of many firms with moderate barriers to entry. Firms competing
in this market attempt to develop differentiated market strategies to establish their own
market share. Firms selling software products would fall into this category.

4. Perfect Competition.

Highlighted by unlimited competition and hardly any barriers to entry, individual firms
operating under this structure would be unable to influence the price or supply of a
particular product or service. Agricultural products are the closest form of pure or perfect
competition.

Let’s look at the chart below to help identify the characteristics of each type of
competitor.

Characteristic Monopol Oligopol Monopolisti Perfec

y y c t

Competition Comp

etition

Product Differentiation
Unique Minor Some None

No. of Competitors None Few Quite a few Many

Size of Competitors N/A Large Middling Small

Price competition None Little Some Total

Control of Price Complete Much Some None

What is your target market?

A market is an aggregate of people, who, as individuals or organizations, have needs

for products in a particular class, and who have the ability, willingness and authority to
purchase such products. This Business Builder will use the term market in that sense,
and not use it in the more general sense of a marketplace or mass market.

In reviewing your market, consider two types of markets:

1. Generic Market. This market is represented by sellers offering substitute

products or services that are dramatically different than your product from a
physical and conceptual viewpoint. The generic market is a broader market
where items like automobiles, designer clothes, or vacations may all be in
competition with each other.
2. Product Market. This market is represented by sellers offering substitute
products or services that are similar to yours from either a physical or conceptual
viewpoint.

How are market opportunities classified?

You will need to review the needs of your existing and potential customers. If those
needs are being inadequately addressed by your company, determine how those
unfulfilled needs may be satisfied or how those needs currently being met by you and
your competitors may be met better.

To accomplish this, you will need to analyze your firm’s competitors and their current
activities. This will require a thorough analysis of the variables that impact your target
market.

There are four kinds of opportunities that your firm may pursue: market penetration,
market development, product development and diversification. Listed below are some
highlights relative to each opportunity.

1. Market Penetration. This is characterized by a firm trying to increase existing

product sales in its present market, for example, by developing an aggressive
marketing mix, attempting to increase product use, win competitor’s customers,
or target non-users. Some of the questions you might want to address are:
 Why are customers currently buying my product or service?
 What might motivate my market to buy more?
 How can I persuade my competitor’s users to switch to my product or
service?
 How can I motivate non-users to try my product or service?
 Can I reinspire former users of my product or service to begin purchasing
again?
2. Market Development. This opportunity is characterized by a firm attempting to
sell its current products or services to new markets (i.e. opening your business in
 a new geographic area or advertising in different media to attract new
customers).
3. Product Development. A firm that offers new or improved products to existing
markets is pursuing a product development opportunity.
4. Diversification. This opportunity would be utilized by a firm moving into a totally
different line of business. It may be characterized by unfamiliar products,
markets, or levels of production.

Which type of opportunity should I pursue?

If you are starting a new business or trying to improve your position in your existing
market, product diversification would be the least favorable opportunity to pursue. The
most promising opportunities for your firm are likely to be improvements in market
penetration or market development.

Why is it important to gain a competitive edge?

In today’s marketplace, there are thousands upon thousands of products and services
available to fulfill the needs of individuals and businesses. Your ability to identify and
exploit the features and associated benefits of your product or service and demonstrate
how it is different or better than the competition will provide you with a competitive edge.
The edge or advantage will provide your firm with the tools to:

1. Increase sales and market share.

2. Improve profit margins for a given period of time in new or existing markets.
3. Ensure your survival in extremely competitive markets.
4. Develop hard-to-copy marketing mixes.

GAINING A COMPETITIVE EDGE 

To get started, you will need to compile all the data collected about your target market
trends, customers, products and competitors. Listed below is an outline of the various
market plan elements you will need to review to identfy your competitive edge or
advantage:

1. Market Positioning
2. Company Resources and Opportunities
3. Evaluation of Opportunities
4. Defining the Process
o Operational Efficiency
o Customer Service
o Product Leadership
5. Choosing a Competitive Edge

Market Position

How can I determine my position in the market?

The identification of your firm’s strengths and weaknesses is an important task that
needs to be accomplished before any competitive edge can be developed. Try to
analyze these factors from outside sources since perception (how you are perceived by
others) is really the key. To determine your position in the market, you must ask many
open ended questions of various types of sources.
Besides your personal assessment, your employees, customers and suppliers are good
targets for questions regarding how they view your firm in the market. Some of the more
typical questions that might be asked are as follows:

Employee-related questions:

 Why is the company a success?

 What has caused it to grow?
 What does the company do best? Why is that so?
 What should the company discontinue doing and why?
 What should the company consider adding and why?
 What are the characteristics of your typical customer?
 Why does your customer buy from you?
 What does the company do well? Can you give me a recent example?
 What does it do poorly? Can you specify?

Customer-related questions:

 How long have you been a client or customer of ABC Company?

 How did you hear of them?
 What criteria led you to select them?
 Do they perform all of your work in this area?
 What do you like best about them?
 What do you like least about them?
 Compared to other firms, what are their advantages? Disadvantages?
 Are there any other services you would like them to provide?
 Would you recommend them to others?
 How would you describe them?

Company Resources and Opportunities

Generally speaking, all firms possess some type of resource or resources that help
distinguish them from other firms. To develop attractive opportunities, you should make
good use of your strengths, while avoiding competition with firms having similar
strengths.

To uncover your firm’s strengths, you should evaluate the functional areas of your firm
(production, Research and Development, marketing, general management and finance),
in addition to your present products and markets. This assessment of your firm’s
internal capabilities and resources will enable you to determine your strengths and
weaknesses. Examples of resources that may impact your firm’s pursuit of selected
opportunities are as follows:

1. Financial Strength. Economies of scales that are achieved by steel and public utility
companies require large amounts of capital. For these types of markets, small
producers would have a tough time competing due to the large capital requirements. In
some industries that have no economies of scale, larger companies may have trouble
competing with smaller ones who provide changing styles and more flexibility. In this
scenario, financial strength may be an advantage for the basic business, but a
weakness when it comes to changing styles and flexibility to meet a variety of customer
needs.

Listed below are some pertinent questions regarding financial strength that may be
addressed:
  Is there an inverse or direct relationship between per unit cost and production?
 What is your current debt? Long-term debt? Plan for future major expenditures?
 What is your expected rate of return?
 What credit terms do you offer? Are they too generous?

3. Raw Material Reserves. The level of raw material reserves may play a major
role in minimizing costs associated with production and the delivery of your
products to market. In the wake of increased demand, potential price increases
and raw material availability may have a significant impact on product cost.

Some pertinent questions may be:

 What is the cost of materials?

 Is your source of suppliers dependable?
 Does the quantity of supplies available fluctuate? If so, do prices fluctuate?
 Can you use substitute materials?

In order to minimize this impact, many companies will build up raw materials reserves.
An example of this would be paper companies trying to control lumber reserves.

3. Physical Plant. The actual location of your plant may have an impact on your ability
to deliver your products to market. If your plant is located close to your suppliers and/or
market, this strength may prove to be a competitive edge allowing you to minimize your
freight cost and delivery time. Well-located plants are usually a strength, while poorly
located ones may be a significant weakness.

Questions you may want to address are:

 Is your plant or office size adequate?

 Is your equipment critical? Does it need to be replaced? Is it flexible?

4. Patents. If you possess a patent for a basic process in the manufacture of your
product, this may provide a distinct advantage over the competition. It may force your
competitors to substitute processes that are inferior or more costly and time consuming.
Your possession of a patent will usually provide you with a competitive edge in selling
your product.

5. Brands. If your firm has developed a group of loyal supporters, it may be difficult for
other competitors to invade your market. Brillo soap pads provide an example of this
type of brand loyalty. Late-comer S.O.S. had a tough fight for market share, because
the name Brillo was synonymous with soap pad throughout most of the twentieth
century.

6. Skilled People. A skilled sales force would be a definite strength that could be used
as a competitive advantage in selling your product. A sales force without contacts or
know-how would be a distinct disadvantage.

 Do your employees have the education and training they need?

 How do your compensation and benefits compare to the industry norm?
 Do you reward exceptional performance?
 How does your turnover rate compare to the industry norm?
7. Management Attitudes. Top management attitudes toward growth of the business
plays an important part in strategy formulation. It will affect the development and
introduction of new products and services.

 How important to you is growth? Market share? Maximizing profits?

 How much do you want market share to grow in the short run? In the long run?
And profits?

Evaluation of Opportunities

Subsequent to evaluating your firm’s resources (for strengths and weaknesses), the
environmental factors impacting your firm, and your management objectives, you should
screen and evaluate the various opportunities that have surfaced. To do so, the
following steps should be taken:

1. Match these opportunities against your firm’s resources and objectives.

2. Eliminate those opportunities that are mismatches.
3. Analyze the remaining opportunities using one or more of the following
approaches:
o Total profit approach
o Return on Investment approach
o Expected value approach
o Boston Consulting Group approach

The measurement criteria used to evaluate each of these opportunities should include
both quantitative and qualitative components.

1. Quantitative components would summarize the objectives of the firm and include
items like sales, return on investment and profit targets.
2. Qualitative components would consist of issues summarized to address the
following types of questions:
o What kind of business does my firm want to be in?
o What business should I exclude?
o What weaknesses should I avoid?
o What strengths and trends should I build in?

Defining the Process

In simple terms, the process of gaining a competitive edge consists of several steps:

 Discovering what your capabilities and resources are in your target market.
 Finding a place in the market where you will be able to position those
capabilities.
 Developing a strategy to capture and maintain your position.
 Implementing and fine tuning your strategy.

To improve the odds that successful competitive strategies are developed and
implemented, the following factors should be considered:

 Personal Strengths.
 Company Strengths.
 Market Position
 Competition
 Market Trends
There is no single factor which dictates what your firm needs to do in the market. You
need to assess the interaction of all these factors and interpret how that particular
grouping of factors affects your firm’s ability to market your product or service.

In determining how to achieve your competitive edge, you will need to address your
market, your company’s philosophy, and the type of product or service you provide to
your target market. This will help you determine whether you want to focus on
operational efficiency, customer service, or product leadership in building your
competitive edge.

Let’s look at these areas on a individual basis to determine which area of focus is more
suitable to your firm.

Operational Efficiency. This term describes a firm that attempts to utilize processes to

provide its customers with dependable products at a competitive price. Factors you may
wish to consider in improving your operational efficiency would include the following:

1. Try to match all your business activities with real and distinct customer needs.
You will need to identify all of your customers needs and align or adjust all of
your activities to ensure customer satisfaction.
2. If you are currently expending time and resources for activities which do not
correspond to specific customer needs, reduce or eliminate these activities
entirely. This reduction may involve outsourcing and worker elimination, an
investment in more state-of-the-art products to improve efficiency, or a
conversion from manual to automated systems for inventory or billing.
3. Develop job descriptions providing for cross-functional responsibilities which
requires everyone to be responsible for customer service. Suppose you wanted
to lower production costs. Each of your departments would need to work with one
other as a team to identify ways to simplify processes and lower costs. For
example, a computer company’s salespeople may work closely with its service
technicians to ensure that their customer’s products are being properly
maintained.
4. Develop a screening process for suppliers, distributors and other vendors that
ensures cost efficiency and timely transfer of products or services to your
customer.

In what areas do I need to be operationally efficient in order to outperform my

competitors?

Operational efficiency focuses on efficient production of your product or service,

distribution capabilities, and customer satisfaction. It requires that you outperform your
competition as follows:

 Respond rapidly to changes in market demand by adjusting your product or

service.
 Ensure that each customer is provided with a quality product that has the
reliability and consistency to satisfy their needs.
 Control production costs to provide your customers with your product or service
at a competitive price.

Customer Service. Many service-oriented companies develop competitive strategies

involving customization of their product or service to meet individual customer needs.
They rarely try to compete on price.
If your firm wishes to gain a competitive edge through customer service, the following
factors should be considered:

 Flexibility. Try to be flexible in delivering your products or services to your

customer. Can you deliver different assortments to different shoppers?
 Make sure that your employees are provided with the proper training,
responsibility and authority to satisfy your customers’ needs. Relationship selling
(building long term relationships with your customers) should be encouraged.
 Ensure that an infrastructure exists to provide a customer service information
system capable of collecting and analyzing customer data to be used by both
management and employees for making intelligent customer service decisions.

Many companies use quality of service reports to rate customer service by customer,
district, area or region of the country. This will provide you with a measurement tool to
identify strengths and weaknesses in your product or service. This can help your firm
highlight any issues which may require corrective action.

For the customer service approach to successful, in what areas will I need to
outperform my competition?

If you want to gain your competitive edge through customer service, you must
outperform your competition in the following areas:

 Make sure your product is tailored to the individual needs of your customers.
 Make sure your customer service is tailored to individual needs.
 Make an effort to provide relevant information and service to each customer
segment.

Product Leadership. Many high technology companies are always searching to

provide state-of-the-art products and services to their customers. Their new products or
services are formulated based on the specific demands from their marketplace.

If product leadership is the competitive edge your firm wishes to adopt or maintain, the
following factors need to be considered:

1. Your firm must ensure that there is effective two-way communication with your
customers. Management, production and engineering personnel should talk with
customers, distributors and dealers to learn how your products are being used
and to identify new challenges that are facing your customers. One effective way
to get useful feedback from your customers is to establish focus groups to
discuss their challenges and opportunities.
2. It is important to maintain an environment within your firm that stimulates your
employees to be creative and entrepreneurial–and a corporate culture that
encourages them to share their new, fresh ideas.
3. Make sure you implement the best ideas in a reasonable and timely fashion.
Don’t fall victim to analysis paralysis. In most cases, it is far better to make the
wrong decision than to make no decision at all.
4. Always try to find ways to improve your product. Be proactive, not reactive to the
marketplace.

Listed below are some of the actions your firm would need to take to outperform your
competition from a product leadership position:

 Endeavor to be perceived by your customers as the perennial technology leader.

  Try to provide your customers with enhanced benefits through frequent product
improvements, marketing each specific competitive advantage or differential over
previous products. Be sure though, that each improvement corresponds to your
customer’s product needs and is easy to implement.
 Quickly commercialize your firm’s ideas.

Choosing a Competitive Edge

The competitive edge your firm chooses will depend on the reasons your customer will
buy a particular product or service. Remember that customers who must meet specific
needs are not ready or willing to make do with the wrong product. Some may like the
newest product that technology has to offer, while others may opt for more convenient
quality products at discount prices. Also keep in mind that the strategy you choose
depends on what your market demands, the product or service you offer, your firm’s
values, resources and expertise. Choosing the appropriate strategy for your product or
service will provide you a competitive edge by allowing you to better serve your
customers’ needs.

In all instances, you should direct your efforts toward satisfying the customer and
achieving a competitive or differential advantage. In your marketing plan, it is important
to review, develop and promote this differential advantage your firm has over the
competition. The most important question is:

Why would my existing or potential customers buy my product or service over that of
the competition?
Remember to ask not what your advantage can do for you, but what your advantage
can do for your customer.

CHECKLIST [top]

Gaining a Competitive Edge

Market Position

___ Have you identified your firm’s strengths and weaknesses?

___ Have you identified and analyzed these factors using internal and external
sources?

___ Have you compared your strengths and weaknesses against those of the
competition?

___ Do you have a clear understanding about what your firm does best?

Company Resources and Opportunities

___ Have you evaluated all functional areas within your firm?

___ What resources do you possess or lack that help distinguish your firm from each
competitor?

___ What opportunities exist for your firm? Why do you consider them opportunities?
Evaluation of Opportunities

___ Have you screened your firm’s opportunities by matching them against your
resources and objectives?

___ Have you eliminated mismatched opportunities?

___ Have you evaluated each opportunity using one of the recommended approaches?

Defining the Process

___ Have you identified your capabilities in your target market?

___ Have you determined where in the market you can position those capabilities to
gain a competitive edge?

___ Have you developed a strategy to capture or maintain your position in the market?

Choosing a Competitive Edge

___ Do you have a clear understanding of why customers would rather buy your
product or service vs. one of your competitors?

___ Will your product or service satisfy the customer’s need?

___ Have you decided how your firm will gain or maintain a competitive edge in your
target market?

 
References[edit]

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Strategy to Broadway". The New York Times.
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3. ^ International Code on Market and Social Research (PDF) (4 ed.).
ICC/ESOMAR Amsterdam, the Netherlands. 2008. Archived from the
original (PDF) on 3 September 2018. Retrieved 29 December 2009.
4. ^ "Commercial Item Handbook" (PDF). market research is a business operation
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Research". Journal of Marketing. 14 (5): 733–
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3. ^ "Market Research END-TO-END Benefits". September 6, 2014. Because
Market Research is a subset of Marketing Research, it is easy to see why the
two terms are often confused.
4. ^ Claessens, Maximilian (9 January 2018). "Difference between Market
Research and Marketing Research".

5. RESOURCES [top]
6. Books
7. Managing Strategy Implementation by Patrick C. Flood et al. (Blackwell Pub., 2000).
8. Developing a Winning Marketing Plan by William A. Cohen. (John Wiley & Sons, 1987).
9. Marketing Your Product by Donald G. Cyr and Douglas A. Gray. (Self Counsel Press,
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10. The Marketing Plan, 3rd ed. by William M. Luther. (AMACOM, 2001).
11. How to Sharpen Your Competitive Edge by Don Reynolds, Jr. (Sourcebooks Inc., 1994).
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Week (October 18, 1999), 146.
14. "Plan of Attack." Entrepreneur 23:8 (August 1995), 150 (7). DacEasy / Best Software.
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