First, it is essential to define and identify competing products. Usually, these will be products that either operate by the same mechanisms, or by utilising different mechanisms achievc the same end result. The latter is particularly influential today with the rapid advances in technology. In consequence, has your company's market intelligence isolated a competitor developing a new process or technology which may greatly affect your product's marketability?
For each competing product, it is necessary to identify
- the technical advantages and disadvantages, bearing in mind the function of the product
- the range of applications
- those products protected by patents, and the advantages created by the patents
- the extent of adherence to British Standards
- the relative superiority on performance, reliability, quality, finish and serviceability
- the reasons for any modifications which have been carried out in the past four years
- those which must be used in conjunction with another product, and may be dependent on factors outside the control of the manufacturer.
For a product to sell successfully, it must appeal to the needs of the potential customer. In order to orientate the design and marketing effort, those factors considered important by the potential customer in making a purchase decision should be identified, eg :
- price
- delivery
- after-sales service
- maintenance cost including spares
- product and company reputation
- brand loyalty
- personal contacts
- sales history
- intra-company trading restrictions
- technical specifications
- political considerations
- number of purchase outlets
- product range
In anticipating the potential growth of each competitor, it is necessary to identify which
- have excess production capacity
- have facilities for factory expansion
- are well placed to obtain capital.
Marketing not only involves selling products in the most effective manner, it demands feedback to various functions within a company, such as design. Hence it is advisable for engineers to be aware of the commercial position of competitors.
Increasing sales in a rapidly growing market is obviously more straightforward than in a mature, slow growth market
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It should be appreciated, however, that mature markets can often provide a stable source of return. Whatever the dynamic position, the market type and structure must be determined to enable marketing plans and budgets to be developed. Therefore the following information should be collected
- the competing companies
- the market size in value and volume, by product
- the competitors' market shares by value and volume, by product
- the market growth rate over the past four years, together with the anticipated growth rate over the next three years
- the changes in competitors' market shares in relation to market size alterations
- the percentage of sales exported, by product, by competitor
- the major competitors which dominate the market, and any changes in leadership over the last four years
- the number of companies entering and leaving the market over the last four years, and the reasons for those movements.
This detail should give a picture of the market structure. It is now necessary to to analyse the marketing operations of competitors. When conducting this, always make a comparison to your own company. You should include
- distribution systems and effectiveness
- disribution agreements and margins
- discount and credit facilities
- stocking policy, at plant, distributors and users
- sales promotion, the mix of techniques and budget
- number of salesmen
- basis for salesmen's remuneration
- basis for territory allocation
- licensing and franchise agreements
- tendering policies.
The above will detail major similarities and differences to your own company. It may also illustrate whether the product type offered by your company is considered primary or secondary to your competitors. Identifying the product which provides each competitor with its greatest profit will give some insight into the possible reactions of those competitors to technological improvements or changes in marketing strategy by your company. Which of these companies take competition and market research seriously, and hence will be able to react quickly to any market changes?
Answering the above questions will indicate what strengths, currently enjoyed by the market leader, can be developed by your company.
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