Competitive Intelligence on a Shoestring Budget

Among managers of small and mid-size manufacturing companies (SMMs), the term “competitive intelligence” often conjures up images of specially trained intelligence sleuths, complicated research, and a high price tag. Many people think gathering competitor information can only be done by large companies with large budgets.

But SMMs also compete in fiercely competitive markets and against clever, resourceful competitors. Thus, it’s just as vital today for small companies to keep tabs on what the competition is doing, particularly in products and services.

At a minimum, all SMMs need to know the following:

1. The direct competitors who compete with them on each of their product lines.

2. Who the indirect competitors are.

3. How they match up to these competitors in their customer’s eyes.

4. How to gather information on their competitors with the built-in limitations of time, staff, and budget.

SMM managers frequently believe their limited financial resources prevent them from doing much to determine their competitors’ intentions or capabilities. In truth, a good deal of competitive information is either free or can be acquired at the cost of a phone call, photocopies, or the time to go and find it.

First, let’s look at what can be done in a small manufacturing company with limited resources and a small staff. Here are some steps you can take to get an intelligence program off the ground:

1. Competitor names. Go through all of your lost order records, trade show information, industry buyer guides, and sales documents to determine the names of all competitors.

2. Collector. Appoint a collector to set up files for every competitor.

3. Website and literature search. Have someone go to each competitor’s Website and print out everything. It’s amazing what proprietary information companies will put on their sites.

If they don’t have literature on the Website, call each competitor and ask for literature on specific models. If you’d rather not call them personally, use a third party.

4. D&B information. Get D&B reports on all primary and even secondary competitors. You can often get annual sales information and other indicators of the competitor company’s size.

5. Advertising and promotion. Have someone cut out all competitor ads, product releases, and stories and send them to the collector. You can learn a lot about their “new” product introductions and strategies just by keeping records.

6. Lost order analysis. Salespeople get to see competitive products, competitor’s bids and pricing, and listen to complaints about competitor’s weaknesses from buyers. Enlist their support by showing how to gather information on lost orders. It is particularly important to get up-to-date pricing information to do competitive comparisons.

7. Trade show information. Trade shows are very expensive to attend, but are also a gold mine of competitor information. Prepare for the show by assigning each person in the booth a specific information-gathering project on a direct competitor.

8. Simple patent search. A patent search can be easily done with just the competitor company name and address. If you are going to redesign the machine you don’t want to run into patent infringement problems late in the game.

9. The Competitive matrix. A quick way to find out how much you really don’t know about your competitors is to design a simple matrix. On the side of a page list all of the direct competitors for a specific product line.

On the top of the page list the key factors the customer will examine when he looks at your quotation next to your competitor’s quotes. These are factors such a production output by the hour or minute, machine speeds, heavy duty features, electronic components, machine footprint, selling price, and other factors.

Now fill in the matrix and see where you are missing information. This exercise is a quick way to find the information “gaps” that need to be filled in before you can determine competitive advantage.

10. The war room approach. Gathering all of the competitive information described in the above steps is relatively easy and inexpensive. But the real question is, how you will use it? More specifically, how do you disseminate the information to employees and how will you use it to make changes in your marketing strategies?

One idea is to use a “war room” approach. Once a quarter, tape the collected information on the walls of the meeting room (war room) for everyone to examine before the meeting. Using this approach, a considerable amount of information can be disseminated in a short period of time. The war room approach makes all employees aware of competition and is an efficient way of monitoring competitors.

The primary benefit of this approach is to use it to develop or change strategies in a business or strategic plan. A strategic plan cannot be strategic unless new product pricing, sales, and channel strategies are based on good competitive intelligence information.

Have all managers examine the competitor information prior to the meeting. Then you use the information on the walls to make decisions on product, pricing, promotion, sales, and distribution channels based on what the competitors are doing.

I realize merely writing about these steps and telling you they’re important won’t going to convince you to set up an ongoing program. So I will give you a personal example of how it works and what the benefits are.

In 1999, the manufacturing company I used to work for called me back to turn around a division that manufactured large automatic production line machines. Globalization had caused great changes in this industry and had put great pressure on all machine prices, along with the continuous requirement for new technologies and better performance.

The division did not react to these changes, and very little had been done to develop new products in the decade prior to my arrival.

The first thing I knew I had to do was to find out how my seven product lines compared to the competition and if we had a competitive advantage. This amounted to doing a competitor matrix for each product line compared to the strongest competitors in terms of price, delivery, and key features…model by model. These are very complex machines and developing seven competitor matrices took me more than a year.

But when the matrices were finished, I discovered two of the product lines were no longer saleable and had to be dropped. In addition two other product lines were not competitive, and would have to be re-designed. It was also found the sell prices on most models were 10 to 20 percent higher than most competitors in “apples to apples” matrix comparisons.

To gain market share would require the redesign of two product lines, development of three completely new product lines, and a cost reduction program for the rest of the models.

This was going to be a major investment for the company and would take five years to complete. The competitive matrices we developed for each product line not only showed the specific weaknesses of our machines but also helped the designers focus on specific engineering solutions that could gain competitive advantage over the competition.

All of the redesigned and new models achieved their ROI goals and met their sales forecasts. In fact, the division doubled in sales and profits within six years. The product development program continued; it was so successful that by 2008, sales from new products accounted for 82 percent of total sales.

The cost of doing the initial competitive intelligence was less then one percent of the total cost of developing all of these products. And it’s no stretch to assume this careful assessment of competitors was the primary reason why all of the new products reached their sales targets.

Mike Collins is the author of “Saving American Manufacturing” and its companion book, the “Growth Planning Handbook for Manufacturers.” To learn more about the author or these titles, visit www.mpcmgt.com.