Today's post is an excerpt from The MFS Guide to Competitive Strategy.
Competitive strategy is an essential part of any business. In a world of rapidly dwindling attention spans and mass AI-driven output, it is important that companies don’t waste valuable interactions with potential customers by delivering a message that is simply more of the same. More than ever, companies need to differentiate themselves from the competition and, in order to do so, must research, develop, and execute an effective competitive strategy.
Competitive Strategy Process
Perhaps the leading thinker on competitive strategy is the Harvard professor Michael Porter and he defines competitive strategy as follows: “Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.” In many ways, it is through Michael Porter’s work that the area of competitive strategy has been formalized and transformed into a core business activity - primarily by articulating something that was already implicit in business strategy.
What is certain is that competitive strategy is now an integral part of business and involves the following steps:
- Competitive Research: The first step involves researching all competitors - both direct and indirect - and analyzing their approach to areas like pricing, product development, positioning, marketing, and sales.
- Strategy Formulation: Once you have gained a deep understanding about your competitors, it is time to start figuring out your competitive strategy. Some of the key activities here will include product messaging, pricing, and marketing channel selection.
- Strategy Execution: The next step is turning your competitive strategy from a vision into a reality through the various tactics and activities involved.
- Strategy Evolution: Finally, competitive strategy is not a one-off task. Instead, competitive strategy is an ongoing program that must evolve to meet competitor and market developments. This step involves putting some tools and processes in place to ensure your competitive strategy stays current.
Competitive Strategy Benefits
Taking the time to develop a thorough and robust competitive strategy brings with it many benefits.
- Positioning: Understanding how your competitors position their company and products will help you figure out how to position your own product.
- Pricing: Competitor pricing will be an important input as you weigh up your own pricing strategy. Understanding the various pricing models in your industry that have and have not worked is key here.
- Messaging: As you develop the messaging that will act as the foundations of your marketing communications, your competitive research will give you valuable insights into what messaging has and has not succeeded in the market.
- Market Dynamics: Competitive research will help you understand current and future market dynamics - including emerging trends, threats, and opportunities.
- Customer Experience: By understanding where your competitors have both succeeded and failed, you will give yourself a better chance at meeting customer expectations. Intel on key deal catalysts for your competitors customers is vital as is insights into why customers became lapsed or chose an alternative. Gathering all this info will give you an understanding into the expectations of your target customer base.
- Product Direction: As you develop your product and plot out company direction, competitive research will give you some valuable insights around which direction to take. If, for example, you can see that all your competitors are taking a similar route by building similar features, the choice for your company might be to try and beat your competitors in a race towards a particular feature set or else, possibly, take a different direction altogether. Regardless of the route you go down, competitor behavior will be a key consideration.
- Channel Selection: By analyzing the different marketing tactics and channels deployed by your competitors, you will be able to understand which channels you should apply your focus to. If all your competitors are investing heavily in paid ads on a specific social media platform, then you would have to assume that this platform is a proven way of getting in front of your target buyer. Alternatively, you may want to go a different route if you feel that a certain marketing channel has become overly crowded or noisy due to increased competition. Either way, competitor research will once again play an important part as you put together your marketing strategy and campaigns.
- Market Gaps: By analyzing competitors, you might well spot gaps in their strategies that you can exploit. An example might be an underperforming competitor website or even a section of the target market that they have not yet infiltrated effectively.
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