By Joanna Jones
At InterQ, we are often tasked with coming in and guiding companies on how their products/services are perceived and used by customers. This typically involves traditional qualitative and quantitative research methods, but it also entails a broader look at industry and market forces that are shaping what else their buyers are faced with. In fact, frequently, our market research scope is expanded to include a competitive review process. Our clients ask us to investigate the competition and forces that are guiding trends.
This can get pretty complex, right quick. Because “competition” is not just from others selling similar products.
A seminal article, by Michael Porter in the Harvard Business Review, details five typical competitive forces that push on companies. He cites them as consisting of:
- Threat of new entrants
- Bargaining power of suppliers
- Bargaining powers of buyers
- Threat of substitute products or services
- Rivalry among existing competitors
Therefore, when we’re asked to do a simple competitive review, we define it much more broadly than simply analyzing media and messaging spend amongst the competition, or looking at the size of the industry as a whole. We see this as a far more complex equation, entailing looking at trends, both within the industry – ranging from suppliers to distributors – and examining consumer patterns.
To keep this a blog post, and not a scholarly article, let’s focus on one of the areas where we excel at with strategic research for our clients: Non-price rivalry factors.
The non-price rivalry: Customer value through segmentation
As market research consultants, we aren’t able to sway supplier-side differentiators or the bargaining power of distributors, but we can advise on competition that is outside of just price – namely, customer value. Companies can create customer value when they seek to understand how product features, delivery times, customer experience, and brand image influence purchasing behavior. In industries that produce highly similar products or are priced relatively the same, understanding the power of segmenting customer markets and each segment’s value-ask can create a marked payoff.
How is this done? It starts with us segmenting the customer market and doing a deep-dive into where customers find value from a company. Though customers may not have visibility into the distribution channels, pricing pressures, or underlying market force structures, they drive purchase behavior by the ways they’re directly influenced when interacting with a company; namely, how the customer experience feels, a brand’s credibility, and how they’re able to use the product or service. Once a company understands the experiential tangibles of what customers go through when purchasing and post-purchase, the company is better equipped to respond to customer needs. And this – the visibility and response – is a huge competitive advantage.
Why competitive segmentation is good for industries
For companies who are fiercely going after the same share of wallet from a customer group, the ability to slice and dice customer segments, and respond uniquely to their needs, is actually a net positive for that particular industry as a whole. How? Because when customer needs are met, it can support higher profitability throughout an industry. To directly quote Porter, “Rivalry can be a positive sum, or actually increase the average profitability of an industry, when each competitor aims to serve the needs of different customer segments, with different mixes of prices, products, services, features, or brand identities.”
Bringing it all together: Market research
When companies engage a market research partner as part of their competitive review process, we’re able to give a more robust picture of not only the industry forces at play, but the unique customer segments and value-gaps that are not being addressed. These insights – ranging from pricing reviews, new entrants, substitutable products, and customer use-cases – can be pivotal in how a company structures its approach. Through a combination of secondary market data, primary quantitative surveys, and qualitative interviews, market research can offer a true competitive review of how a company can differentiate itself and respond uniquely in a crowded industry.
