Business is looking good, you are making decent profit margins each year, and your customers seem to be happy with your services.
Things are going well, right? Right. Let’s say you’re making around $X a year and satisfied with the numbers. But what your competitors are making 50 or even 100% more in the same market? Would you still feel your business is doing well?
A company’s individual key performance metrics do hold importance as they allow them to understand their brand’s strengths and weaknesses and focus on their USPs. But apart from an organization’s personal sales ledgers, to survive in a fast-growing business world, they need insights about their competitor’s performance as well.
Such information helps brands to position themselves against industry giants as well as new, incoming competitors, and then objectively assess: How good is my good?
This is what competitive benchmarking is all about.
You track and collect a set of metrics and compare your own company’s data with a bunch of other competitors’ in the market. This allows you to look at the complete, bigger picture that you would miss if you were focusing on your own data only.
Let’s look at the metrics to monitor for competitive analysis, the ultimate goals and benefits of this activity, and how to understand competitive dynamics with a market intelligence solution.
5 steps for effective competitive benchmarking
An effective competitive benchmarking process consists of the following five stages:
1. Select benchmarking metrics
Start the process by identifying the key metrics that need to be monitored to evaluate how well different competitors are doing in a certain market segment. These metrics can differ based on your market area and what you wish to attain. Some benchmarks include:
- What is the YoY revenue growth for the company?
- How many sales did the company make and the number of units sold in a certain period at the store-level?
- How is the company’s relative market share trending over time?
- What are the average prices across various product categories?
- What is the effect of price changes on total units sold?
- Which items are most likely to be bought together?
And other such measures.
2. Identify market competitors
An important step of the process is to decide which competitors you will be benchmarking yourself against. The thing to remember here is that you might not be able to formulate effective action plans if you choose to compare yourself with too many or too diverse competitors.
There are three types of competitors that exist in a market for every business. It is best to tackle one category at a time depending on what you wish to attain.
Leading market giants capturing major market sharesCompetitors closest to your business operationsIncoming new entrants in the market.
3. Collect data about your competitors
Once you know what to measure and for whom, the most crucial part of the process is getting your hands on the required data. There are multiple sources from which you can gather the data you need, but make sure that it represents accurate market information and not biased opinions based on certain demographics. Different sources use various methodologies to capture this data such as:
- Collecting direct data from retailers
- Surveying data from consumers
- Gathering digital shelf analytics
- Aggregating data from receipts
- Market measurement with deep learning
4. Perform competitive analysis
This is the step where you start to benchmark yourself against competitors based on the chosen measures. You’ll be able to assess some basic reports yourself such as which competitors are selling more than you in certain market segments, their average pricing, etc.
But most businesses require an expert team of skilled analysts who can help them dig deeper to visualize reports and identify underlying patterns.
This helps you to not only know the high-level market dynamics but also assess the behind-the-scenes strategies that drive this market picture that you are looking at right now.
And that is the ultimate goal of this process:
Understanding what is causing a competitor to sell more in a segment, so you can adjust your strategies and inventory accordingly.
5. Build an action plan based on findings
When you have performed a thorough competitive analysis, you’ll be able to understand market dynamics in a whole new way. This will allow you to set improved goals, develop action plans, and set out to achieve these targets weekly, monthly, or yearly.
The key is an ongoing market and competitor analysis. You need a framework that offers near real-time market data and analysis so that your targets and decisions are not based on outdated information.
Competitive pricing intelligence with machine learning
You might be thinking by now that competitive benchmarking is a time and resource-intensive process, and you’re right, it is. That’s the reason why market giants are now investing in an all-in-one cloud intelligence platform that is based on machine learning and AI that automates the entire process of competitive pricing intelligence.
ML algorithms deep crawl the entire web to collect market data and cover thousands of brands and categories stocked at major retail stores in both in-store and online channels. After collecting this data, it is then cleaned and analyzed to give you intelligent insights.
Data that was previously monitored and analyzed through manual procedures and efforts, is now being automated using AI cloud intelligence. Reliable, accurate competitive insights that are delivered in real-time are now possible through reports that can be drilled down in any dimension such as location, category, product, price, etc.