The internet supplies an enormous multitude of information - but not necessarily the most useful. Market Intelligence and Competitive Intelligence are ways of gathering information that is highly valuable to buisnesses. This white paper defines the terms and describes the information provided by each.
Businesses now operate in a world in which information is more readily and publicly available than ever before. Thanks to the development of the Internet, information on market trends, legislation, customers, suppliers, competitors, distributors, product development and almost every other conceivable topic is available at the click of a mouse. Search engines, online libraries, company websites and other sources provide information in an increasingly plentiful, easy to find, and easy to digest way.
Even traditional forms of information provision such as libraries and publications are moving online. All in all, information providers are responding to customer demand by making more and more information available not only online, but also in a searchable format (see Figure 1 below).
Despite this trend, it is often the most valuable information which cannot be found online. An example of this is competitive intelligence, regarded by most information users as the most difficult type of information to acquire. Collecting such information often requires access to an expert market intelligence consultant, who will glean information from the competitor or another source. Similarly technical information, particularly in rapidly evolving (and therefore confidential) areas such as product development, is often poorly documented and therefore requires one-on-one discussion with a technologist.
In other words, whilst general information is often available freely in every sense of the word, information that is sufficiently specific, validated and well presented to be of real use to decision-makers often requires a specialist market intelligence provider.
What Is Market Intelligence?
Market intelligence is a term that is widely used, widely misunderstood, and often mistaken for a mysterious art requiring high-level detective work. Before providing advice on how market intelligence can potentially benefit your business, it is therefore essential that we begin this paper by agreeing on a definition.
It is defined by Wikipedia as follows:
“Market Intelligence is the information relevant to a company’s markets, gathered and analyzed specifically for the purpose of accurate and confident decision-making in determining market opportunity, market penetration strategy, and market development metrics.”
In simple terms, market intelligence is information that is gathered for the purpose of making business decisions. It is largely synonymous with market research, the systematic gathering, recording, analysis and interpretation of information about a company’s markets, competitors and customers. DVL Smith and JH Fletcher’s overview of the market research industry in 2008 describes the convergence of market research surveys and market intelligence that has occurred over the past decade:
“The last few years have seen the arrival of ‘new’ market research. Gone are the days when market research posed as a quasi-academic activity that only flirted with the business decision-making process. Today, market researchers are much more focused on improving the quality of business decision-making.”
In practice market intelligence tends to refer to the branch of market research called market assessment research, which is designed to help a company establish a foothold in a market, or increase its presence in a market. As such, typical areas covered would be routes to market analysis, market size calculations, competitor analysis, substitute products (or services) analysis, and market growth predictions – in summary, information about the external market environment.
Market intelligence can be obtained externally – by a market research and intelligence company, or by an internal department. Once the market intelligence is obtained, it is usually managed in-house, often in an informal fashion, but increasingly with the assistance of IT-based market intelligence systems provided by technology and market research companies.
Market intelligence, competitive intelligence & business intelligence
Market intelligence is sometimes confused with competitive intelligence. The latter is a more specific term, referring specifically to information about a particular company’s competitors. SCIP, the Society of Competitive Intelligence Professionals, defines it as follows:
“The legal and ethical collection and analysis of information regarding the capabilities, vulnerabilities, and intentions of a business competitor.”
In effect, competitive intelligence is a specific type of market intelligence. As a result, a good quality provider of market intelligence should offer competitor intelligence as part of its range of services.
Business intelligence (BI) is also a term that is frequently used interchangeably with the term market intelligence, again incorrectly. Business intelligence refers to all of the information used by a company for the purposes of decision-making, but tends to refer to data relating to the company itself, rather than its market environment. BI therefore includes sales data, production data and financial data, and tends to be collected internally rather than by outside agencies. BI is usually closely related to businesses’ KPIs (key performance indicators).
With the above definitions in mind, this paper discusses how to add value to your business using market intelligence, with particular attention paid to the important discipline of competitive intelligence.
The Purposes Of Market Intelligence
Market intelligence can be used to assist with more or less every decision faced by a company. The overriding purpose of most market intelligence, however, is to help the company grow – to increase revenue, profit, or market share. Good market intelligence can therefore have a huge return on investment - $40,000-$150,000 spent on intelligence can generate or save many times that amount in extra customer revenue or the avoidance of a bad investment decision.
The purposes of market intelligence are constantly evolving. Figure 2 shows the key purposes of market intelligence, and the type of market research or market intelligence study that is typically used to meet these requirements.
Gathering market intelligence
Market entry and market expansion studies
Means of gathering market intelligence vary according to the objectives of the intelligence. The first example in the table above – market entry and market expansion intelligence – is the most varied in terms of the mix of intelligence gathering methods used. In order to gather enough good quality information to inform a decision to invest in a new market, or simply to increase investment in an existing market, the market research and intelligence firm would gather information from the following sources:
- Potential buyers – to ascertain how much demand there is for the product/service
- Distributors, agents and other intermediaries – to find out how to best get products and services to market, and again to ascertain how much demand there is for the product/service
- Competitors – to find out how other companies have successfully entered and stayed in the market, and judge the market’s likely response to a new entrant
- Industry experts such as journalists and industry associations – these organizations can frequently provide a quick and concise overview of the market, as well as numerous leads in the form of contact details of market players
In short, conducting a comprehensive and actionable market entry or market expansion project requires a 360-degree view of the market.
Market assessment studies are extremely similar in their approach, albeit the consultant is generally cross-checking a decision that has largely been made, rather than exploring a completely new market or opportunity. Acquisition studies form part of the due diligence of an acquisition target, with most of the information being gathered through the following means:
- Interviews with the acquisition targets themselves – to gauge their strategy, intentions, performance and characteristics
- Interviews with competitors of the acquisition target – to assess their views of the company’s strengths and weaknesses as well as the strategy, intentions, performance and characteristics of the competitors
- Interviews with customers of the acquisition target – these are arguably the most important interviews of all, as they allow us to gauge the reputation, performance and brand values of the acquisition target, as well as pick up ‘industry gossip’ regarding issues such as the target’s financial status
- Published information such as annual reports and industry reports
- Suppliers and distributors to the acquisition target are generally of less use, but can provide some interesting perspectives in terms of the performance and attributes of the acquisition target
Competitor intelligence studies
Competitor intelligence studies are in increasingly high demand, and typically companies seek the ‘inside’ view of that company’s strategy and approach. Sales figures and production data would be a typical example. Certainly this inside view can be extremely valuable. What can be even more valuable, however, is ‘external’ intelligence on the competitor. Such information does not require anyone to ‘tap up’ an employee or search through the company’s garbage can. Typical sources of information used in a competitive intelligence study are described below.
Press analysis – Publicly available information such as headline financial figures, changes of key personnel, senior management statements etc can be of great interest, and most companies conduct such research in-house on a regular but unsystematic basis. On a more formal basis, a common project conducted by external market research and intelligence agencies is marketing analysis of competitors. For example, detailed tracking of adverts placed over a period of time can be combined with exploration of publications’ advertising rates to come up with an accurate estimate of a competitor’s advertising budget. Press analysis can also be used to assess competitors’ marketing strategy (by assessing the messages behind the adverts) and, through examining employment advertisements, gain valuable intelligence on wage rates.
Pricing research – there are a number of different types of pricing research. Statistical techniques such as conjoint analysis and SIMALTO are pure market research techniques which are used to calculate what prices the market would bear for different types of offering. In terms of competitive intelligence studies, competitor pricing research is easier to explain but arguably no easier to carry out! This painstaking work involves trawling websites, price lists and other sources of information for the prices of competitors’ products and services. This information is then benchmarked against one’s own prices.
Competitive pricing research is increasingly difficult, increasingly valuable and increasingly expensive. The key reason for this is that pricing models are increasingly complex. Definitions of ‘product’ in most markets have broadened to encompass service benefits and intangible brand benefits. The services associated with a product are sometimes priced separately as add-ons, and sometimes included as part of one ‘all-in’ price. Even the product benefits themselves can be priced as part of one overall price is some cases, and as add-ons in others.
By way of example, it is worth considering the way different cars are priced in the USA. A BMW 3-Series (www.bmwusa.com) is advertised at around $35,000 for a basic model, whereas the starting price of a Lincoln MKS (see www.lincoln.com) is advertised at between $37,000 and $38,000. It would therefore appear that the BMW is the cheaper vehicle. A closer look at the BMW website reveals, however, that the buyer is invited to ‘build their own’ vehicle. A host of options ranging from metallic paint to leather seats, sun-roofs and satellite navigation are available for extra incremental fees. Exactly the same applies to the Lincoln. However, not only does the price of each of the options vary between the vehicles, so too do the options themselves.
The delivery fee for the BMW is $825, against $800 for the Lincoln – the price of these two equivalent offerings can be directly compared. This is the exception, however. Look further and it can also be seen that the Lincoln offers a set of ‘20’’ polished cast aluminum 11-spoke wheels’ for a fee of $1,195. The BMW offers no such option, but does offers ‘17” V-spoke wheels with run-flat tires’. How do we compare the prices of these two completely different types of wheel? Add to this running costs, fuel efficiency and other outgoings associated with owning a car, as well as the fact that prices of all packages, options and benefits constantly change over time, and it is clear that price benchmarking is an extremely difficult and resource-intensive task.
Market research and intelligence agencies are employed, of course, to devote the time and expertise necessary to make sense of such data. The agencies scour pricing lists and store the information they gain into databases. As the databases are complete, closely comparable ‘options’ are compared directly against each other. In addition, typical ‘packages’ of benefits are drawn up and then priced. So, a ‘typical’ basic BMW package would be compared with a ‘typical’ basic Lincoln package, even if the composition of the two packages is not exactly the same.
It is worth mentioning that competitor pricing studies allow us not only to compare prices, but also to compare our respective companies’ ability to capture value. If our product or service is more expensive than a competitor’s, this is only cause for concern if our revenue, market share or profit is decreasing. Our price must reflect the value to the market of the package of benefits offered. Every aspect of our product, associated services, and the intangibles such as brand should be charged for, if they are valued by the target audience.
This is an excerpt; the full white paper is available in pdf format.