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Sault Ste. Marie Innovation CentreCompetitive Market Intelligence Workshop

June 18, 2008

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Speaker

David Lithwick is a partner at Market Alert Limited (www.marketalert.ca ), a Toronto based competitive intelligence consultancy.

He has 25 years experience in CI, including completing over 800 studies.

David has written, in conjunction with the Marketing Research Intelligence Association, a manual on competitive and sales intelligence techniques.

He also co-authors a monthly CI column in VUE Magazine.

Prior to joining Market Alert, David worked as a CI analyst for a major bank and as an account manager in advertising, servicing SC Johnson, Wendy’s and Pfizer.

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Let’s Begin

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Definition

Active CI - gather intelligence on your competitor to learn about their capabilities, strategies and intentions.

Defensive CI - prevent competitors from learning about your marketing initiatives and your employees from leaking sensitive information.

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What CI Is

Early warning of threats and opportunities.

Approximations and best views of the market and competition. It is not a peek at the rival's financial books.

Means many things. A research scientist sees it as a heads-up on a competitor's new R&D initiatives. A salesperson considers it insight on how their company should bid against another firm in order to win a contract.

Short and long-term. Can use intelligence in immediate decisions, such as how to price a product or use the same data to decide on long-term market positioning.

(Source http://www.fuld.com)

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What CI Is Not

Crystal ball. There is no such thing as a true forecasting tool. Intelligence will give you good approximations of reality.

Database search. Databases do not replace human beings who need to make decisions by examining the data and applying their experience, analytical tools and intuition.

20th century invention. (Nathan Rothschild, cornered the market on British securities by receiving early warning of Napoleon's defeat at Waterloo.)

News story. Too broad and not timely enough for managers concerned with specific competitors and competitive issues.

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Example 1

A pulp and paper company needed to know if a new competitor was going to start competing aggressively on costs.

Their CI supplier tracked down from the internet a profile of the rival firm's CEO, which said that to save $, the CEO takes buses versus a limo to visit their firm's plants. This was a tip that the competitor will compete aggressively on costs.

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Example 2

A bank hired a CI firm to see whether any competitor will preempt them in being the first to offer internet banking.

The CI supplier subsequently discovered that ING Direct was planning to enter the market shortly .

The supplier tipped off a major newspaper who interviewed ING Direct, got confirmation and then published an article on the front page.

As a result, the bank fast tracked their launch before ING was able to enter the market.

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Example 3

Getting information on a privately held start up venture proved to be very challenging for a hi tech company, until they discovered Deja News (www.Dejanews.com ) which allowed them to tap into some online discussion groups.

One participant disclosed that the start up had posted 8 job openings on one Usenet group. That posting was a road map to the start up’s development strategy.

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Best Practices

1. Competitors are regularly monitored versus conducting CI in reaction to a threat

2. Formal set of ethical guidelines in place for collecting CI

3. CI is tracked to see:

a. how many people are using it

b. how they are using the findings

c. what their level of satisfaction is with the CI

d. what impact CI has on the company’s overall business performance

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Worst Practices

1. Rushing to set up your CI program versus actively collecting CI based on a real threat

2. CI is managed by someone who is too busy, too junior or not interested

3. CI is assigned too many tasks that end up confusing what the deliverables should be and not meeting key needs

7. Overly simplistic view of how easy it is to collect and analyse CI

8. Concentrating only on traditional competitors

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Non Traditional Threat - Research in Motion

When RIM first introduced the BlackBerry, the major telecoms did not consider RIM to be a threat.

The original Black Berry had limited capabilities and RIM itself seemed to be on the edge of financial ruin.

RIM’s technology and financial situation both improved dramatically.

Now the telecoms are playing catch up and missed an opportunity to truly compete.

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If you were the chief information officer at Algoma and concerned of having too much sensitive information on your website, where would you look to cut back:

– Corporate Mission?– Corporate Governance?– Facilities (e.g. steel making, cold mill, etc.)?– Career Opportunities?– News media (e.g. press releases, executive bios)?– Investors (e.g. financial reports, quarterly conference calls)?– Customer News?– Business Partners?– Supplier News?

Your Turn

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Ethics

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CI vs. Espionage

CI sources information within the public domain.

Espionage implies illegal activities and is an infrequent activity. Think about it; corporations do not want to find themselves in court, nor do they want to upset shareholders.

For the most part, you will find spies in espionage novels, not in the executive suite.

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Trade Off

The greater the sensitivity of information you seek, the higher the risk of being unethical

Open source - readily available info (e.g. websites)

Open proprietary - obtained through concerted efforts (employee interviews, databases, etc.)

Closed proprietary - info obtained through “back channels” (e.g. friend of a friend works for your competitor)

Strictly Classified - information obtained covertly

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Ethical

Attending a conference where the competitor is speaking

Becoming a shareholder of your competitor

Paying industry experts an honorarium for their opinions about your competitor

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Unethical

Misrepresenting yourself

Accepting competitor information or documents from someone with a possible hostile intent (e.g. disgruntled ex-employee)

Interviewing competitor employees for a position that doesn’t exist at your company

Hacking into your competitor’s website

(Please see handout - “Is CI Ethical?”)

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On a business flight, you are sitting beside a sales manager of your main competitor.

Is it unethical to let him talk about his company's marketing initiatives without telling him who you work for?

Your Turn

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Planning Your First Study

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CI Brief

You work for Research in Motion and heard that Business Depot is launching a private label BlackBerry.

What must this investigation achieve?

Provide details of Business Depot’s launch. This will help us develop a strategy to defend our market position .

What must know questions are to be answered?

1. When is the launch date?

2. What will the price be?

3. What channels will the product be sold through?

4. What % of Business Depot’s stores will have onsite demos?

5. What key benefits will be promoted?

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CI Brief (Cont’d)

What do you already know?

US now test marketing advertising (print and radio)

Which sources are priority to contact?

Business Depot

Buyers from our key retail accounts

When is the latest that you require the information?

January 10, 2008

(Please see hand out - “How to Plan Your CI Investigation”)

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Work in Progress

Must Know Questions Sources # Mentions

Secondary In-house External

When is the launch date? Q2 Mar Feb Feb/Mar

What will the price be? $75.00 $70.00 $80.00 $70-$80

What channels?

• Face to face selling x x x 3

• 1-800 number x x 2

% stores w/ onsite demos?

• 80%-90% x x 2

• 100% x 1

Advantages promoted?

• Lower price x x x 3

• 3-year extended warranty x x 2

• Ease of usage x 1

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Sources

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Sources

CompetitorCall centres, investor relations, sales, suppliers to

your competitor, competitors of your competitor

Third Parties Customers, journalists, stock analysts,

government, associations

AlliancesSuppliers, companies who co-market your product

SecondaryAnnual reports, brochures, market research,

press releases, newsletters, industry reports

(Please see hand out – “ Helpful Internet Sources”)

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Sources Cont’d

Internal

Accounting – interpret competitor financial data

Customer Service - daily contact with customers who hear information about competitors

HR - helpful at reconstructing competitor org charts

Legal - interpret competitor patent data and possible trademark infringements

Sales - in contact with competitor reps

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Tips

1. Don’t ask too many people to help you; you may get overwhelmed with conflicting information.

2. Never restrict your search. Not only can one source provide several important types of data, but multiple sources should be cross-checked to generate data on the same point.

3. Corroborate findings by speaking to 3 different sources.

4. Be wary of relying too much on sales reps, as they frequently will provide CI to fit their agenda and/or fail to separate their opinions and conjecture from fact.

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Example - Sourcing Internal CI

You work in sales support for Bombardier Aerospace. A key competitor, Embraer, recently hired a lobby firm to help procure Chinese government contracts.

Which 3 departments at Bombardier would you contact to learn more about the demand by the Chinese for small jet planes?

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Findings

Purchasing More companies are using lobbyists to help break into the Chinese market, where the China Aviation Industry Corporation is the key central buying unit.

SalesEmbraer just completed a tour of their new small jet plane, Embraer 170, to 5 Chinese cities last week.

Product SpecialistsChina will need another 950 jet planes of 30 to 120 seats in next 5 years. (Right now they have about 600 small jet planes. This represents a market worth of $16 billion US.)

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Trade Show CI

Conference SpeakersAs someone who has paid to attend the conference, you are entitled to ask questions, even if they are your competitors.

Competitor BoothsInstruct colleagues before visiting your competitor ‘s booth on what questions to ask.

People Visiting Your BoothPut together a survey and hire a researcher or consultant to intercept buyers, brokers, etc. for their insights.

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Analysis

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Stages

1. Incorporation - read all materials, two or more times.

2. Incubation - assemble the facts in various ways so that a logical picture emerges.

3. Enlightenment - after studying the data and reflecting on what you need to get answered, the real meaning (and thus a solution) becomes clear.

4. Validation - draw specific conclusions and then test these conclusions against facts.

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Tip

Avoid falling into:

1. “Group Think” - pressure to play it safe and compromise vs. stressing diversity or even dissension

2. “Rosy Scenario” - seeing events through a mental filter that blocks out “inconvenient facts”

3. “Sherwin Williams Mentality” - provide analysis on every aspect of the topic in order to predict every possible action by a competitor

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Data Cell Screening

Maps out cells to obtain a visual on which gaps to fill.

Steps

1. Calculate the total # of possible cells to be filled.

2. Ask yourself: Of those categories listed, which are the ones to focus on? Is there a key product per competitor to concentrate on?

3. Narrow the cells to 5 or 6 to focus your investigation.

4. Construct a matrix.

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Example – Northern Credit Union

Statement TD RBC ING BMO BNS CIBC HKB

Savings Account ??

Credit Card ??

Money Market Funds ??

GICs ?? ??

Int’l. Equity Funds ??

Self-Directed RRSPs ??

You work for Northern Credit Union and have been asked to collect copies of competitor customer statements. Which statements would make most sense for you to assess?

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Data Verification

Corroborates data from multiple sources

E.g. estimating the daily volume of cell phones sold by a competitor who recently launched a 1-800 order centre

a) Press release - 196,000 sold in 5 weeks or 5,600/day

b) Call centre reps - sell 1,750 /day in Ont. Assuming Ont. accounts for 40% of all sales, 1,750/40% = 4,375/day

c) Your staff - each call center rep sells an average of 50/day and there are 90 call center reps. 50 x 90 = 4,500/day

Conclusion: 4,375 - 5,600 per day

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Blind Spot Analysis

Uncovers flaws in your competitor’s decision-making process that are caused by bias and misinterpretation such as

Winners Curse - It is common at auctions to pay too much. Similarly in business acquisitions or geographic expansion, some competitors falsely assumed that the long term advantage will outweigh cost.

Escalating Commitment - when something does not meet expectations, but professional pride or fear of accountability prevents your competitor from admitting that it is a mistake. For example, instead of cutting losses, allocation is escalated in the hope that this will solve the problem.

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Ratio Analysis

Used to better understand your competitor’s strengths and weaknesses

4 types: "liquidity”, "leverage”, "turnover” and "profitability."

(Please see handout – “Using Ratio Analysis to Better Understand Your Competitor’s Strengths and Weaknesses”)

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Predicting Techniques

1. Historical Review - see what the competitor did previously in a similar situation

2. Global Strategy - find out what the competitor is doing in other countries and apply this to your own situation

3. Veto - see if the competitor has any obvious restrictions (e.g. plant size, regulatory, manpower) that automatically rules them out as a threat

4. War Gaming -simulate a business situation, where each team represents a competitor. Helps pinpoint most likely attack and defensive positions of your key competitors

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Reporting Your Findings

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Tips

1. Assign a level of confidence to findings

2. Promote CI positively (e.g. limit any mention to military and avoid joking about being a spy.)

3. Clarify whether the information is fact or assumption

4. Avoid floating comparison such as “a 60% increase”

5. Weed out misinformation

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Example

You work for a pharma company. A competitor is rumoured to be introducing a new drug that will compete with your company’s “blockbuster”.

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1 - Record Interviews

Medical Information Representative 7/6/08

Do you plan to enter the Canadian market? Yes. The market size there is large enough to make it attractive to us.

Have you submitted an application for NOC?

Yes. We did this in the past year.

When do you expect to receive approval from Health Canada?

Probably in a few months.

How soon will you launch? As soon as the product is approved.

What will the key selling message be? This drug is a safe alternative, with fewer side effects, but equally effective.

Who will your key target audience be? Dermatologists.

How many reps will detail the product?

This hasn’t been decided yet, but probably 150 specialty reps and another 100 GP reps.

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2 – Set Up Summary Table

MI: Medical Information, SR: Sales Rep,

PM: Product Mgr, MM: Marketing Mgr

MI SR PM MM Total

Do you plan to enter Canada?

Yes ● ● ● ● 4

Submitted application for NOC?

Yes ● ● ● ● 4

In the past year ● ● 2

6 to 12 months ago ● ● 2

When do you expect approval?

In a few months ● ● 2

6-9 months ● ● 2

When do you plan to launch?

Within a month of approval ● ● ● 3

As soon as it is approved ● 1

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3 – List Observations

Competitor X has already submitted an application for notice of compliance with Health Canada.

Approval is likely to be in the next 3 to 9 months, with launch occurring soon after.

Key selling message will focus on the new product being a safe alternative and equally effective.

The key target audience are dermatologists.

Approximately 150 specialty reps and 300 GP reps will be detailing the generic drug.

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4 – Assess Threat Level

The threat that Competitor X poses is high:

– already filed with Health Canada– expect approval as early as a few months from now– will directly position their product against ours– are committing a large sales force to support their

product

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Templates

Eliminate the need to start from scratch each time you write a new report .

Ensure continuity when more than one person is submitting findings.

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Example – Product Profile Scan

IBEX Compex Omni Overall

Monitor Model Grid A40 Triad 255 M34

Volume 140,000 86,000 14,000 240,000

Market share 56% 35% 9% 100%

Factors driving success

Worldwide distribution

Customer loyalty

Aggressive pricing

Key gap to capitalize on

Poor servicing

Errors in invoices

Operational problems

Primary target Marketing Scientists Students

Incentives

• Factory rebate $75 $50 $35 $35-$75

• Vol. discount 2% 3% None Up to 3%

New developments 3D Monitor

Display

Loyalty Points

Extended Warranty

Threat Level High Medium Low

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CI Software

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Pros

Saves time by creating a structure for quickly accessing, analyzing and sharing competitive data.

Good for storing, centralizing and monitoring large volumes of information.

Helps avoid information overload by filtering data from a number of sources.

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Cons

Puts you in a tracking (versus investigative) mode

Assumes all of the info needed is in the database

“Bells & whistles” can make it too time consuming and confusing to use

Can be expensive and quickly become obsolete

CI software supplier may not be available for support

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CI Software < $10,000

Competitive Intelligence Dashboard

Features automatic news feeds from MSNBC, placeholder for competitive graphics, a list for tracking competitive profiles, rankings, surveys and document libraries related to CI.

Have to buy Microsoft Office Window Sharepoint Services - $4,500.

Overly complicated

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CI Software < $10,000 (Cont’d)

Traction Software

Combines wiki style group editing with the simplicity of a blog format.

Collects, organizes, shares, links and retrieves CI information from many sources.

But price is steep considering the additional fees ($125 per account, 20% annual maintenance fee).

Hidden fees for upgrading software and support.

Not Canadian specific as the software is from the U.S.

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Tips

1. Develop your own software first

2. Subscribe to free news service engines for weekly updates on industry activity.

3. Check out Assessing Competitive Intelligence Software by France Bouthillier and Kathleen Shearer

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Defensive CI

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Applications

1. Countering your competitor who is trying to get information on your company.

2. Eliminating leakage of sensitive information by your

employees.

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1. Countering Your Competitor

A competitor has been obtaining information on your services and technology by using their own clients as “trojan horses”. These “clients” sign up and then leave after a short while.

In the interim, they gather information on your services, technology and pricing.

What can you do?

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What Can You Do?

1. Ask the prospective customer “who do you use now, for what products, why do you want to switch”. And then press them to sign up today.

2. Have your IT dept. provide you with information on these “trojan horses”, such as which clients frequently sign up and leave shortly. If one of these individuals tries to sign up again, they can be “red flagged” and their application rejected.

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2. Eliminating Leakage

Sales and Customer ServiceLoaded with large amounts of information In regular contact with competitorsFeel compelled to help

Your WebsiteBeing scanned regularly by your competitor for references (e.g. product claims, job postings) to use when probing your employees for sensitive information.

SuppliersLeak sensitive information about your company in their advertising materials, discussions with prospective clients and personal resumes

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Case in Point

John H is the Sales Director for Jack Rabbit, a snow shoe manufacturer. Recently he was invited to speak at the national conference of winter sports manufacturers.

John was asked what strategies he found helpful in landing Wal-Mart as a new customer. His reply - onsite product training sessions for the Wal-Mart store staff.

Unbeknownst to John, the person who asked the question was a sales rep for Jack Rabbit’s direct competitor, Atlas.

Within 3 months Atlas won the Wal-Mart account by not only offering onsite training, but also a 1-800 support line exclusive for Wal-Mart employees to call with questions relating to Atlas products.

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Website Exposure

Source Competitor Will

Press Release Email asking for more details on a subject mentioned in a release.

Career Ad Be tipped off to changes in your staff (e.g. new dept) or market focus (e.g. new product launch).

Product and Services Info

Pinpoint gaps in your products and services and could then use this information when making sales presentations to customers.

“Who We Are” Reconstruct your organization chart to pinpoint weaknesses in your staff resources and/or poach employees.

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What Can You Do?

1. Have employees sign confidentiality terms (when hired & leaving).

2. Advise your receptionist to tell callers who claim they are students to put their inquiry in writing.

3. Get reps to follow a script when making sales calls or attending a trade booth

4. Make it clear to suppliers that they cannot work for a competitor whose product competes directly with yours.

(Please see handout – “Loose Lips Sink Ships”)

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Special Applications

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Mystery Shopping

Acting as a customer, shoppers carefully observe and report their shopping experiences

Onsite, phone calls or email

Competitors frequently shopped as a benchmark

Why is this important - some sectors up to 30% of new customers leave and do not return because of a bad sales or service experience.

Has anyone been involved in a mystery shop?

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Evaluating Sales Personnel

Greeting

Needs assessment

Product knowledge

Use of a sales tool (e.g. brochure, price sheet)

Cross selling other products

Closing the sale

Follow up

Professionalism (polite, helpful, enthusiastic)

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Telecom Shop

You work for a new telecom, “Horizons Plus”. One of your first tasks is to develop sales aids.

You decide to do a phone shop to learn more about your competitor’s sales performance.

Scenario: “I am considering changing my phone company and would like some information about your company to help me make a decision”.

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Call Center Rep #1 #2 #3

• Waited under 3 minutes for contact Yes Yes Yes

• Probed shopper’s needs Yes Yes No

• Listened to shopper’s expectations Yes No No

• Took time to answer questions Yes Yes Yes

• Explained rates Yes Yes No

• Explained payment options Yes Yes Yes

• Cited clarity of phone calls Yes Yes No

• Cited state of art technology No Yes Yes

• Cited long distance savings Yes Yes Yes

• Cited long distance phone card Yes Yes No

• Led conversation Yes Yes Yes

• Tried to close Yes Yes No

• Cross sold other product offerings No Yes Yes

• Offered to email material Yes Yes Yes

Total # ‘Yes’ scores 12/14 13/14 8/14

% 86% 93% 57%

Rating Very Good Excellent Good

Telecom Shop (Cont’d)

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New Market Assessments

As an intelligence tool, CI can also be used to assess the viability of entering a new market before investing significant time and energy.

Develop prospect lists

Pinpoint volume, sectors to target and buying criteria

Uncover hidden barriers to entry

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Would Better CI Have Averted These Product Failures?

Pudding Chocolate Bar – no attempt made to investigate other companies who had already failed with a similar product

Tahiti Bath Foam – relied on only 1 source for volume projections

Quick & Easy Pasta Dish – did not gauge level of awareness of Betty Crocker frozen meals generated by US TV border advertising

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Sales Intelligence Report

Ice Cream Dessert Co. Targeting Food ChainMarket

PositionBudget Current

Supplier’s Weakness

Level of Satisfaction with Current

Supplier

How to Win the

Business

Next Steps

20% sales growth

$25M sales/yr.

$1.75 M

Up 10% from last yr.

Rigid invoicing policy

Cash flow problems

Low

Frequent shipping errors

Agree to use client’s shipping company

Determine if there is a conflict of interest

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Your Turn

You have 3 days to decide whether to invest $3 million in selling wind turbines to the Canadian residential market.

After that your competitors will be able to bid for the turbines.

The only data you have is a report from a consultant eagerly endorsing wind turbines and some data from Statistics Canada on electricity consumption in Canada.

– Who will you speak to?– How will you contact these people?– Who within your co. can help you?– What does your gut tell you?

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Wrap Up