By Curt Nelson, President & CEO, EDC
Knowing your competition means being aware of what offerings they provide that do or will compete with yours. It is critical to understand your competitors’ price versus benefit position, or value position, as it relates to your own.
A straight-forward exercise that you can do with your team is to plot the position of your business along with the competition on a “Fair Value Matrix”. Measure benefits along the X axis and price along the Y axis. Now plot your relative position, along with that of your competitors on this matrix. This will give you a visual representation of how you are positioned and the view your overall marketplace sees.
Critical to the success of this exercise is the use of quality data. When it comes to benefits, I do not mean features. Buyers pay for benefits, not features. Features are product attributes, like horsepower, number of channels, RPMs, color, size, and shape. Benefits are the meaningful outcomes produced by such attributes like speed, flexibility, durability, efficiency, and appearance. Many products have features that provide no benefit because the buyer does not need or want them. How many of you, remembering VCRs, had a need, or more importantly, the capability, to record twenty different shows over thirty days on twenty different channels? How many of you found it a benefit to turn on your television so you could read the menu of the VCR when programming?
When you compare your product to the competition, be very careful to look from a buyer’s perspective and only compare benefits people will buy. Do not give yourself credit for additional features that buyers do not want, or worse yet, see as a distraction. Be aware that it is possible to add features that actually reduce the benefit of your offerings.
When plotting your position, and that of the competition, you can use different sizes of circles to indicate the relative size of each competitor. When complete, you should have a good view of your competitive position in the market. Now, the questions to answer are:
- Does your position match what you thought it was?
- Is your position where you want to be?
- Can you be successful in this position?
If you are one of the smaller circles inside or overlapping a major competitor (big circle), should you be re-thinking your position? Is there an opportunity in another position? Be aware that just because there is a hole in the matrix does not mean it is a viable position to be filled. You need to conduct research to make the right determination.
