Competitive Analysis Before Advertising Your Business

by | March 16, 2020

Competitive Analysis

Competitive analysis is something you can understand a lot better if you compare archery with tennis.

Archery is a sport that calls for skill and practice and a good right arm, but an archer may shoot a quiver full of arrows at the bull’s eye and pay little or no attention to what a market or business competitor is accomplishing.

On the other hand, a tennis player cannot forget his opponent for one second. The one game is far more competitive than the other.

1. Importance of Competitive Analysis

Advertising is a part of modern business in which the market and business competition is the very essence. It is not enough for the advertiser merely to study and compute the possible demand for his own product. He should do an  accurate competitive analysis to know what his business competitors are doing to satisfy the demand. Accurate knowledge of this kind is useful, not only in advertising, but also in determining the entire sales policy.

Much that passes for information concerning what competitors are doing is mere gossip and practically worthless. It is difficult to obtain reliable information about one’s competitors, but this should be no deterrent to making the effort.

Of course, if the purpose of seeking this information is merely to copy others in advertising, it is so much time and money wasted. Constructive business policies may be built upon research but not upon imitation.

To the advertiser who blindly copies his business competitor’s type of advertising, who patterns his appeal along similar lines, we must point out again the all important objective. Behind the competitor’s advertising may be a purpose far different from that of the man who would copy the advertising.

– The Hassles of Copying Others’ Ads

Not knowing the purpose, the plagiarist is in very much the same position as the man who would take, without a physician’s advice, a drug prescribed for another patient. What will prove beneficial in one instance may and probably will be injurious in another.

Advertising must be fitted to the requirements of the particular advertising problem. If there were such an advertising panacea as a cut-and-dried pattern of advertising, then, on this principle, the canvasser who comes to your door to sell your wife a one-volume edition of the complete works of Shakespeare could successfully copy the methods of the huckster who simply calls “fresh vegetables” from the seat of his wagon.

Too many advertisers have a habit of dismissing the question of meeting competition with the complacent remark, “We have no business competition.”

This would be important, if true, but it is seldom true. The fact that another concern may make an article inferior in quality to yours is no proof that it does not compete with yours on the market. It may be an entirely different product, yet it may compete with so on, indefinitely. Dozens of manufactured articles that provide the prospect with an alternative can rightly be said to compete for his patronage.

The wise advertiser will do the competitive analysis to study his business competition just as carefully as he does his own product and his own selling efforts, but with the idea of strengthening the individuality of his own advertising rather than with any thought of adopting part of the individuality of another.

He must show or imply in his advertising the advantages which a person would enjoy from the use of his product—advantages that he might miss were he to spend his money for a competitor’s line of goods. Such products as toothbrushes, cosmetics, hosiery, shoes, and men’s hats come within the definition of things that are highly competitive.

2. Comparisons with Competition

In studying the business and market competition, the advertiser should measure each method of the other man against his own, and judge between them.

Stepping out of his character as a manufacturer, he should analyze the situation from the viewpoint of an outsider.

He may picture himself, for instance, as a dealer, and decide whether his product will be as quick a seller as the products of his business competitors. If it will not be, where is the weakness? How can it be corrected? Analysis should be made of the advertising appeals to the consumer, placing them side by side with the advertising appeals of competitors.

From the consumer’s standpoint, does the advertising of his competitors’ attract more attention, hold greater interest, and create a stronger desire for possession than his own advertising?

3. Comparisons of Goodwill

The advertiser should ascertain, as nearly as possible, how long competitors have been advertising to the trade and to the consumer; how much they have spent in advertising; and in what territory they have advertised. Some advertisers feel that they have a basis for estimating the goodwill enjoyed by competitors if they have a knowledge of competitors’ advertising activities.

Nothing could be more erroneous than such a belief. Knowing the advertising schedules of competitors will not help an advertiser to know the friendships which these business competitors enjoy with the trade. It is these friendships that build goodwill, and with which an advertiser must he familiar before he can lay plans for building up goodwill in the interests of his own product.

A number of cases could be cited of new concerns attempting to market a product in the face of competition, when the goodwill of their competitors was so impregnable as to force the new arrivals to withdraw from the fight. Goodwill may also permit a manufacturer to market a new product in opposition to the competition of new concerns in the field.

For years De Long hooks and eyes held leadership at notion counters.

Along came the snap fastener. Women all over the country responded to the appeal of the new convenience, and to the urge of the slogan used by one of the makers of snap fasteners, “Good bye, old hook and eye.”

But the De Long Company did not go out of business. They fell in with the procession, began making snap fasteners, and the name of De Long was all the average woman needed to see, to enlist her confidence and secure her purchase.

Competitive analysis includes so many factors, not only knowing that what and how your competitors sell.

4. Comparisons of Reserve Strength

Von Moltke, the elder, the great German chief-of-staff, said that no one strategical plan survives in detail the first encounter with the enemy. The most carefully and minutely planned campaign is likely to fail through the effects of unforeseen conditions.

The same principles apply in planning and executing advertising campaigns. For this reason, strategical planning ought to embrace reserve plans to meet as many contingencies as possible. The bicycle and roller-skate manufacturers could hardly have been expected to anticipate the decline of those once popular sports.

Business is, in fact, an economic warfare full of surprises and unexpected reverses. This uncertainty about the future necessitates the making of plans for many contingencies. The situation calls for:

  • (a) Advance knowledge of new tendencies and plans to meet them
  • (b) Training the organization to insure the ability of meeting emergencies
  • (c) Understudying of all important officers and employees
  • (d) Insuring against fraud by employees or under mining by business enemies
  • (e) Checking up sources of information and advice, to insure that they are not misleading
  • (f) Experimenting with new ideas, methods, and plans to make sure that all profitable ones are adopted
  • (g) Developing the strongest points, and studying the proper time and methods, for offensive and defensive campaigning
  • (h) Employing the best minds upon the difficult problems of the business, including the business competition, so that the benefits of their solution will be secured before others secure them
  • (i) Recognizing that the human factor is one of the greatest assets in any business today, and that, therefore, the endeavour should be to get the ablest men in that line of business to work for the company
  • (j) Frequent strategical trials of strength of both the firm and employees along extra-difficult lines, in order to demonstrate capacity, fitness, and initiative
  • (k) Constant pre-emption of ideas, methods, patents, etc., which might be of any service to competitors
  • (l) Keeping an open mind

5. Comparisons of Policies

The fact that one competitor’s volume of sales to the retail trade exceeds another’s in a given period of time does not necessarily prove that consumer demand for one product is greater than for another. A competitor may be making the grave error of overstocking his retailers. Nothing else will so quickly prejudice a dealer against a product as being oversold and overstocked. The dealer’s ideal, to quote an old-time merchant, is to have goods “come in the back door and go quickly out the front door.”

The dealer’s shelves are, for him, an expensive boarding place for stock. He is interested in turnover, first and last. A far more cordial feeling toward a product exists in a dealer’s mind if he orders fifty dozen and disposes of them in five weeks than if he should order 100 dozen and they move slowly from his shelves.

The psychological effect on the consumer of having the dealer assure him that “they’re fresh goods— just in today,” is a definite sales asset that is reflected in purchases and eventually reacts to the manufacturer’s benefit. Dealers naturally lose enthusiasm for any product that lingers so long in their stock as to necessitate price cutting and consequent sacrifice of profits to move it.

A few years ago, a new cleaning fluid was put on the market and developed an excellent distribution. The dealer was not permitted to purchase more than one dozen bottles of the product on his first order. The smaller the order was, the better the company liked it.

This was on the theory that, if the dealer ordered and disposed of ten bottles in a week, he would get a more favorable impression as to the rapidity of turnover than would be the case if he had purchased eighty bottles and sold them in two months. By deliberately underselling, rather than overselling, the manufacturer made the dealer decidedly conscious of the demand for the product and of the rate at which it turned over.

6. Comparisons of Advertising

While it is important to make a study of a competitor’s advertising program, it is not profitable to imitate it. For example, a manufacturer of sporting goods noticed his competitor’s advertising appearing regularly in a woman’s publication. He naturally assumed that the repetition of this advertising, month after month, was an indication that the publication was a profit able one for his competitor to use, and that it would pay him to use it. He instructed his advertising agency to make a contract for his advertising to appear regularly in the magazine. The agency advised against the use of the publication, asserting that it would be unproductive. Said the advertiser, “If it pays Jones to use it, why will it not pay me? I make a better product than Jones and can undersell him.”

The agency had been doing a little investigating into the merits of this particular magazine. It called the advertiser’s attention to a page on which was printed a list of premiums given by the publishers of the magazine for new subscriptions. Six of the ten premiums offered were products of the Jones factory, though they were not so stated. The publication was placing such substantial orders with Jones that, as a reciprocal measure, he bought, part cash and part trade, space in the publication. The advertising was what is known as “complimentary,” and even Jones did not look for results other than the goodwill and continued patronage of his customer—the publishers.

It is advisable to keep a file of competitive advertising, if only to know what not to do. Such a file, of course, has many other uses.

7. Comparisons of Follow-up

The alert advertiser will make it a point to secure as much as possible of his competitor’s follow-up material. It is a simple matter to have an. employee fill in a coupon clipped from the competitor’s advertising, or write a letter giving Ins or her home address. This will give a line on how competitors take care of inquiries; how promptly they are answered; how many pieces of mail there are in the follow-up; whether personal, multigraphed, or printed letters are used; the approximate sum spent on follow—up, and what selling points are advertised.

As each piece of literature comes iii it is dated and compared for appearance, quality, and the impression it creates with other like material received from other business competitors. A complete set of each competitor’s literature is collected and the sales arguments of each listed. Then a record is made of the proportion of space used for each argument, and the order in which the arguments are presented. Such tests often reveal valuable working data.

8. Comparisons of Methods

By studying all business competition, many errors may be discovered in your own methods. A certain manufacturer, a national advertiser, discovered a weak point in his own follow up system through comparing his competitor’s methods with his own. The competitor, in his national advertising, invited readers to send for a copy of an illustrated booklet.

As soon as a request for the booklet was received, the competitor immediately forwarded the inquirer’s name and address to the retail outlet in the town from which the inquiry was received. The retailer was provided by this competitor with a form letter on his own letterhead; this was filled in and forwarded to the inquirer, with the booklet, and so the sales machinery was set in motion. Our manufacturer, however, had neglected to tie up carefully all the factors in the sale, and had not realized his deficiency until he checked up on his competitor’s methods.

A manufacturer of radiators, wishing to dominate his field, decided some time ago to extend his advertising campaign. He requested his agency to obtain the schedules of all competitors’ advertising that had appeared during the preceding five years. Since this schedule showed that all his business competitors began to advertise during the first week in August, he ordered his advertising to begin in the middle of July, and made his advertisements a little larger than theirs. Thus, by careful analysis and strategy, he was able to get the jump on his competitors.

9. Comparisons of Selling Arguments

When an advertiser employs the printed word as a direct sales appeal, he naturally embodies every sales argument he can muster in the limited space of his advertisements. But if the article has a wide variety of features, he usually enumerates them one at a time. By making a careful analysis of competitors’ talking points, a manufacturer obtains a valuable guide in presenting his own. Extravagant claims by one competitor have frequently and advantageously been capitalized by another.

A recent instance may be found in the advertising of two rival manufacturers of dentifrices. One advertised the merits of his product by asserting that a dentifrice that merely “washed” the teeth was not sufficient to remove an accumulation that was deleterious to the health of the teeth and gums. The competitor was quick to grasp the opportunity with copy that admonished, “Wash—don’t scour the teeth,” and he backed up his arguments with a number of professional opinions on the subject.

Some advertisers are fortunate in being able to present features that are patented and therefore immune from attack by competitors. Others possess exclusive features which, while not patented, are preempted and cannot profitably be imitated. While there is no patent on the process of setting the bristles of brushes in rubber, the name “Rubberset” is a registered trade-mark. Advertising the “Rubberset” brush, the pioneer in this process of brush making has established for it a foothold that seemingly no amount of business competition or imitation can dislodge.

Do not overlook a competitor’s talking points. Through analysis and study of them, you may discover one or more points about your own product that you should emphasize more forcibly than you have.

10. Avoiding Pitched Battles

Competitive advertising should not be met by points that might lead to advertising battles. The example of the two dentifrice manufacturers quoted is not an illustration. Both manufacturers made positive statements. It was for the consumer to decide whether he wanted to “wash” or “scour” his teeth. The point we wish to make is that an advertiser should not use his advertising space as a vehicle for attacking his competitor’s product.

Aside from the violation of business ethics, such a procedure is not only undignified, but is a of advertising effort, and it will invariably fail to produce the desired reaction in the reader of the advertising. In the old days of advertising, every advertiser claimed “best” for his product. Superlatives, such as this, fail to convince and are inadvisable.

The line to follow is to discover all the advantages that a product has over competing products and to play up these advantages in advertising. If a certain product will serve the consumer better, serve him longer, and at less cost than will others, the manufacturer should tell the consumer why, without making any comparisons. The reader should be given credit for having some imagination, and he will do the rest. Everyone is trying to get the utmost for his money. If one company’s advertising can tell the consumer something that its competitors’ advertising cannot, the reaction will be far more satisfactory than any amount of comparison or “knocking.”

11. Determining a Fair Share

After making a careful analysis of the market and product consumption, an advertiser is able to judge, to a reasonable degree, at least, how much of the total business he may rightly expect to secure, and can lay his plans accordingly. He may decide to dominate the field in an advertising way or, on the other hand, he may decide that it would be more desirable for him to use small space.

The advertising manager of a concern manufacturing industrial conveyors found that 80 percent of the business in his line was controlled by a single competitor, the balance being divided among twenty other companies, of which his was one. A study of the large competitor’s advertising showed that it used large space and educational copy. Since his own company lacked the finances to compete on any such basis, he decided to take space regularly in the technical publications in which the large competitor’s advertising appeared.

His copy, however, was constructed on a different basis. It was designed to bring inquiries at a low cost, leaving it for the sales department to turn the inquiries into sales. He reasoned, rightly, that the prospect in such a line would investigate the products of several concerns before buying, and that, therefore, his sales force could overcome his competitor’s advantage gained from the use of large advertising space.

A manufacturer of men’s furnishings followed a somewhat different plan. An analysis of his trade showed that he controlled 15 percent of the business done in his field, and that he had two principal competitors, one controlling 30 percent and the other 10 percent. The balance of the market was divided among a number of small concerns.

The manufacturer now framed his attack. Studying the methods of his chief competitor. he planned his own advertising so as to give the effect of leadership. The illustrations in the advertisements were better than his competitor’s, and the space he used was larger and more commanding. Furthermore, he advertised continuously while his competitor advertised only spasmodically. This plan was so effective that today he controls over 75 percent of the total business in his line.

The most effective procedure is to determine, by a careful analysis of the market and product consumption, how much of the total business should come to any particular company, and then to lay plans for securing that portion of the sales believed to be its share.

12. The Saturation Point of Distribution

The economic law of diminishing returns applies to advertising, as well as to agriculture or any other industry. In agriculture, after a certain point, the quantity of product diminishes per additional unit of capital and labor; in advertising, the diminution is in the value of the results when a certain point is reached. Every advertiser’s personal experience has shown him that returns from ally given advertisement are subject to this law, and all campaign expenditures are governed by it.

For example, an advertiser may spend $100,000 in advertising and obtain a million dollars of business; with an expenditure of $200,000, he may be able to do a two-million dollar business. If there were no law of diminishing returns, the advertiser could proceed with all confidence to increase his expenditure, and could expect returns in direct ratio. All he would have to do would be to decide how large a volume of business he wanted, and spend an advertising appropriation calculated to produce such a volume, based upon the simple formula. “If one secures twenty, ten secures two hundred,” and so on, ad infinitum.

However, he will probably find that if he raises his advertising appropriation to $500,000, he will be able to do, say, only four million dollars of business, and that it does not hold true that if he spends $2,000,000 in advertising, he will get $20,000,000 worth of business.

The law of diminishing returns manifests itself in the size of an advertisement as well as in the amount of money expended for advertising. A half-page space in black and white in the Sat Evening Post costs $4,000. It may bring 4,000 inquiries at a dollar apiece. A black and white page in the same publication costs $8,000, but it may not necessarily bring 8,000 inquiries. It may bring more, or it may bring less.

Suppose, for example, that it brings 9,000 inquiries. To conclude that a double-page advertisement at $16,000 will bring 18.000 inquiries is wrong. Experience has shown that a double-page spread, al though it may bring inquiries or orders at a very profitable rate, seldom doubles the production of a single-page advertisement.

When an article is sold for rapid consumption, such as bread, sugar, matches, etc., in which there is a strong repeat element, the point of diminishing re turns is farther away than on an article that is sold only once or twice.

Every additional retail outlet added to convey goods to the consumer is an additional drain in sales men’s traveling expense .an additional expense in dealer helps, and an additional source of supervisory and clerical cost. As the business grows, there comes a time when there is no possibility of increased sales in the immediate neighbourhood   In order to develop, the business must branch out into new fields, before the competitors do it. This calls for more traveling expense for salesmen. Perhaps it doubles the former sales expense, without bringing anything like commensurate returns.

13. The Saturation Point of Consumption

There is, likewise, a limit to the amount that can he consumed. Sales cannot be maintained for long, by advertising or by any other means, beyond the normal rate of consumption. Statistics may show, for example, the per capita consumption of coffee in a given territory.

Even the best grade of coffee, offered at an especially appealing price, would increase total consumption only so far, although it would divert demand to the good and low-priced coffee. it is not advisable, therefore, to concentrate on one territory beyond the point of trying for a reasonable volume of sales.

14. The Chance for Growth

In discovering total volume, determining a fair share and his competitors’ strength, the advertiser should calculate his chances for expansion, and how he can develop sales through advertising. The development of new users for a product and new uses for it, and keeping the users sold on the product by constant reminders in advertising, are the requisites for growth.

If a product has only one use, the problem is to secure more users by advertising. If new uses are being developed for a product, advertising’s job is to inform and sell the consumers on the new uses. The manufacturers of sugar, for instance, increased their sales by putting out educational campaigns, to the housewife, on canning and preserving and the part sugar plays in this branch of cooking.

Manufacturers of a certain line of men’s under wear modified the lines of their garments, and sought new consumers, by advertising in the women’s market.

There are certain definite elements to be dealt with in the contemplation of growth for any product:

(a) the natural gain in the number of possible users through increase in population; (b) increase of uses; (c) increase of popularity. If the product is right, and the sales policies and distribution methods are sound, advertising can promote growth by giving attention to each element, although accomplishing its work in different ways.

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