Marketing - Developing Market Intelligence

"Time Spent on reconnaissance is seldom wasted" - Sun Tzu in Art of War

In today’s competitive world, a firm cannot build a long term competitive advantage based on products, procedures or technology. Competitive advantage is built on intellectual capital. Competitors cannot copy a firm’s information or knowledge capability. Thus the firm’s information content constitutes as its chief competitive advantage.

Marketing department has the responsibility to collect data that is scattered across the organization in several databases, records, plans, files and the heads of its employees. Marketing department must channel all this data into meaningful information and present it to various decision makers to enable them to make the right decisions. (or atleast help the top management to take informed decisions)

Data mining however is a complex task. Advent of database software and data analysis tools has made data mining somewhat easier. But to use these tools one needs to know what information to search for?

Answer for this question is tricky as it varies from industry to industry. However commonsense approach would start with asking:

• What information do we need in order to make better decisions?
• Where can we get that required information?

Answers to above question will help to identify most of the internal sources of information. Often the required information regarding market trends, customer needs, business environment, company environment, business cycles etc. are available in customer related databases - sales, purchase orders, contracts, proposals etc. Selecting a data mining and analysis tools will help extract this information from the existing data.

In addition, marketing department also needs to collect information from outside the organization to know about customer behavior, competition, market trends, business environment, etc. Getting this external information is very difficult but not impossible. To begin with, one needs to identify the sources of information. To help identify the sources of information, one can begin with asking:

• What are the sources of information do you get regularly?
• What are the public sources of information you get on regular basis? ( trade magazines & reports)
• What special topics of interest would you like to receive on regular basis?
• What market research would you like to have (that you currently don’t) ?

From my experience in semiconductors and software world, It is easy to answer the above questions - as I know the trade magazines, journals, market research reports and I know what market research to be done. The difficult task is to get that piece of information that I know that I need but that information is what I don't have: namely information regarding business environment, competition, customers, partners and suppliers.

Business Environment

Business environment plays a huge role in the success or failure of small high tech firms. Small firms do not have the capacity to influence the markets or drive the technology standards - so it is imperative for small firms to correctly read the current and future business environment.

For example, a company developing WiMax solutions should have a very good understanding of the future standards, government regulations, customer needs, competition, supplier’s ability and collaborator's motives. Any mistake will lead to failure in the market. For small firms failure means the end of its existence.

Business environment can be further broken down to:

• Market/Customer Trends
• Technology Trends
• Political/Regulatory Trends

Information regarding these trends are often unknown and is subject to speculation. Conducting a targeted market research will help identify these trends - but the costs may be prohibitive for small firms. The best alternative in such cases is to rely on market mavens or gurus for guidance, or collect opinions of industry veterans/captains or even get opinions from employees including middle managers & front-line employees. Often front-line employees have a better understanding of the market/customer trends than the top management.

Jerry Taylor, Former CEO of IDT Inc. used to invite a randomly selected employee for lunch to learn from them. Herb Keller, CEO & founder of Southwest Airlines encourages managers to work as front-line staff to enable them to learn from other employees. These are just a few examples - but often many firms fail to capture the knowledge which resides in their employee’s head.

Customer Information
Firms need continuous information about customers, competitors and collaborators - 3Cs.

Customer information can be summarized as:

• Who are the customers?
• What do our customers need?
• What do our customers want?
• What are the objectives of our customer?
• Who are involved in the buying decision?
• Who makes the final buying decision?
• How customer makes the buying decision?
• When and where do customers prefer to buy?

In addition to the above, for Business to business transactions, additional information has to be gathered:

• Who are the customers of our customer?
• What market segments to our customer cater to?
• What is our customer’s product road map?
• What is the financial position or market share of our customer?
• Who is the competition to our customer?
• What are the technical capabilities of our customer?

Often sales people know the answers for these questions. Therefore marketing should ask the relevant questions to salespeople (sales representative, salesmen etc.) and collect the information. Over a period of time, these answers will reveal customer/market trends and customer behavior. A detailed analysis will result in a customer model which can be used in developing future marketing strategy.

In addition, SEC filings and customer web sites provide a rich source of information. Researching customer’s SEC filings, reading their website, scanning trade magazines, publications etc. will yield a lot of valuable information. This however is not an easy task. One has to spend considerable resources to get it done.

Collaborator Information

Collaborators are the key players involved in day-to-day operations but they are outside to the firm. These include: Suppliers, sales representatives, distributors, logistics agencies, marketing agencies, recruitment agencies etc.

Collaborators for a particular firm work in a specific area and they will have an in-depth knowledge of the market. For example, supplier of package material for Open-Silicon is also a supplier to Xilinx, so they will have a better understanding of ASIC market trends. Collecting market intelligence from collaborators is thus invaluable. However, this is often ignored as firms are busy doing other things.

In addition, a firm also needs to collect information about their collaborators - their reliability, ability to serve you as a customer/partner, their real motives, their pricing structure to you as customer, their pricing to your competitors etc. This helps in choosing the right partner, getting a competitive price from suppliers, and delivering better value to your customer.

Competitor Information

Firms need accurate information about their competitors. The company’s main competitor is the one most like itself: Competition has the same set of suppliers, sells to the same target market, has a similar business model and uses a similar marketing mix.

Firms must also keep an eye on distant or category competitors. For example, Open-Silicon must watch out for developments in firms which make & sell FPGA and Structured ASIC as these are category competitors - and can replace standard cell ASICs. Another example which people can relate to: Software consulting firm Infosys can face potential competition from Oracle in their financial consulting space if Oracle develops a standardized banking software.

To begin with, a firm must have a clear understanding of the objectives, strategies, strengths & weaknesses and competition response of their competitors. The following questions may serve as guidelines for better understanding:

Objectives:

• Is the competitor pursuing profitability? Or Market Share? Or Technology Leadership?
• Is the competitor taking aggressive steps to win our market share?

Strategies:

• How does our competitor win: better prices? Better service? Better technology? Better quality?
• What is their long term & short term strategy?

Strengths & Weakness:

• In what areas is our competitor stronger than us?
• What weakness of our competitor we can exploit to win customers?

Response:

• How will our competitor respond to if we raise or lower our price?
• How will our competitor respond to our marketing/promotion campaign?
• How will our competition respond to changes on our product offerings?

Collecting competitive intelligence is an ongoing task. There are numerous ways to collect competitive intelligence:

• Scan magazines, papers, journals, websites etc.
• Scan competitor’s website for: organizational structure, hiring patterns, company policies, financial disclosures etc.
• Hire current or past employees of the competitor.
• Survey the collaborators/partners/suppliers of your competitors
• Reverse engineer or do in-depth analysis of your competitors offering
• Hire mystery shoppers who will buy competitor’s products/service to help you learn from it
• Collect information from your employees

Office of Market Intelligence

Collecting market intelligence on Business environment, competition, customer & collaborators is a tough and time consuming process. Data has to be collected in advance, analyzed and the information is decimated to top management in timely manner. Only then market intelligence will add value to a firm.

Taking a clue from the military - firms are establishing an Office of Market Intelligence within the marketing department. The aim of this office is to define information needs, prepare research instruments, collect data, analyze data, evaluating its quality and decimate information to decision makers. In addition, the office is also responsible for developing and maintaining marketing decision support system. Marketing decision support system is a coordinated collection of data, systems, tools and techniques for collecting and analyzing data which forms as basis for future marketing actions.

Firms use statistical models, regression analysis, conjoint analysis, factor analysis, cluster analysis and other statistical analysis to develop marketing models for different market segments, to set prices, sales forecast, plan advertising and promotional campaigns.

Closing thoughts

In an era where competition is ruthless and marketing is war, collecting market intelligence is absolutely indispensable. Creating the Office of Market Intelligence with a clear mandate and objectives is essential. Top management and other decision makers will find the information provided to them by the office of market intelligence invaluable - thus enable them to make informed decisions.