Understanding where your business stands compared to your competitors is crucial. Competitive benchmarking offers a clear view of your strengths and weaknesses, providing improvement opportunities.
This article explores essential types of competitive benchmarking to enhance your commercial strategy.
Price benchmarking
Pricing benchmarking focuses on evaluating your pricing strategy against competitors. This involves analyzing price levels, discount structures, and overall pricing models. Understanding how prices compare can help you optimize pricing to boost profitability and competitiveness.
Have you noticed you are losing market share to competitors despite offering high-quality products or services? Or are you in a fiercely competitive market, with companies engaging in price wars to attract customers? To stay competitive, you need to understand your competitors’ pricing tactics and adjust accordingly.
Customers might perceive your company’s products as overpriced compared to similar offerings. Addressing price perception and adjusting pricing strategies during different economic conditions is crucial for maintaining customer loyalty, remaining attractive, and attracting new buyers.
Or are you entering a new market and need to set competitive yet profitable prices? Perhaps you're launching a new product and need to understand the pricing landscape to make informed decisions. Benchmarking can help you set competitive prices while considering local purchasing power and competition.
Why price benchmarking is the solution
- Make informed pricing decisions: Set competitive prices that attract customers while maintaining profitability.
- Identify market trends: Adapt quickly to changes and stay competitive.
- Enhance value: Improve customer perception of value, retain existing customers, and attract new ones.
- Identify inefficiencies: Optimize profit margins without losing market share.
- Plan strategically: Ensure all your efforts align with competitive pricing realities.
- Mitigate risks: Adjust prices without negatively impacting your company's market position or profitability.
Developing your pricing strategy must align with all ethical and regulatory frameworks to ensure fairness and transparency. This approach guarantees that all stakeholders, especially the crucially important customers, perceive the pricing as fair and equitable.
Marketing and sales benchmarking
Examine your marketing strategies and sales processes compared to those of top performers. This includes evaluating the effectiveness of marketing campaigns, sales funnels, and customer engagement tactics. You can refine your approaches to drive better results by understanding what works for your competitors.
Does your sales performance seem to be declining? Or are your marketing campaigns failing to attract the expected number of leads? A consistent decline in sales signals that your current strategies are ineffective or outdated.
Has a new competitor entered the market and disrupted dynamics? When your sales and marketing investments aren't yielding significant returns, it’s a clear sign to evaluate and compare strategies with successful competitors.
How sales and marketing benchmarking can help
- Optimize resource allocation: Gain insights into how to use budgets most effectively and achieve higher returns on investments.
- Understand your market position: Identify strengths and weaknesses in your sales and marketing strategies.
- Discover best practices: Understand what's driving industry success and improve your processes and outcomes.
- Better target and segment customers: Refine your targeting and segmentation strategies for more effective marketing and sales.
- Achieve higher sales conversion rates: Benefit from higher conversion rates and increased revenue.
- Identify growth opportunities: Identify gaps and opportunities for growth that may have been overlooked. Develop new products, services, or market segments for more profitable and sustainable growth.
Customer experience benchmarking
Customer experience benchmarking helps you understand how your customer satisfaction and loyalty compare to competitors. This involves measuring key indicators like Net Promoter Score (NPS), customer retention, and feedback. Improving your customer experience based on these insights can lead to higher customer loyalty and better word-of-mouth.
A drop in customer satisfaction scores indicates that your current strategies are not meeting customer expectations. A high churn rate suggests that customers are leaving for competitors, which can be due to a poor customer experience or better offerings elsewhere.
Maybe you are concerned about low engagement rates on digital platforms. If customers are not interacting with your company’s content or services as expected, they are getting what they need and value elsewhere.
Lagging behind in adopting new digital technologies can also put your company at a competitive disadvantage. With increasing numbers of users accessing services via devices, a poor digital experience can significantly impact customer satisfaction and retention.
Compare your customer experience to competitors
- Drive innovation: Foster a culture of innovation within your company by understanding approaches and technologies used by competitors.
- Improve customer satisfaction: Identify gaps in customer experience and make targeted improvements that enhance customer satisfaction and loyalty.
- Optimize your digital marketing: Understand which digital marketing strategies are most effective.
- Enhance your digital presence: Compare your digital presence to competitors and understand how they leverage digital platforms to reach and engage customers.
Competition mapping
A competition map is a strategic tool that provides a clear overview of your market landscape. It allows you to assess market attractiveness and allocate resources effectively. By visualizing market segments and priorities, you can develop competitive strategies and identify areas where your company or competitors have a natural advantage based on unique capabilities and value propositions.
The competition map also highlights segments prone to price wars, enabling you to address potential threats proactively.
Building a competition map with Simon-Kucher
At Simon-Kucher, we can help you build a competition map based on expert knowledge of market size, margin levels, competitive intensity, growth opportunities, and other relevant criteria. In doing so, we provide valuable insights for strategic decision-making and competitive positioning.
Example of using a competition map
Let's take an example of a company that wants to grow and is looking for opportunities. The company aims to understand:
Where are our natural spaces (and where not)?
- Identify the market segments or geographical areas where the company's products or services are well-received and have a competitive advantage.
- Focus on expanding in these natural spaces to maximize growth opportunities.
- Assess areas where the company's offerings may not align well with market demands to avoid unnecessary resource allocation.
Where can we increase prices based on value?
- Conduct price benchmarking to evaluate the company's pricing strategy against competitors.
- Identify areas where they offer unique value propositions that justify premium pricing.
- Understand market perceptions and customer willingness to pay to strategically increase prices in areas where value is perceived to be higher.
How should we best allocate resources?
- Utilize marketing and sales benchmarking to optimize resource allocation.
- Identify competitors' most effective marketing channels, sales processes, and customer engagement tactics.
- Allocate resources towards strategies that yield the highest returns and align with the company's growth objectives.
How can we grow without having to "buy" market share?
- Focus on organic growth strategies that leverage the company's strengths and competitive advantages.
- Expand market presence without buying market share through acquisitions or aggressive pricing strategies.
- Emphasize sustainable growth through product innovation, customer experience enhancements, and strategic partnerships.
How can we create a mindset of deserved market share?
- Foster a culture of excellence and continuous improvement within the organization to earn market share through superior products, services, and customer experiences.
- Encourage a customer-centric approach that focuses on delivering value and building long-term relationships to gain a larger market share based on merit.
Defense strategies for high market shares
Alternatively, a company may already have high market shares but is looking for defense strategies. Competition mapping can help answer questions like:
Which market spaces do we own, and which do our competitors?
- Identify the market segments or geographical areas where the company's products or services are well-received and have a competitive advantage.
- Identify areas where competitors have a strong presence and market dominance.
Which spaces could we use to defend against potential attacks?
- Focus on expanding in the market spaces where the company has a competitive advantage.
- Maximize growth opportunities in these areas to strengthen the company's position and create barriers for competitors.
- Strategically increase prices in areas where the company offers unique value propositions to deter competitors from entering or competing aggressively.
- Respond to competitive actions to maintain market share and competitiveness.
In short, the competition map helps you understand which part of your portfolio deserves more attention. It allows you to focus your time and resources on the essential products to achieve your goals and overcome the most significant barriers to selling more of these products.
Overcome challenges in competitive benchmarking with Simon-Kucher
- Data collection: At Simon-Kucher, we help companies overcome data collection challenges by utilizing proprietary tools, market research capabilities, and industry expertise. We have access to extensive databases and employ advanced analytical techniques to gather accurate and comprehensive market data. This ensures that you have the insights you need to make informed decisions.
- Metric alignment: Not all metrics used by competitors may be relevant or directly comparable to your company’s context. We focus on the metrics that matter most to your success, aligning them with your goals and industry standards.
- Change management: Implementing insights gained from benchmarking may require substantial changes in your company’s processes and culture. Our change management support engages stakeholders, demonstrates the value of benchmarking findings, and guides your organization through the process.
- Innovation over imitation: While learning from others is essential, unthinkingly copying strategies without adapting them to your company’s unique context can lead to suboptimal outcomes. We help you strike a balance between learning from competitors and innovating. By identifying unique selling propositions (USPs) and areas of competitive advantage, we guide you in adapting benchmarking insights to your specific context. This approach ensures that you innovate effectively while leveraging successful strategies observed in the market.
Ready to elevate your commercial strategy with competitive benchmarking? Reach out to one of our experts today.
