competitive scanning

Overview

Competitive scanning involves the systematic, constant surveillance of the activities of a company’s competitors. Companies that engage in competitive scanning can benefit in a number of ways. However, benefits are likely to occur only if firms follow the various guidelines which the experts recommend for competitive scanning programs.

Scanning of competitors is a part of any company effort to monitor the environment. In addition to competition, the environment includes technology, legal/political arena, the economy, and societal norms and values.

It can be argued that competitive scanning should be the major element in any system to scan the environment. Competitor analysis is viewed by many executives as the starting point for their companies’ strategic plans.

Competitive scanning systems have a number of important, basic functions. They can be used for defensive intelligence, passive intelligence and offensive intelligence. Avoiding surprises from competitors is the main objective of the defensive intelligence function. Passive intelligence is designed to obtain benchmark data for objective evaluations of what competitors are doing, whereas offensive intelligence is designed to identify opportunities.

There are a number of important aspects of competitors’ activities which may be monitored through competitive scanning. These include competitors’ prices, market share, new product plans, strengths and weaknesses, basic goals and objectives, plans or strategies for achieving these goals and objectives, sales data, new markets, profitability data, acquisition plans, and research and development activities.

Examples

A large number of well-known companies have established formal departments to keep tabs on their competitors. One company designates the responsibility for monitoring competition to the marketing research and research and development departments. Another allocates responsibility for monitoring competition to its consumer product research department. Yet another company’s commercial analysis department monitors competitors. Some have an executive whose title is Manager of Competitive Intelligence.

Benefits

There is evidence that companies which have competitive scanning programs are more likely to be successful than these without a competitive scanning effort and are less prone to downturns. These results occur because these companies are able to alter their competitive strategies when appropriate.

Some examples include:

  • Changing pricing strategy
  • Redesigning products
  • Adjusting new product development programs
  • Reevaluating advertising or promotional campaigns
  • Modifying product packages
  • Adjusting discounts
  • Changing sales force tactics and strategies
  • Avoiding legal entanglements
  • Changing distribution patterns

Implementation

Two major sources of information can be used to gather data about competitors: published sources and field data. Published (or secondary) sources have the advantage of low cost, but lack timeliness, depth, and have a low level of aggregation. Some of these sources become “spy tools” such as AdPlexity for “spying” competitors’ most profitable performance marketing ads.

Field data essentially involve interviews with people in the industry or observers of the industry. Field data are timely and address significant issues more directly.

Companies have traditionally shown some strong preferences in regard to specific techniques used to acquire information concerning competitors. These include:

  1. Feedback from sales personnel
  2. Examination of competitors’ advertisements
  3. Examination of competitors’ products
  4. Reading competitors’ manuals, catalogs and other literature
  5. Talking to competitors’ customers
  6. Reading business magazines, online and offline
  7. Attending professional and technical meetings
  8. Studying competitors’ annual reports
  9. Using directories containing information about competitors
  10. Subscribing to government publications
  11. Talking to competitors’ suppliers

Evaluation

An effective competitive scanning program will involve a number of dimensions. Specific organizational responsibility for the scanning effort must be assigned. The office in charge should not be located in any particular functional area, and the competitive scanning officer should report to the company’s chief executive officer.

If companies make major decisions at the headquarters level, a centralized competitive scanning effort is recommended because personnel can fit various pieces of information together for a composite idea of competitors’ current endeavors and future plans.

On the other hand, if the firm makes decisions at divisional or strategic business unit (SBU) levels, a decentralized competitive scanning program is more appropriate.

At least one analyst and an assistant or secretary are probably required for medium- or large-scale companies and these individuals’ sole responsibility should be competitive scanning.

If companies use outside firms to keep tabs on competitors, they can count on paying about $10,000 yearly for information about one competitor. Salaries and expenses for an internally operated competitive scanning program involving the number of personnel indicated above will probably run $80,000 to $100,000 a year.

In order to incorporate an effective competitive scanning program, companies need to assess the quality of the information obtained about competitors and determine which type of data is the most helpful.

Information acquired must be used to alter tactics and strategies. Companies need to ensure that their competitors are not deliberately misleading them to cause them to pursue wrong courses of action.

For example, false information has caused companies to direct their products to inappropriate market segments, institute different production capabilities for product materials which were not needed, and develop a new product that was not needed by the market.

Conclusion

Despite the many significant benefits accrued by companies which engage in competitive scanning, evidence exists that many companies are not keeping tabs on their competitors or not doing so very effectively.

Approximately two-fifths of companies contacted about their competitive scanning efforts did not have such a program in operation. Those with competitive scanning efforts tended to locate them in a functional area, usually marketing, rather than give them separate organizational status.

There was a reluctance to assign the competitive scanning department sufficient numbers of people or to provide them with a sufficient budget. Companies tended to emphasize data collection methods which were able to easily and quickly collect data about competitors and were inexpensive, but did not provide very meaningful information.

A great deal of emphasis was placed on obtaining information about competitors’ marketing operations, but little emphasis was placed on acquiring data about other functional areas or top managements.

Applications to Small Business

Small businesses need to keep tabs on their competitors. Because their competitors are usually geographically close to them, small businesses can use a variety of direct methods for determining what their competitors are doing.

The owner of a grocery store, for example, can “visit” competitors’ stores and check on their prices, merchandise mixes, displays, and so on. A restaurant owner can have friends sample competitors’ food and beverages and report back. A manufacturer can purchase a competitor’s product and take it apart in order to discover materials used, quality of workmanship, and how it operates.

Since a small business may frequently consist of the owner or manager and only a few other employees, there is a tendency to direct all efforts toward the company’s day to day operations and problems while ignoring opportunities for competitive scanning.

This is unfortunate because small businesses, especially those in their early years, are quite vulnerable to tactics and strategies of their competitors. Thus, in order to protect themselves, they must allocate some of their time to finding out what the competition is doing.

 

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