Online Competitive Intelligence

Sarah Blake

Image via Flickr, by Dan Diemer under CC

A competitive strategy is fundamental to business success. Head out into the Internet wilds with no strategy and you might find initial success (and be fooled by randomness), but sustainable profitability and business success are founded on a solid competitive strategy.

In the heady days of the first dotcom bubble, spending time on the basics of strategy seemed to be by the by. Money pumped in as fledgling companies assured investors that profits would follow, with no clear indication where these profits would be coming from. The bubble burst, as those companies who were waiting for profitability to magically appear went along with the bubble.

And so, as we intimated in a previous blog post, the Internet does not necessarily mean throwing out the rule book of marketing, business foundations and principles. Instead, the Internet provides a new environment in which to build on these principles. Profit is still revenue less cost. The Internet does not change that.

We’ve briefly spoken about McCarthy’s 4 Ps in light of the textbook, highlighting the need to discuss these fundamentals in an online environment. When it comes to competitive strategy, Porter’s five forces analysis comes to mind as a foundation to build on. In fact, Porter wrote a 2001 article in the Harvard Business Review, discussing the relevance of his five forces analysis and the Internet. (Click here to read the pdf of the article). In the article, Porter notes that: "In our quest to see how the Internet is different, we have failed to see how it is the same."

So, if business principles are the same, what is different? The chief difference, when it comes to strategy, is that in order to transact online, you need to be online. You need to be connected, plugged in if you will, to the Web. You need to literally exchange data, and this exchange can be monitored and tracked. You can use this fact to extract enormous amounts of competitive information, and this same fact can be used to gather competitive information about you (whether “you” refers to an individual or a company).

Porter’s article goes into more detail on how the Internet has changed the competitive environment, both positively and negatively. Production and distribution costs in many industries have been drastically lowered; the barriers to entry and costs of switching are reduced. Perhaps most importantly, the bargaining power of end users is increased as they have greater access to information when making a purchase decision. His claim is that the Internet migrates competition primarily to price, though this is not the best strategy for companies to follow. Strategic differentiation comes from the value that a company can provide to a consumer.

Differentiation relies on knowing what is out there: who your competitors are and what they are doing. Essentially the framework for online and offline is the same, but online we have access to greater resources for competitor research. A competitive strategy should start with an analysis of your business. Identify your business needs and objectives and the social context in which you operate. It is only once you know what you are that you can truly identify your competitors.

Having identified your business needs and objectives, you can turn to the Internet as a powerful tool for competitive analysis. There are plenty of free technologies that allow you to gather competitor information, and many sophisticated paid-for tools that can do the same. Deciding where to invest your finances and your time is determined by the depth of analysis required. While it can be easy to gather quantitative information, analysis of the information can turn these results into business intelligence. Many of the ORM tools can and should be used for researching your competitors.

Search data for both SEO and PPC

Watching competitor activities

Sophisticated market intelligence can also be gained through subscriptions to Hitwise, for example.

Tools such as Google Insights would fall under customer and market research.

When researching competitors, never forget the basics: visit their websites! Not only can you gather basic price and product information, but it can be relatively easy to discover information about marketing initiatives such as affiliate marketing.

When it comes to the Internet, it's all out there. It's just about knowing how (and where) to look.

The questions for you are:
1. What is your view on the relevance of so-called traditional strategy when it comes to the Internet? Do you think we should be seeking new models, or do the same principles apply?
2. What tools do you use for gathering market intelligence?