How Do We Know Who the Competitors Are?
In business context, we can define competitors as brands with which we compete in the market. But, how do we actually identify those brands? Do we just assume that the competitors are the brands with market shares above and below our brand? We might reason that we are actually competing only with the brands within the same price segment. Similarly, we might believe that competitors are only the brands with similar brand image. But, if we define the competitors simply as the brands to which we lose or from which we gain customers, we can use switching analysis to discover who they are.
Switching analysis is a research approach that taps directly into the interactions between the brands, and is best suited for data obtained through market research surveys. However, we can base it on other data sources as well, assuming they contain the information about the currently and the previously most consumed brands.
Key metrics: What do I need?
Main brand: „Which of the following brands do you use most often?“, „Who is your current service provider?“, „Which company’s services do you use the most?“
Switching: „Have you changed your main brand/provider in the past ___ years/months?“
Previous brand: „What was your previous most frequently used brand?“, „Who was your previous service provider?“, „Which company’s services did you previously use the most?“
These questions should be adjusted to the needs of the specific industry. The formulations are slightly different for products and services. The assessed period can also be adjusted. For example, it should be shorter for FMCG and longer for services or possessions.
The main concepts: What should I know?
Switching analysis takes two parameters into account: the Inflow (from which competitors do our current customers come?) and the Outflow (to which competitors did our former customers switch?).
The interpretation of the outcome: How should we read it?
The results of switching analysis can be conveniently visualized using a Senki chart (although it is certainly not the only way to present). Let’s take a look at the example given in the interactive dashboard below (made using real, white labeled data from FMCG industry).
For example, if we hover over brand C, on the left-hand side of the chart, you will see a highlighted outflow of the brand. Brand C’s Outflow is 22% of total outflow, and it goes to F, I, N, and P brands. On the right-hand side, you can see that the inflow of brand C is just 5% and comes from brand A.
Key take-aways: How can I use it?
The importance of correctly identifying the brands with which your brand exchanges customers is mostly obvious. You can apply this knowledge to all aspects of brand development. Some ideas for specific applications are listed below:
Tracking promotional activities of the brands to which you lose customers (Outflow)
Monitoring the availability of the brands from which you gain customers (Inflow) in targeted stores, and taking advantage of the opportunities to grow your brand.
Paying closer attention to the placement of your products on the shelf in places of purchase.
Observing broader trends in the market and aligning your portfolio. In the example we gave, we showed the interactions among price segments, but you can also use other segments that make more sense in your specific case (such as flavors, sizes, models, etc.)
Pair the results with market segments (see the post on Segmentation) and drill down the analysis to identify competitors within each segment.
Conduct a simulation survey to forecast future interactions under different price change scenarios.
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