Data Analytics, Competitive Advantage and Profitability
Since you’ve landed here, I assume you are keen to understand if there is anything you’ve missed – that you can do to increase profitability and… you’re already aware of the power of data analytics.
However I’ll play the game so that we don’t leave anything unturned.
How do they all align?
We believe that facts don’t lie… meaning that if you use the facts (available data) to make decisions and form strategies – it’s a whole lot more likely the outcomes will be much better for you.
So how does competitive advantage come into it?
I’m sure you can guess from the meaning of the word that it will help you become more profitable when you have a competitive advantage.
The biggest problem is that there is that there is a fairly big misconception around what a competitive advantage is.
I’m not trying to be smart, but if you use the words “high quality”, “fast turn around” or “good customer service” as the foundations of your competitive advantage – you’re amongst the 99.5% of companies that all sing the same song – which does NOT help you become more profitable.
Summary of the article
1. What is a Competitive Advantage?
2. What kind of Data Analysis is used for sales and marketing?
3. How do they specifically work to improve profitability?
In it’s simplest description, a competitive advantage is… “a difference that affords you a more favourable position” ie. more sales leads, increased sales or better margins than your competitors, “attributed to a specific reason”
There has been much research undertaken to determine the strategies which are key to sustainability advantage in business. The winners are… “cost leadership”, “differentiation” and “focus”.
Here are the most common strategies – to build an advantage over your competitors… with a large enough differentiator… which you can read more about on this page “Competitive Analysis”
– Lowest Cost Strategy
– Differentiation Strategy
– The Focus Strategy
– Operational Effectiveness Strategy
– Technology Based Competitive Strategy
– Innovative Strategy
– Adaptability Competitive Advantage
– The Information Advantage
How to start nailing your Competitive Advantage
Data Analytics – how it works with marketing and sales
Identifying the direction to head in developing sales and marketing plans is the key… also to identify your unique selling points, value proposition and a competitive advantage; as well as target markets, best selling products and verticals to chase amongst other goodies you’ll discover in the process.
There are three main categories/ types of data analytics that we do to aid marketing and sales.
This should be the precursor to any strategic business plan writing exercise… and all three of these components of a competitive analysis should be revisited throughout the process once a number of things are established to cross check the results and information previously gathered.
Your target market should be one of the things that is carefully looked at and continuously monitored and scrutinised – because it is a key factor of your profitability.
When analysing the business we mainly look at sales data but also look at overall business numbers so that we get a good idea of how the business is positioned. Competitive positioning is what we are after here and we need to understand the differentiator that gives you that business advantage in the market place; be that from a cost or differential advantage point of view.
Sales data is pretty broad as well, so to break it down quickly we look at your best customers in order to identify the reasons they buy what they buy and how to best research the market and analyse your competitors.
This particular piece of analysis helps all of us to clearly identify and begin to understand how to exploit the gaps in the market and your competitors weaknesses. It also serves the purpose of benchmarking what your value is and the specific things you offer in your industry – when we are looking at the types of competition that are out there.
Businesses often waste too much time with products and services that are either not worth selling (too much competition where they are out classed) or they don’t market it well enough to make the ROI worth it ie. spend too much time proving the point (wrong people or wrong time of buying journey).
That’s why we look at the sales process and marketing systems to establish what a company needs to do – initially, as a part of boosting their marketing and sales efforts. Integrating marketing into the different stages of a sales process is incredibly important for the success of sales.
Most companies today, have never done a customer buying journey mapping exercise. What’s that!?
Well there are stages that every potential customer goes through on their journey toward buying. If you understand what they are thinking along the way and the questions that they would typically be asking – you can provide the answers to these questions without “selling”. The “selling” here is called social selling or inbound marketing, with the premise that you actively give information in order to attract potential customers to engage with your brand.
Market research is critical for any business, especially those that are wanting to grow sustainably. Market research and analysis are all about finding out what the potential customers want, what’s on offer from your potential competitors and how big the market is.
There is often a good and bad side of most things… the internet is one of those things. For research purposes it is great – as there is a huge amount of data to be gleaned. The flip side of the easy access of information is that companies from overseas, interstate and all over your city are also able to promote their business to your customers who are local and also further a field.
So market analysis… we commonly look at a number of different areas and segment the market into verticals or niches depending on the industry and products/ services offered.
There are sometimes obvious gaps in the market for things people want, but are not necessarily readily available. Companies that can offer a faster service or lower priced product are often the winners – with a comparative advantage or differential advantage. This is often the case in the online FMCG market.
There are other not so obvious things that pop out, once the benchmarking steps are complete ie. market segments and competitors. Most companies have some sort of USP (unique selling point) published on their website or at least a list of products or services that we can differentiate them from you (with some work).
Message boards and forums are very useful places to see what people are looking for and what is not yet available. However all things need to be strategically weighed up… which is why we have the three pronged approach to then be able to write a strategic business plan.
Barriers to entry should also be evaluated and understood as a part of the strategic planning process before moving to develop a competitive advantage.
Competition to your business is vital. You may think they are painful, however when harnessed well, deep knowledge of a competitor’s USP’s, strengths, weaknesses and also how the market to your target market and also other markets that you don’t necessarily engage with are all useful for building your own strengths and up-skilling to cover the gaps in your operations… as well as finding that gap in the market to position your brand and create a useful business development strategy.
Analysing the types of competition and the way they do business development and marketing will shed much light on how to go forward.
Firstly we find all companies that say they do something similar to you and then refine from there. Generally we have a predetermined localisation before we start ie. where you currently do business and where you want to be doing more business.
As mentioned above, these pieces of research and analysis help us (and you) understand the current state of affairs, the gaps in the market and also the rough diamonds for further development of a differentiator or two – which will allow your company to have a commercial advantage.
A competitive analysis should be a fundamental part of any company’s strategic business planning process.
When your business has a differentiator (that is significant enough to make your product or service seem superior in the eyes of your target market) the potential customers will see the value in buying from you instead of the competition (your competitive advantage).
As we wrap up the three pronged approach to the competitive analysis, we are primed to help you with a competitive strategy; which is simply formulating an action plan from the research and analysis we’ve documented for you. We also have the strategic planning tools needed to make it easier for us to help you lay this out for you and your team to easily take to market.
Profitability – how Analytics and Competitive Advantage change it
Pretty simply, the data researched and analysed shows you where the gaps in the market and competition are – which you can then exploit to make a higher value offering to the market – which you already know they want and which there is no supply or poor supply of what they want.
It’s all about making decisions based on fact.
The main reason that using data to form a competitive advantage is a clear winner is that there are not a lot of companies actually doing it… hence there are openings in every market for someone to be better at most disciplines than their competitors.
Really all you need to be is better than your competitors at something that you can sustain for it to be a worthwhile differentiator!
Obviously this already makes you more profitable, when it’s up and running for you. However there are also some other benefits which may not be as clear by now.
Here are some additional profitability benefits to identifying and developing a sustainable competitive advantage.
According to a recent LinkedIn study and articles collated by Forbes, CNBC, Price Waterhouse Coopers and many more – creating an environment where sales people feel like the company is supporting them and also forging the correct path keeps them around for a much longer tenure. This cures the worry of most CEO’s and also the reason why sales people keep leaving prematurely.
So as you can see – data doesn’t lie and it helps you to understand what to do and also what not to do.
The cost of losing sales and sales people, rehiring and training is a massive consideration when looking at profitability and scalability over the long term. So why not investigate something that when used in the right way, will help to reduce costs and boost revenue – in turn potentially making profitability increase dramatically!
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About the Author
Matthew Benn is the founding partner of Alongside Business Consulting. He has been a senior Marketing and Sales leader for over 12 years, as well as being a small business owner for more than 9 years.
He really enjoys the challenges and successes that come with developing people and growing businesses, hence has taken these passions and put Alongside Business Consulting on the map.
Our aim is to curb the frustrations business owners have, with sales and marketing; therefore helping them take control of their destinies to build their businesses successfully… Business Growth Simplified.