“Art of War” is my favorite business book. It has everything we need to know to compete in the cut-throat world of technology. When it comes to competitive intelligence, “Art of War” is highly informative.
“Know the enemy and know yourself; in a hundred battles you will never be in peril.”
It is only one sentence but it contains so much knowledge. How does it apply to us, in a technology battlefield?
What weapons do we need to bring to the battle and how should we conduct ourselves for success?
Know the Enemy
Before entering into battle it is wise to have a thorough understanding of our enemy. What are his strengths? What are his weaknesses?
From a business perspective our enemy (competitor) has goals and has certain views about the market. He has plans for achieving those business goals, and those plans are set in motion. Our job is to figure all this out in advance, because the time to learn about our competition is not in heat of battle but beforehand when we can strategize and plan.
We want to be able to forecast how the competition will react in different circumstances, so we can find the shortest route to victory.
What are our strengths? What are our weaknesses? How do they stack up against our competition?
Our strengths should not be used to attack our competitor’s strengths, unless we have an overwhelming force. Our strengths should be used to attack our competitor’s weaknesses. Find the soft underbelly of our competition and attack that. Is there a market segment they are ignoring? Is there a gap in their product line? Is there something they are unwilling to do – regardless of the reasons why – that you can exploit.
“Now an army may be likened to water, for just as flowing water avoids the heights and hastens to the lowlands, so an army avoids strength and strikes weakness.”
Conduct War Games
Now that we’ve identified our competitor’s strengths and weaknesses, it’s time to play war games. Develop a set of attack plans targeting our competitor’s weaknesses. In each scenario, how will our competition react? What will they likely do? What won’t they do?
Evaluate each scenario based on the likelihood of winning the battle. We will find that some scenarios are more favorable than others. The goal is to identify the scenarios with the highest degree of success and focus there.
Some Battles are not Worth Fighting
How many times have you seen your salesforce get into competitive situations that they could never win, yet burn untold company resources trying?
Knowing our competition, knowing ourself, and simulating what might happen in a battle gives us the insight that some battles are worth fighting (and winning) and some are not. In some cases we should rally all our resources for victory and in others we should retreat.
Too often the request for help with a competitor comes after the battle has already started. The biggest lesson from Sun Tzu about knowing our competition is that we shouldn’t wait until the heat of battle to start to figure this out.
A Sharks season ticket holder wrote:
I was surprised to learn that the SJ Sharks are printing variable pricing on the tickets for the games. “This means that the price printed on your ticket will reflect the true market value based on the expected demand for each game.”
So if you are in a low priced (Tier 1) game, do you wear your old uniform?
It turns out that the Sharks are considering the opponent and the day of the week the game is scheduled to estimate demand and therefore price. This makes perfect sense for pricing individual games.
What didn’t instantly make sense though is why do this for season ticket holders, who pay for the season, not individual tickets. Why should the Sharks bother printing different prices on each paper ticket?
After a little digging you find that this behavior provides more value to their season ticket holders.
To make sense of this you need to know that the NHL hosts a site called NHL TicketExchange, which is where you can legally go to sell tickets to any game you might not be able to attend. However, you can only sell them for the face value of the ticket. This variable pricing allows the season ticket holders to sell the best games at higher prices.
Also, when you add up the prices of all of the individual games, you get a number larger than the price of the season ticket. This means if a season ticket holder could sell every ticket at face value, he or she would make a profit.
What is fascinating about this example is simply by changing the printed price on a paper ticket, the Sharks provided more value for their season ticket holder. Are you always on the lookout for ways to add value to your customers? It doesn’t have to be with the price label (and rarely will be). When we add value, we make happier, more loyal customers who will likely be willing to pay more.
I love to see unusual pricing behaviors. They are intriguing and often we can learn something interesting from them, even if it’s what not to do. Please send me any apparently inexplicable pricing you run into.
Competitive Intelligence: Use Employees and Internal Knowledge to Create a Competitive Edge
Pragmatic Marketing is pleased to host Tim Rhodes, Oracle’s director of competitive intelligence, at our upcoming webinar, Tuesday, Sept. 23, 2:00 – 3:00 p.m. EDT.
Tim will discuss how companies have increased their win-rates, improved competitive positioning and planned for the future using internal crowdsourced competitive intelligence. Learn about real-world examples and the best practices that you can put to use at your company.
The following question was asked on the LinkedIn group Pragmatic Marketing Alumni. FYI, Rhoda, who asked the question, works for a large company that sells information products.
Global Pricing – Fact or Friction
No. It isn’t a typo. I really mean friction. Lately I’ve been thinking a great deal about how readily we do business on a global basis. Yet, working for a company that has been around for over 170 years, we’re faced with many traditions. In some cases, it is those traditions which have made our brand recognized around the world as being trustworthy and accurate. We’ve continually adapted and changed with the times.
With physical products there are clearly reasons for pricing differences based on geographies, but with software (or in my case, data), I’m not so sure. With the current trends of transparency, do we create more buying friction by having geographic pricing differences?
I am not a pricing expert, so I ask the group membership to weigh in on this topic. Are differences in pricing based on geography a leftover, unnecessary legacy or are companies justified in charging a different price for the same product or service in different countries?
Hi Rhoda, If we could boil all of pricing down to a single concept (which we can’t) it would be “charge what your customers are willing to pay.” Pricing based on geography is typically based on the fact that customers in some regions are willing to pay more than customers in other regions. For example, many hardware components (e.g. semiconductors) sell for less in Asia and for more in US and Europe. This isn’t about cost to serve, this is about willingness to pay.
Two cautions, which may be causing your angst. First, we have to be careful of arbitrage. Can someone in one region buy at a lower price and resell at higher price in another region. As a digital information product, you have this problem even if you charge the same price to everyone because typically there is no cost to your customers if they replicate your information. I’m sure you have means in place to minimize people pirating your information.
Second, sometimes customers in one region get upset that they have to pay more than another region. This only happens when they are aware of what others are paying. Most companies who charge different prices by the region try to not let anyone else know what prices are actually paid. The easiest way to do this is to publish a single worldwide price and then offer discounts to the geographies who you think have a lower willingness to pay.
Now you face the problem of large multi-national organization that get quoted different prices for the same item across regions. This is extremely hard to deal with. You either get to try to justify the price difference (support costs?) or offer the same price for the large multi-nationals regardless of where the information is consumed. My preference is usually to be a true partner to your multinationals and give them your best price regardless of location.
Of course there could be many nuances, but these three points should get you started in the right direction:
1. Charge what your customers are willing to pay
2. Avoid arbitrage across regions.
3. Hide your best prices from those who pay more when you can.