Understanding the environment you operate in is a key component of any strategy. It is critical to determine how you fit into the market, to monitor how it is changing and evolving over time, and to decide how you respond. It’s also important to know the different markets, sectors and segments available to you, to choose which ones to target, and then identify how to compete effectively.
Building market awareness includes understanding customers, competition and market trends, and understanding how your internal competences and capabilities align to these. By gathering data and insight across these areas you can build depth and confidence into your strategic and tactical decision making.
First and foremost, who are your customers? How many of them are there (or could there be), and what trends can be observed? Mapping the market and understanding the segments that exist is a fundamental task. You also need to be clear what your customers want from you, and how this might evolve over time. Your customers will have a perception of your brand, which is vital for you to gauge. More often than not they won’t hold the opinion you’d like them to, and that’s a clear indication of where you need to take some action.
Who else is serving your customers? You need to be able to answer that question today but also to have an informed view of how the competitive landscape is likely to look in the future. Alarms bells should be ringing if you perceive their offering to be a closer fit with customer needs, but it’s important not to jump to conclusions and to perform an objective metric assessment.
What does your industry / market place look like? Identify the key social, regulatory, economic, political, and technological changes and trends. Once you’ve done that you can establish how you will respond. You may choose not to respond at all, but that’s a decision that can only be made once you’ve evaluated the risks.
Having understood the external environment, it’s important to also understand internal capabilities and how these help/hinder your strategy. The best known tool is the SWOT analysis, which is one of the most valuable yet under-utilised management tools available.
Once you have an understanding of your market across these four areas, then you can feed this knowledge into your strategy and proposition. One of the most powerful outputs is the data you gather, and the insight that can subsequently be gleaned from it.
CASE STUDY: Banking
Possibly the most important ingredient in understanding your market is data, as it can inform your view of customer needs and changing trends. A recent development in the banking industry provides a great example.
Technology and marketing innovation mean the banks are now using the data they hold in a much more effective and profitable way – and selling the most targeted advertising opportunities to companies, including supermarkets.
It works like this: a customer that spends a regular amount of money each month in a particular shop on a particular line of goods (say cosmetics) is targeted with an offer placed on their online bank statement next to the relevant transaction to purchase the same items for a 20 per cent discount from a rival store. Once clicked on, the customer’s debit card ‘carries’ the offer and the customer becomes eligible for a discount in store when they meet a spending threshold.
The take up on these targeted offers is remarkable – more than fifteen per cent of those targeted are clicking through. When you consider that the average online banner has a click through rate of 0.1% (according to Doubleclick), it puts this into perspective.
A great example of how you can unlock the potential of your data by objectively looking at opportunities to increase your bottom line and challenging the way data is used in your organisation, particularly in respect to marketing strategies.
6 key market awareness questions to ask yourself:
- Do you have a deep understanding of your market and how it might develop in the next 2-4 years?
- Do you have a clear understanding of major external trends and know how they may impact your organisation?
- Do you understand your current and future competitors, and know how you’ll outperform them?
- Do you have a good understanding of customer needs and how they might develop in future years?
- Do you regularly solicit customer and partner feedback to improve products and services?
- Do you know what the biggest opportunities and threats facing your organisation are?
These questions are mirrored within our Strategy Survey, a free tool also available on our website.
This blog is the first of a set of four in Whitecap’s Strategy Series, published in November/December 2013.