Companies need to keep a tab on the competitor activities. Market research is the act of gathering competitive intelligence and is done by a company to find its own standing against the competitors or when a company is entering a new market or industry where there are already existing players. The most fundamental question being tried to answer is what is the market share of the various companies in the market. Market share by revenue might be different from market share by volume shipped.
Types of Competitive Intelligence
Research questions for gaining competitive intelligence can be one or more among the following but not restricted to these only.
Channel Partners
New products
Consumers
Market share
Self-assessment/ NPS
1. What are the competitors doing to attract new channel partners?
1. Have new competitors or alternative products entered any new market?
1. What category of consumers are targeted by the competition? Is there a niche market serviced by competition?
1. What is the market share of the major competitors or has there been recent changes in the market share of companies?
1. How efficient company’s systems are in terms of accounting, complaint redressal, scheme disbursement, etc?
2. What short term and long term schemes are being run for the channel partners?
2. Which innovations are the competitors bringing in their product?
2. What has been the recent changes in the competitor marketing communications?
2. What is the market share of the unorganized sector competitors?
2. How satisfied are the customers with the company’s marketing/ supply chain activities vis-à-vis those of the competitors?
3. What are the billing and wholesale prices of competitors?
3. What is the feedback on the product quality compared to competitor’s product?
3. What are the consumer schemes being run by the competition?
3. What activities by the company will have the highest impact to increase the market share?
3. How likely are the channel partners (promoters) to recommend our product?
Market Research questions pertaining to Competitive Intelligence
Though superficially all the research questions for getting competitive intelligence look different, there are deep relationships among them and response on one question impacts the response on another.
Pricing strategy for commodities, especially right at the time of introduction is another important element of the marketing strategy. Typically in commodities, there is a range of brands available for a wide spectrum of prices. Generally there are one or two price leaders in a market. As we go lower in the price spectrum, the number of brands increases at each price level. After introduction of the brand, most of companies follow market-based pricing strategy for commodities.
Types of Pricing strategy for commodities adopted by companies
Below are the various pricing strategies adopted by commodity companies. Cost plus pricing and competition based pricing are the most prevalent ones in the market and easy to ascertain. Value based pricing needs some research into the usage patterns of the product by the consumer and can change with geography. Penetration pricing and price skimming are used during production introduction phase.
Types of Pricing strategy for commodities
Initial Pricing strategy for commodities
Initial pricing is determined by what does the company want to achieve. If it wants quick sales numbers, then pricing at the lower spectrum makes sense (penetration pricing). However, so strong are the perceptions in the minds of wholesalers, retailers and customers formed about a product that it is very difficult to drastically change price relative to alternatives/ competitors after a certain period. Prices of commodities are always determined with respect to the price leaders. The price gap with the price leader remains more or less the same for long period despite the market seeing price fluctuations several times. Also, it is prudent to initially make more profits when the competition is not intense (price skimming).
Price Leader vs Volume Leader- Whom to follow
There are generally two types of markets, one where the price leaders are also the volume leaders and second where the lower-priced brands command the major market share and the premium priced brands have limited presence. Penetrating the market and getting some early sales is easier in the first scenario than in the second. However, positioning in the premium segment requires a whole lot of marketing effort. The switching costs are higher for consumers in the premium segment. The brand equity and thus loyalty of premium brands is already high. Company will have to invest heavily in advertisement as it will help in image building.
In markets dominated by low price leader, without a comparable price, entering the market itself is an uphill task. However, at low price, the new entrant might not be profitable as its costs might be higher than an established player in the market. The pricing strategy for commodities have to be such that the users see that the new product is giving a better value to the customers despite a higher price. Influencers like contractors and architects in case of building materials will have to be lured to promote the new brand. To operate at low price means that the input costs also have to be low, which means that all cost centers have to be very efficient.
Discounts for channel partners- Important aspect of pricing strategy for commodities
The pricing strategy for commodities becomes more complicated because of the various types of discounts floated by competitors. Often the billing price of the company has no correlation with the existing wholesale prices in the market. What is more important is the landing cost for the wholesalers. As part of the pricing strategy, companies need to closely monitor their wholesale and retail price. This will help to maintain the desired positioning in the market. Companies need to periodically adjust the billing price and discounts. This ensures that price fluctuations do not affect the wholesalers and retailers earnings per unit. They need to conduct marketing activities appropriate to maintain the brand positioning in the market.
Pricing strategy for commodities must also consider the influence of a few stakeholders in the market. Companies must also ensure that a big wholesaler does not disturb the prices in the market as it shakes the confidence of small retailers in the control mechanisms of the company. There should not be arbitrage opportunity for the wholesalers by way of bringing material from one region and selling in another. This becomes important because commodity prices vary drastically every few kilometers due t high freight involved in their transportation.
