Maximizing Opportunities for Market Differentiation

The SWOT analysis aids in understanding the market position of your company. In previous resources, we focused on Company Strengths and Unique Market Position, demonstrated by the SWOT analysis.  In this resource, we look to provide a process to evaluate the opportunities within your company.

SWOT Analysis: Reviewed

SWOT stands for Strengths, Weaknesses, Opportunities and Threats. The chart to the right shows the typical format of a SWOT analysis. Strengths and weaknesses are considered of internal origin, or attributes of the organization, while opportunities and threats are considered of external origin, or attributes of the business environment.

The SWOT analysis can be used for multiple purposes including market position. The Giersch Group uses SWOT for the overall evaluation of the company in our Business Review service. Here we will use it for market position. The company’s strategic plan would incorporate the SWOT analysis on market position factors for the coming year.

Market Position

Developing a market position needs to cover (a) customers, (b) products and services, (c) competition, and (d) trends in each of these.  In our prior resources, the competitor analysis is described. Here we consider the customer and the product and services.  Please note that pricing relative to the customer value is distinct from the pricing relative to the value to your company.  

The best way to profile the customers (the target customers) that make up your particular market starts with looking at your current customers. What are their tastes? What do they value most when buying a product or service: convenience, quality, price, individual attention, or something else? Here are some recommended questions to begin understanding your customer.

1. What product or service do they buy?
2. What are the price/value points for the customer?
3. Where is the customer located? Does location contribute to the value proposition?
4. Demographics

• For retail customers: age, income, family situation, etc.
• For company customers: size, needs, etc.

1. Innovation orientation – are the customers looking for new ideas or a stable service/product offering.
2. Capacity to pay – this includes income levels and financial strength.
3. Why or how are new customers generated?
4. Communication orientation is a new aspect of customers. The use of e-mail for ordering and marketing can be a distinction.

The goal is to understand what your current customer’s value about your services and products. 

Then we need to extrapolate this information into the broader target market for your customers. Here we need a bit of research into how many customers are available in your market.  This will give a measure of market share.  The above demographics can be used to quickly develop this information. Trade associations that provide some industry analysis and government databases that provide local demographic data are two great places to start.

The next step of the analysis of your opportunities should be examining your competition. At this point you should be able to recognize your target customer’s needs and areas where your competition is not capitalizing. Every small business owner should have an understanding of who their competition is and where they lie in the market.  Below are some ideas to consider on your business’ market position and the opportunities that have not been uncovered yet. 

1. Where is the overlap between my products/services and my competitors?
2. How do we distinguish our position?
3. What are the key points of difference between us and them?

The answers to these questions can uncover key opportunities. Small companies generally have the opportunity to “own” a specific target niche that is underserved by larger competition. The goal should be to avoid competition whenever possible because the cost to steal customers from your competition is 8 times as expensive as servicing a new market.

The Giersch Group recommends that a business focuses on opportunities that utilize its strengths rather than overcoming weaknesses. This is known by some as the “90% rule”, or only pursuing opportunities that your business is already 90% capable of achieving. This makes it more likely that you will achieve some type of return for your investment and will help your business grow in a more systematic way. Some questions to answer here are: What is the value add that you bring to your customers and how is it unique and valuable to your target market?  The goal should be to identify and capitalize on strengths while repairing weaknesses within your business. The Giersch Group recommends that you identify 3 unique values that you bring or seek to bring to your customers.

After you’ve determined some of your core value drivers and the available market, you can identify opportunities to strengthen your hold on your current customers and expand services or products or customers. 

Technology and Industry Changes

Addressing Weaknesses

This process will identify some weaknesses of your business’ market position. Creating opportunities from weaknesses involve first fixing weaknesses within your company.  This could be improving service levels. Another key internal weakness is becoming too relaxed and not adapting to the changes happening in the market and just letting things happen.  Generally, this weakness requires a refocus on the customer.  Surveys can help to monitor your progress on your products/services and your customers.

Here the Giersch Group would add the warning of the disgruntled customer.  The case study would be “New Coke” where Coca-Cola created New Coke to replace Coke, and ended up completely misjudging the market.  For the smaller customer, the last grumpy customer can make us feel like we need to reengineer our company.  That is why we need to be systematic in the market position evaluation.

Addressing Threats

Other weaknesses may be threats, outside shifts in marketing which require evaluation of the entire business. Industry changes or technology changes affect the market position in such a way that they can be either opportunities or threats.  Clients and customers will give you a heads-up on changes in the market.  They will communicate needs that are not being met or ways your current services could be enhanced.  Too often, businesses ignore customer input which is free marketing information.  Similarly, the perception of market change can be validated by the above customer survey.

Some technology changes are really threats.  Currently the publishing industry is facing a digital threat.  We may have read of the Borders bankruptcy that is now in liquidation.  The warning is that the market is now in structural change and the old business model and customer value is gone.  This is an example of a threat and needs to be addressed as such.

Action Items

1. Develop a check list of value evaluations for your customers.
2. Consider a survey to affirm your perceived value propositions.
3. Develop a market size by looking at the demographics.
4. Develop a list of potential market shifts or technology shifts that may be threats.
5. Develop a list of 3 key items for improvement of market position.

All of this data will then be used in the strategy review.

Articles for Further Reading

1. Berry, Tim. “Use SWOT to kick start your planning.” 23 July 2007.
2. “Understanding Your Target Market and The Competition.” 
3. Author Unknown. “Advertising is Not Marketing.” 15 October, 2008.

For more information, contact the Giersch Group for a free 30-min consult. We have offices in Milwaukee, Madison, and Brookfield Wisconsin.