Understanding Business Failures: A Comprehensive Guide to Competitive Analysis and Customer Loyalty

Why Do Businesses Fail?

Businesses fail for various reasons, including:

• Creating products that customers do not want
• Running out of financial resources
• Failing to investigate their competitors

Competitive Analysis

1. Identifying Competitors

Direct Competitors: Products or services that are similar substitutes for yours and operate in the same geographic area.

Indirect Competitors: Products or services that are not the same but could satisfy the same need or solve the same problem.

2. Assessing Competitors' Strategies, Objectives, Strengths, Weaknesses, and Reaction Patterns

Benchmarking: Measuring the performance of a company's products or processes against industry leaders.

Business Analysis:

• Product line, quality, pricing, discounts

Sales Analysis:

• Sales process, channels, revenue per year, sales volume, market share

Marketing Analysis:

• Website, marketing efforts, online and offline advertising, social media presence, customer service, customer reviews

SWOT Analysis:

• Strengths: Internal positive attributes within your control
• Weaknesses: Internal negative factors that need improvement
• Opportunities: External factors in your business environment that can contribute to your success
• Threats: External factors that can negatively impact your business, requiring contingency plans

3. Selecting Competitors to Attack or Avoid

Monitoring Customer Service Delivery

Dimensions of customer service delivery that contribute to loyalty:

• Reliability: Ability to perform promised services dependably and accurately (32%)
• Responsiveness: Willingness to help customers and provide prompt service (22%)
• Assurance: Knowledge and courtesy of employees, conveying trust and confidence (19%)
• Empathy: Caring, individualized attention provided to customers (16%)
• Tangibles: Appearance of physical facilities, equipment, personnel, and communication materials (11%)

Customer Relationship Management

A strategic approach to managing a company's interactions with current and potential customers, focusing on satisfaction, quality, loyalty, service, reliability, improvement, and support.

Stages of the Customer Lifecycle

• Acquisition: Attracting new customers through marketing efforts
• Retention: Maintaining relationships with existing customers, creating customer delight, and adding value
• Development: Growing the value of retained customers through cross-selling and up-selling

Customer Loyalty

Attracting the right customers and encouraging them to make repeat purchases in increasing quantities, leading to customer referrals.

Types of Customer Loyalty

• Cognitive: Based on available information, preferring a particular brand
• Affective: Developing a brand loyalty or attitude after repeated purchases
• Conative: Strong commitment to repeatedly purchasing a specific brand
• Action: Actual act of buying, maintaining the intention to repeatedly purchase

Ladder of Customer Loyalty

Different types of customers, with CRM aiming to retain customers as it can be more cost-effective than acquiring new ones:

• Suspect: Encounters the company's promotion
• Prospect: Pays attention to or is interested in the promotion
• Customer: Purchases the product or service
• Client: Returns for repeat purchases
• Advocate: Promotes the business, providing unpaid advertising

Customer Loyalty Programs

Incentives offered to bond customers to a company's products or services, often attracting price-sensitive customers but increasing marketing expenditure.

• Simple percentage discounts on purchases
• Buy-one-get-one-free promotions
• Tiered rewards
• Customer relationships with frequent special offers