How to Explore Secondary Markets for Competitive Intelligence - dummies

How to Explore Secondary Markets for Competitive Intelligence

By James D. Underwood

Competitive intelligence can be crucial in secondary markets because they can be subject to rapid change. Secondary markets, often referred to as aftermarkets, are extensions of primary markets that typically appear in one of the following forms:

  • Original equipment manufacturer (OEM) replacement parts: Many manufacturers earn significant profits from the sale of replacement parts for items they manufacture, including cars, home appliances, and airplanes.

  • Aftermarket parts: Third parties manufacture products for the purpose of replacing OEM parts, usually with less-expensive options.

  • Customers other than those a product was designed for: For example, jewelry makers may use toolboxes and tools designed for general use.

  • Used parts: For example, a used oil-field pump jack is often viewed as a great buy (versus a new one), because a pump jack often has a useful life of 100 years.

Secondary markets may be one of your company’s most profitable areas, but they may also pose a significant threat to your profits when third parties try to swoop in and claim their pieces of the pie.

To keep tabs on secondary markets, here’s what you need to do:

  • Be aware of your company’s key profit producers. In many cases, the most profit from the sale of a product is the sale of replacement parts, not the original product. Those fat margins can be tempting for agile competitors who specialize in aftermarket parts.

  • Keep tabs on your secondary market competitors. Find out who they are, how agile they are, and how willing they are to invest in producing your aftermarket components.

  • Watch for companies who compete on price alone. They often enter a market by offering high discounts, which can rapidly erode profits in a sector.

  • Maintain an active intelligence file on all your secondary-market competitors.