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The Secret Dangers of Competitive Intelligence Gathering

Published: June 24, 2020 | By Chris Mele |

Why You Need To Know About Competitive Intelligence

Early in my career, I fell for a competitor’s spying ruse. I was working a tradeshow booth during the busiest traffic period when a “prospect” peppered me with questions about our product, pricing and development plans–and views of how the market was evolving. Of course, I was too naïve to suspect and too eager to notice what was actually happening. Between the time I spent ignoring legitimate prospects and the juicy insight I gave up, I did my software company no favors.  

It was a rude welcome to the world of competitive intelligence gathering.  

Competitive Intelligence

Now, decades later, I am no longer naïve. I know all about competitive intelligence and its beneficial role in software company strategy, particularly as it relates to pricing. In fact, at my company, we have an entire department of professional competitive intelligence gatherers. 

But I am an idealist, and strongly believe there is a right way–and a wrong way–to go about it. I am also practical, and quite mindful of the legal boundaries that govern how competitive intelligence can be obtained.

So, I am concerned that–still today–some common competitive intelligence gathering practices do more harm to your business than good.

Navigating the Ethics of Competitive Intelligence

To be sure, competitive intelligence is important to software pricing. The licensing metrics your competitors use (e.g., per-user, transaction volume, storage capacity, etc.), the structure of their packages and terms, and the prices and discounts they offer (including published vs. actual) are important inputs to any well-conceived monetization strategy. 

To gather this intelligence, it is perfectly acceptable to use all available information published from sources like company websites, product reviewers, discussion forums and reputable third-party research firms. It is also acceptable to conduct primary research by interviewing software purchasers, resellers or even competitors themselves–as long as the purpose of the interview is clearly and honestly represented.  

This last point is where things can go awry. Rather than reveal the true purpose of the discussion, competitive intelligence is often gathered under false pretenses, where the interviewer pretends to be a real prospect, for example. Such a practice puts your company in the thick of a few important ethical issues:

  • It unfairly disrupts another company’s operation and their employees’ opportunity to earn income. Sales is hard work and many software salespeople get paid and evaluated on closing deals. Pretending to be a real prospect takes important time away from the company and its staff that should be spent trying to generate real revenue. 
  • It damages your company’s reputation in the marketplace. At some point, it will likely be discovered that your company was involved in the practice. When that happens, your reputation as an ethical, high-integrity organization will take a hit, with the potential to affect revenue from both customers and prospects.
  • It creates a workplace culture precedent you may regret. Many software companies depend heavily on their company values and culture to attract and retain high-performing employees and motivate them to achieve. Unethical competitive intelligence gathering is inconsistent with that focus and sends the message that your company is willing to cut corners to make money.

When Competitive Intelligence Crosses the Legal Line

Ethical issues aside, there are serious legal consequences to consider as you conduct your competitive intelligence research. As a leading intellectual property litigator at an Am Law 200 law firm described it to us:

“There is nothing wrong with obtaining information on your competitors, when done in the right way. There is a difference between freely available competitive information and information that competitors do not wish to freely share. It is a competitor’s choice, and just because you can obtain the information in some fashion does not mean that you should, or that legal liability will not result from your actions. Legal pitfalls exist when, say, competitive information is obtained through false pretenses. Concerns include trade secret violations, nondisclosure obligations, and accusations of unfair competition, not to mention possible criminal liability.”

Importantly, this applies whether the violation comes directly from your company or from a third-party you’ve hired. So, ask your service providers about their intelligence gathering procedures to ensure they adhere to suitable ethical standards. In particular, weed out consultants who inappropriately use “mystery shopping” to gather intelligence from your competitors’ salespeople.

Done well, competitive intelligence is an important asset for today’s software companies. But the ethical and legal risks in how competitive intelligence is gathered require extra attention be paid to how it is practiced.   

Software Pricing Partners adheres to the code of ethics promoted by Strategic & Competitive Intelligence Professionals (SCIP). 

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Chris Mele

About The Author Chris Mele

Chris is Managing Partner for Software Pricing Partners, where he and his team have launched some of the software industry’s most transformative monetization strategies. As a former software company founder and leader, Chris focuses on the impact effective licensing, packaging and pricing strategies can make on the most essential software company metrics: revenue, profit and valuation. Under his leadership, Software Pricing Partners has become an influential voice for growth-oriented software companies both large and small.


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