• Aim: create value for customers

• good marketing means keeping customers by:

 understanding their needs,
 designing appropriate customer-driven marketing
C R E AT I N G strategies
C O M PA R AT I V E  building customer relationships
A D VA N TA G E • Understanding customers is a prerequisite, but also use
this to gain competitive advantage
• offer more value than rival firms deliver
• i.e. need to understand competitors as well as customers,
thro’ competitor analysis
•
• Today firms face their toughest ever level of competition
• NB – global market place; companies have moved from a
‘product and selling philosophy’ to a ‘customer and
marketing philosophy’
C R E AT I N G
• how firms go about outperforming competitors C O M PA R AT I V E
• consumers see competitive advantages as customer A D VA N TA G E
advantages, thus giving a company an edge over its rivals
 •

COMPETITIVE ADVANTAGE
• An advantage over competitors gained by
offering consumers greater value than
competitors do

COMPETITOR ANALYSIS
CREATING • The process of identifying key competitors;
assessing their objectives, strategies,
COMPARATIVE strengths and weaknesses; and selecting
ADVANTAGE which competitors to attack or which to
avoid

COMPETITIVE MARKETING
STRATEGIES
• Strategies that strongly position the
company against competitors and give the
company the strongest possible strategic
advantage
 COMPETITOR ANALYSIS

A company needs to find Then it can spot areas of

out all it can about its potential competitive
competitors. This means advantage and
constantly comparing : disadvantage
 IDENTIFYING COMPETITORS

• first task is to identify its competitors

• not just companies that offer similar products to same customers at
similar prices, e.g. Coca-Cola and Pepsi
• all firms with the same class of products, e.g. all soft drinks
manufacturers
• all those companies that compete for the same customer cash, e.g. ice-
cream manufacturers.
• avoid competitor myopia
• industry perspective
• market perspective, i.e. a broader set of actual and potential
competitors
•
 A range of objectives, e.g. current
profitability, market share growth, cash
flow, leading on technology

Relative importance of each

ASSESSING
COMPETITORS’
OBJECTIVES
Different objectives may exist for
different market segments

Knowledge of objectives will help

company predict how competitors will
react to its actions
 • More similar 2 firms strategy, the more they
will compete
• Strategic groups
ASSESSING • Need to consider all dimensions:
COMPETITORS’  Product quality
MARKETING
STRATEGIES  Product mix
 Customer service
 Pricing policy
 Intensity of distribution
 what can competitors do?

ASSESSING
COMPETITORS’
STRENGTHS AND Information is difficult to obtain
WEAKNESSES

benchmarking –comparing one company’s

products / processes to those of
competitors to identify best practices, to
improve quality and performance
 Estimating competitors’ reactions

• what will the competitors do?

• competitors’ philosophy of doing business?
ASSESSING • i.e. their internal culture and guiding beliefs
COMPETITORS’ • try to get into competitors’ minds to see how
STRENGTHS they will react
AND • some react quickly and strongly – others not
WEAKNESSES • some will not react – believe their customers are
loyal
• some will be slow in noticing change; others will
not have the funds to react e.g. cannot finance a
matching price cut
• how to best attack competitors or how best to
defend its current position
A] Strong and weak
• Customer value analysis – what benefits target
customers value
• how they rate the relative value of various
competitors’ offers.
• company needs to identify first what attributes
customers value, and the importance they place
WHICH
on these attributes.
• finding the ‘strategic sweet spot’, i.e. where the
COMPETITORS
company meets its customers needs in a way
that rivals don’t – then able to:
TO ATTACK
1. charge a higher price > earn greater
profits OR
AND WHICH TO
2. charge same price > gain a greater
market share.
AVOID
If performing poorly on the relevant attributes
[compared to its rivals] :
• then invest in strengthening those attributes, or
• find other attributes where it can outscore
competitors
B] Close or distant

C] Good or bad
WHICH
• Good - benefit from the existence of
competition, e.g. share R + D costs.
COMPETITORS
• Competition can lead to more product TO ATTACK
differentiation > thus helping to create a niche.
• Competition can also increase total market AND WHICH TO
demand.
• Bad – taking part of the market share of the
AVOID
company;
• those that take greater risks are able to do so by
being larger resourced but this will be at the
expense of the company
Avoiding competition

W H I C H C O M P E T I TO R S
• finding uncontested market spaces TO AT TA C K A N D W H I C H
TO AVO I D
• ‘blue ocean strategy’.
• ‘a bloody red ocean’
• ‘value innovation’
• identify types of competitive info needed and the best
sources of this information

• design a system then to continuously collect data

DESIGNING A
COMPETITIVE
• check the validity and reliability of this information INTELLIGENCE
SYSTEM
• this gives company timely information about rival firms

• smaller companies have ‘in-house expert’

 •
• by which it can gain competitive advantage thro’ offering
superior customer value
Different approaches:
• many large firms develop a formal competitive marketing
strategy, others adopt a less formal / a less orderly strategy
COMPETITIVE • Entrepreneurial marketing
STRATEGIES • competitive positioning strategies: [Porter]
1 Overall cost leadership
2 Differentiation
3 Focus
• ‘middle-of-the-roaders’
• gain positions of leadership in their market by delivering
superior customer value
 VALUE 1] Operational Excellence

DISCIPLINES 2] Customer Intimacy

- 3
STRATEGIES 3] Product Leadership
 • Competing firms differ in their objectives and
resources
 Large v Small
 Established v New
COMPETITIVE
POSITIONS  Those that aim for rapid market share -v- long term
profits

• Competitive strategies depend on their respective

positions in the target market
Definitions
• [40%] leader = the firm in an industry with the
largest market share

• [30%] challenger = a runner–up firm that is fighting

hard to increase its market share in an industry
COMPETITIVE
• [20%] follower = a runner-up firm that wants to hold
on to its share in an industry without rocking the boat
POSITIONS
• [10%] nicher = a firm that serves small segments
that the other firms in an industry overlook or on
purpose ignore
• Most industries have a recognised market leader, i.e. the one with the largest
market share
• usually leads the other firms on price changes, new product introductions, level
of spending on promotion.
• competitors look on the leader as the company to challenge, imitate or avoid
• McDonald’s, Google = examples of market leaders
• Being market leader is not easy:
MARKET LEADER
• needs to be constantly on its toes as other firms keep challenging its strengths or
try to take advantage of any weakness. STRATEGIES
• a slip and the market leader can easily move to 2nd or 3rd place.
• product innovation, complacency, misjudging nature of competition can impact
on the leader – so market leader needs to guard against this
• leader may become dated and old-fashioned in the products it offers, and thus
lose its no. 1 status
•
 To remain no. 1, 3 possible course
of actions market leader can take:

A] Find ways to expand total

demand

MARKET LEADER
find new users - untapped market
STRATEGIES segments

discover new uses

more usage of its product[s]

• to remain no. 1, 3 possible course
of actions market leader can take:
B] Take steps to protect their current
market share
• prevent or fix weaknesses that
provide opportunities for
competitors
• always fulfil its value promises MARKET LEADER
• prices must remain consistent with STRATEGIES
the value that consumers perceive
in the brand
• work tirelessly to maintain strong
relationships with valued
customers
• i.e. should ‘plug holes’ so that
competitors do not jump in.
 MARKET LEADER STRATEGIES

• attack is the best form of defence

• best response is continuous innovation
• market leader must refuse to be content with the way things are
• needs to lead the industry in new products, customer services, distribution effectiveness,
promotion and cost cutting
• needs to keep increasing its competitive effectiveness and value to customers.
• when attacked by challengers market leader reacts decisively
 MARKET LEADER STRATEGIES

•
• To remain no. 1, 3 possible course of actions market leader can take:
C] Try to expand market share further
• In many markets a small increase in market share = a very large increase in sales
• Studies show that, on average, profitability rises with increasing market share
• Companies must not think however that, automatically, increased market share = improved profitability
• Higher market share leads to higher profits only when average costs of production fall with increased market
share, OR when companies have superior quality products and charge a premium price that more than covers
the increased production costs involved
 MARKET CHALLENGER STRATEGIES

• Challenge market leader OR

• Play along with competitors and not ‘rock the boat’
• Market challenger must first identify which competitors to challenge + also define its strategic
objective
• Challengers can attack the market leader – a high risk but potentially high gain strategy
• Objective may be to take over market leadership OR to gain more market share
• Challengers have ‘second-mover’ advantage OR
• challengers can avoid the leader and instead challenge other firms [its own size, or smaller local
and regional firms, who may be underfinanced and not serving their customers well]
 • How can challengers attack?

1] Full frontal attack – matching the competitor in all

aspects of 4P. Attacking the competitor’s strengths, rather
MARKET than its weakness.
CHALLENGER
• If challenger has fewer resources than the competitor, a
STRATEGIES full frontal attack makes little sense.
• Many new market entrants avoid frontal attacks – price
wars inevitably follow

2] Indirect attack - on competitor’s weaknesses, or on

gaps in the competitor’s market coverage
 • followers can gain many advantages.
• market leaders often bear huge costs of developing new
products/markets.
• Followers can learn from market leader’s experience,

MARKET copying and improving leader’s product and marketing

programmes, usually with much less investment.

FOLLOWER • Following does not mean the same as copying exactly

market leader.

STRATEGIES • Must find right balance between following closely

enough to win customers from market leader, but
following at a distance to avoid prospects of retaliation.
• Each follower tries to be distinctive – location, service,
financing
• A follower is often a major target of attack by
challengers
 • target sub-segments
• Often smaller firms with limited resources.
• Also smaller divisions of large firms pursue
niching strategies.

MARKET • niching profitable as such firms get to know

their customers so well that they meet customer
NICHER needs better than other firms.
• Firms charge a substantial mark-up over costs;
STRATEGIES mass marketer achieves high turnover, nicher
achieves high margins.
• An ideal market niche is big enough to be
profitable and has growth potential, but most
importantly is of little interest to major
competitors
• uses its customer goodwill to defend itself
against a major competitor
• Key is specialisation - either:
• Geographically
• Quality-price
• offer services not offered by other
MARKET
firms.
• Niching carries major risks; market
NICHER
may dry up or might grow to a
point that attracts larger companies.
STRATEGIES
Hence multiple niching practiced -
developing 2 or 3 niches increases
chances of survival
 • Whichever position a company holds in the
BALANCING market it MUST watch its competitors
closely.
COMPETITOR • find the competitive strategy that creates the

-CENTRED most effective market position for itself.

• continually adapt in a fast-changing
WITH BEING competitive environment.

CONSUMER- • a company can be over-focused on

competition and thus damage its customer
CENTRED orientation
 A] Competitor-centred company spends most
of its energies tracking competition and trying to
BALANCING find strategies to counter them.

COMPETITOR • Good – develops a fighter orientation that

looks for its own weaknesses and searches for
-CENTRED weaknesses in rival firms

WITH BEING • Bad – co. becomes too reactive. Rather than

carrying out its own customer relationship
CONSUMER- strategy it bases its own moves on the
strategies of competitors. Result is that it
CENTRED merely matches actions of others, rather than
seeking innovative ways to create more value
for customers
 • B] Customer-centred company focus
instead on customer developments in
BALANCING designing its strategies. It is then in a better
position to identify new opportunities. By
COMPETITOR observing customer needs as they evolve it

-CENTRED can decide what its customer wants as they

emerge. Thus it can concentrate on delivering
WITH BEING superior value to its target customers
• C] Market –centred company is what
CONSUMER- today’s companies should aim to be – i.e.
CENTRED watching BOTH their competitors and their
customers