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Chapter 3- Competitive Advantage- Notes

by: Callisa Ruschmeyer

Chapter 3- Competitive Advantage- Notes MKTG 3310-001

Marketplace > Auburn University > Marketing > MKTG 3310-001 > Chapter 3 Competitive Advantage Notes
Callisa Ruschmeyer
GPA 4.0

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Chapter 3 Competitive Advantage Competitor Analysis Competitor Strategies Competitor Orientations
Class Notes
Marketing, kincaid, competitive, Strategies
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This 6 page Class Notes was uploaded by Callisa Ruschmeyer on Thursday September 15, 2016. The Class Notes belongs to MKTG 3310-001 at Auburn University taught by MICHAEL KINCAID in Fall 2016. Since its upload, it has received 13 views. For similar materials see PRINCIPLES OF MARKETING in Marketing at Auburn University.


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Date Created: 09/15/16
Chapter 3- Competitive Advantage Buyers' Experience  Purchase --> delivery --> use --> supplements --> maintenance --> disposal Buyers Experience Cycle: 3 questions for each stage 1. Do customers need to complete specific tasks, solve specific problems or satisfy specific needs at this stage in the cycle? 2. Do customer experience pains (undesired costs, situations, and risks) at this stage in the cycle? 3. Do customers have any desires (benefits they expect or desires they would be surprised by) at this stage in the cycle?  If you reduce customer effort, you increase brand loyalty  High levels of service can substitute for high customer effort o Charter gives you free HBO to make you feel better; but does that really compensate for them just being better to begin with  Example- Charter o HBO isn't working- call the number- can't connect  This is a good opportunity for a competitor to come and pull market share o You have to wait from 12-5pm to have it installed  Effort is a cost  Risk- time lost, added hassle  Which of the 6 levels affect social risk- social risk is the fear of being disappointed because of the product you bought, use, disposed, etc. of it? IMAGE  Why do people wear camo to a restaurant? It is all about image. Utility Levers  Customer productivity- the innovation helps customers do things faster, better, or in different ways o Sales people and smart phones = huge productivity  Simplicity- the innovation offers enhanced ease-of-use  Convenience- the innovation makes a desired activity easier to perform o The internet makes buying goods easy  Amazon, Zappos, etc.  Risks- the innovation minimizes customers' financial or physical risks (& social and time off) o Example: PayPal  Fun and image- the innovation delights customers  Environment friendliness- the innovation facilitates recycling and other environmentally sensitive practices Creating Competitive Advantage  Competitive advantages- require delivering more value and satisfaction to target consumers than competitors  Competitive marketing strategies- how companies analyze their competitors and develop value-based strategies for profitable customer relationships Chapter 3- Competitive Advantage Competitor Analysis 1. Identifying competitors o Competitors can include:  All firms making the same product or class of products  All firms making products that supply the same service  All firms competing for the same consumer dollars o Industry vs. Market Point of View  Companies may also identify their competitors from an industry or market point of view  Industry View Market View Nike might see Adidas and Nike might see all outdoor apparel firms Under Armor as competitors (Columbia, Timberland, Solomon) as because they are in the same competitors because they attempt to satisfy the industry- Athletic Apparel same customer need or build relationships with the same customer group 2. Assessing competitors Competitors' objectives Competitors' strategies  Profitability  Strategic group offers the strongest  Market share growth competition *  Cash flow  Technological leadership  Service leadership Competitors' strengths and Estimating competitors' weaknesses reactions  What can our competitors do?  What will our competitors  Benchmarking do?  Competitor reactions to change in price o Develop a fighting brand  Lower priced product that competes- forces customers to compare two lower priced items rather than the premium price with the lower price  Example: Polo vs. Chaps - both branded by Ralph Lauren but one is distinctively priced cheaper than the other o Reduce prices  Reduce prices and follow the competition  You can liquidate your brand equity  Drops profitability of the entire industry Chapter 3- Competitive Advantage o Increase advertising spend  Price elasticity of the demand- demand changes as price changes  As price increases, demand decreases  As price decreases, demand increases  Advertising elasticity of demand- the more you spend on advertising, the greater the demand will be o Increase sales promotions  Increase sale's promotions  If we know our competition, we can predict with some certainty, which of ALL of these actions we should take 3. Selecting Competitors to Attack and Avoid o Customer value analysis determines the benefits that target customers' value and how customers rate the relative value of various competitors' offers o Identification of major attributes that customers value and the importance of these values o Assessment of the company's and competitors' performance on the valued attributes o Close or distant competitors  Firms will compete with those firms that resemble them most ("closeness")  Example- Nike will compete more with Adidas and Under Armor than with Timberland  The smart competitor offers lots of benefits  Sometimes it's better to "support" a healthy, close, but weaker competitor than not  If you beat out all competitors, you run the risk of a different major company taking that market space, which causes your company an even great risk  An unattractive SBU (the dog) may become a "star" for another firm through divesting o Good or bad competitors  Good competitors: play by the rules of the industry (don't want to kill off, just beat)  "Share" in the cost of market and product development  Legitimize new technology  They may serve less attractive segments or lead to more product differentiation  They may help increase total demand  Bad competitors don't play by the rules (avoid)  Rather than engaging in market building by bringing new consumers to the market, they grow their business by buying share (share building) not earning it  Buy business instead of earning it  They take large risks that may destabilizes the industry resulting in decreased profits for all firms  They play by their own rules  Continental Airlines, Huffington Post Chapter 3- Competitive Advantage 4. Designing a competitive intelligence system (BUT you never will be asked to repeat these) o Identifies competitive information and the best sources of this information o Continually collects information o Checks information for validity and reliability o Interprets information o Organizes information o Sends key information to relevant decision makers o Responds to inquiries about competitors Competitor Strategies  Approaches to marketing strategy o Entrepreneurial marketing- involves visualizing an opportunity and constructing and implementing flexible strategies  Gorilla marketing- getting extremely close to the customer  Replaces financial capital with intellectual capital o Formulated marketing- involves developing formal marketing strategies and following them closely o Intrepreneurial marketing- involves the attempt to reestablish an internal entrepreneurial spirit and refresh marketing strategies and approaches  Take existing products and use different strategies to give products a "rebirth" Basic Competitive Strategies  Michael Porter's four basic competitive positioning strategies 1. Overall Cost Leadership o A company achieves the lowest production and distribution costs and allows it to lower its prices and gain market share o You have found what your customer wants, so now in the production process, you try and create for the lowest price possible o Low price does not sacrifice quality- companies just find the sources of inputs for lower prices (outsource) o With lower prices, companies usually tend to sacrifice customer service  The effortless experience is more in line with Publix than with Walmart or Sam's o Examples- Walmart, JetBlue, Texas Instruments 2. Differentiation Strategy o A company concentrates on creating a highly differentiated product line and marketing program so it comes across as an industry class leader o Focus on adding value by creating the form, place, possession, etc, that the customer wants o Examples- Under Armor, Caterpillar, Publix, Apple, Delta 3. Focus Strategy o A company focuses its effort on serving few market segments well rather than going after the whole market o Going after a small,well-defined target market o Less competition, but costs are usually high Chapter 3- Competitive Advantage o The Focus strategy does not physically add any greater value than the other two strategies, it just appears to add value from the targeted customer standpoint o Examples- Four Seasons, Bose 4. Middle of the Road o A company that pursues a clear strategy will achieve superior performance…a company without a clear strategy will not succeed o Examples- Sears, Holiday Inn Value Disciplines  Michael Treacy and Fred Wiersema suggest companies can gain leadership positions by delivering superior value to their customers in three "value Disciplines 1. Operational Excellence o Refers to a company providing value by leading its industry in price and convenience by reducing costs and creating a lean and efficient value delivery system o Examples- IKEA, Southwest Airlines, Walmart, Costco 2. Customer Intimacy o Refers to a company providing superior value by segmenting markets and tailoring products or services to match the needs of the targeted customers  These targeted customers are willing to pay a higher price to get exactly what they want o Delighting customers through a super high level of service may produce high levels of brand loyalty, but pales in comparison to "effortless experience"  Effortless experience- do what you say you are were going to do; deliver on your promises o Customer intimacy competes with customer relief 3. Product Leadership/Differentiation o Refers to a company providing superior value by offering a continuous stream of leading-edge products or services o Open to new ideas and solutions and bring them quickly to the market o Innovation: continuous, discontinuous, disruptive (in a positive way- things that require us to change the way we use a certain product) o Examples- Apple, Under Armor Competitive Positions  Market leader strategies o 40% share o Expand total market/demand  New users- untapped market segments in many places  New uses  More usage- use product more or use more per occasion o Protect market share- good defensive and offensive actions  Fixing or preventing weaknesses that competitors could take advantage of  Maintain consistent prices that provide value  Keeping strong customer relationships  Promoting continuous innovation Chapter 3- Competitive Advantage o Expand market share- if market size remains constant  Increasing profitability with increasing market share in served markets  Producing high-quality products  Creating good service experiences  Building close relationships  Market challenger strategies o 30% share o Full frontal attack  Challenge the leader with an aggressive bid for more market share o Indirect attack  Second mover advantage- challenger observes what has made the leader successful and improve on it  Market follower strategies o 20% share o Follow closely o Follow at a distance o Other strategies include  Play along with competitors and do not rock the boat  Copy or improve on leader's products and programs with less investment  Bring distinctive advantages  Keep costs and prices low or quality and services high  Market nicher strategies o 10% share o By market, customer, product, marketing mix o Multiple niching o Ideal market niche is big enough to be profitable with high growth potential and has little interest from competitors Balancing Customer and Competitor Orientations  Companies need to continuously adapt strategies to changes in the competitive environment o Competitor-centered company  Spends most of its time tracking competitors' moves and market shares and trying to find ways to counter them  Advantage- the company is a fighter  Disadvantage- the company is reactive o Customer-centered company  Spends most of its time focusing on customer developments in designing strategies  Provides a better position than competitor-centered company to identify opportunities and build customer relationships o Market-centered company  Spends most of its time focusing on both competitor and customer developments in designing strategies  Balances the other two: you know and understand competitors' tactics, but you are familiar with what your customers value and want


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