MARKETING MANAGEMENT12th edition
11 Dealing with Competition
Kotler Keller
11-2
Objectives
How do marketers identify primary competitors
How should we analyze competitors’ strategies, objectives, strengths, and weaknesses?
How can market leaders expand the total market and defend market share?
How should market challengers attack market leaders?
How can market followers or nichers compete effectively?
11-3
Competitive Forces & Analyzing Competition
Competition is any past, current or future potential
solution to an application need from either an
internal or external entity = risk and opportunity
DEFINITIONDEFINITION
DINDUSTRYDINDUSTRY CONCEPT CONCEPT• Number of sellers
• Degree of differentiation
• Entry, mobility, and exit barriers
• Cost structure
• Degree of vertical integration
• Degree of globalization
Five Five Forces Forces
Determine Determine SegmentSegmentStructural Structural AttractivenessAttractiveness
● Pure Monopoly
● Oligopoly
● Monopolistic
● Pure Competition
INDUSTRIESINDUSTRIESGroups of firms with products that are closesubstitutes for each other
MARKETING CONCEPTMARKETING CONCEPT
Any type of functional solution to an application need
versus grouping competitors by common product attributes
Who is the Competition / leaders and key others per target market
What are their strengths and weaknesses (products, resources, alliances, value chain integration, market share, etc.)
What are their objectives and strategies
What trends have their historical performance demonstrated
How do they react to new competitors and current competitors with new initiatives
ANALYZING COMPETITORS - INDIVIDUALLYANALYZING COMPETITORS - INDIVIDUALLY
11-4
What are the strategic groups that comprise the industry
What are the marketing mix characteristics that define each group
What market share (and history) does each group constitute in the industry
What group offers the product mix within which it is best to compete
Who are the leaders and key players in each group
What are the objectives, strategies, strengths and weaknesses of each
What are their reaction patterns to competitive initiatives
EXAMPLES: Industry Strategic Groups
Dell Market Objectives and Strategies
Customer Awareness
Product Quality
Product Availability
Technical Assistance
Selling Staff
Competitor A E E P P G
Competitor B G G E G E
Competitor C F P G F F
Note: E = excellent, G = good, F = fair, P = poor.
Market Share Mind Share Heart Share
2000 2001 2002 2000 2001 2002 2000 2001 2002
Competitor A 50% 47% 44% 60% 58% 54% 45% 42% 39%
Competitor B 30 34 37 30 31 35 44 47 53
Competitor C 20 19 19 10 11 11 11 11 8
SURVEY: CUSTOMER RATINGS OF COMPETITORS – KEY SUCCESS FACTORS
SURVEY: CUSTOMER MIND SHARE AND HEART SHARE
DominantDominant
StrongStrong
FavorableFavorable
TenableTenable
WeakWeak
NonviableNonviable
Analyzing Competition By Group
11-5
Hypothetical Market Structure
Market-Leader StrategiesMarket-Leader Strategies Expanding the Total MarketExpanding the Total Market
New UsersNew Users Market-penetration strategyMarket-penetration strategy New-market segment strategyNew-market segment strategy Geographical-expansion strategyGeographical-expansion strategy
New UsesNew Uses More UsageMore Usage
Defending Market ShareDefending Market Share
Defense StrategiesDefense StrategiesPosition DefensePosition Defense
Flank DefenseFlank Defense
Preemptive DefensePreemptive Defense
Counteroffensive DefenseCounteroffensive Defense
Mobile DefenseMobile Defense
Market broadeningMarket broadening
Principle of the objectivePrinciple of the objective
Principle of massPrinciple of mass
Market diversificationMarket diversification
Contraction DefenseContraction Defense
Planned contraction Planned contraction (Strategic withdrawal)(Strategic withdrawal)
Expanding Market ShareExpanding Market Share
ConceptOfOptimalMarketShare
Competitive Strategies for Market Leaders
● Provoking antitrust action is a possibility
● Economic cost could increase
● Pursuing the wrong marketing-mix strategy
may occur
● Of the effect of increased market share on actual and perceived quality
Expanding Market Share Expanding Market Share
May Not Always Increase May Not Always Increase
Profits Because:Profits Because:
11-6
Market-Challenger StrategiesMarket-Challenger Strategies
Defining the Strategic ObjectiveDefining the Strategic Objective
and Opponent(s)and Opponent(s)
It can attack the market leaderIt can attack the market leader
It can attack firms of its ownIt can attack firms of its own
size that are not doing the jobsize that are not doing the job
and are under financedand are under financed
It can attack small local and It can attack small local and
regional firmsregional firms
Choosing a General Attack StrategyChoosing a General Attack Strategy
Choosing a Specific Attack StrategyChoosing a Specific Attack Strategy
Price-discountPrice-discount
Lower price goodsLower price goods
Prestige goodsPrestige goods
Product proliferationProduct proliferation
Product innovationProduct innovation
Improved servicesImproved services
Distribution innovationDistribution innovation
Manufacturing cost reductionManufacturing cost reduction
Intensive advertising promotionIntensive advertising promotion
Hypothetical Market Structure
Market-Follower StrategiesMarket-Follower Strategies
Innovative imitation Innovative imitation (Product imitation)(Product imitation)
Product innovationProduct innovation
Four Broad Strategies:Four Broad Strategies:
CounterfeiterCounterfeiter
ClonerCloner
ImitatorImitator
AdapterAdapter
Market-Nicher StrategiesMarket-Nicher Strategies
High margin versus high High margin versus high volume volume
Nicher Specialist RolesNicher Specialist Roles
End-user specialistEnd-user specialist
Value-added resellerValue-added reseller
Vertical-level specialistVertical-level specialist
Customer-size specialistCustomer-size specialist
Specific-customer specialistSpecific-customer specialist
Geographic specialistGeographic specialist
Product or product-line Product or product-line
specialistspecialistProduct-feature specialistProduct-feature specialist
Job-shop specialistJob-shop specialist
Quality-price specialistQuality-price specialist
Service specialistService specialist
Channel specialistChannel specialist
Other Competitive Strategies & Balancing Orientations
EncirclementEncirclement
FlankFlank
FlankFlank
BypassBypass
GuerrillaGuerrilla
MUST BALANCE BETWEEN BEING A CUSTOMER VS COMPETITOR CENTERED COMPANY
11-7
SUMAMRY
Design a competitive intelligence system to assure accurate data
Develop market objectives and a competitive strategy based on:
opportunities from customer needs, strengths of core competencies
and probability for success relative to the strength of competitors
and factors that facilitate or inhibit competition within the industry
Focus on Being Customer-Centered versus Competitor Centered
Know Who Our Competition is
Analyze the Competition
11-8
Additional Perspectives
Other Supporting Foils
11-9
REACTION PATTERNS
1. If competitors are nearly identical and make their living the same way, then their competitive equilibrium is unstable. Since differentiation is hard to maintain then price wars are frequent.
2. If a single major factor is the critical factor, then the competitive equilibrium is unstable. Here economies of scale often provide cost differentiation opportunity. Improvements in cost generally result in price wars.
3. If multiple factors may be critical factors, then it is possible for each competitor
to have some advantage and be differentially attractive to some customers. The more factors that may provide an advantage, the more competitors who can coexist. Competitors all have their segment, defined by the preference for the factor trade-offs they offer. Opportunities for reasonable margins exist through multiple differentiation (quality, service, support, etc.) opportunities.
4. The fewer the number of critical competitive variables, the fewer the number of competitors.
5. A ratio of 2 to 1 in market share between any two competitors seems to be the equilibrium point at which it is neither practical nor advantageous for either competitor to increase or decrease share.
Analyzing Competitors
11-10
The Competitive Intelligence System Selecting Competitors
Customer Value Analysis (CVA) – Another Tool for Developing Competitive Strategies
• Customer Value = Customer Benefits – Customer Costs• Customer Benefits = product benefits, service benefits, personnel benefits, image benefits• Customer Costs = purchase price, acquisition costs, usage costs, maintenance costs,
ownership costs, disposal costs
A B C
Price $100 $ 90 $ 80
Acquisition costs 15 25 30
Usage costs 4 7 10
Maintenance costs 2 3 7
Ownership costs 3 3 5
Disposal costs 6 5 8
Total costs $130 $135 $140
Major Steps in Customer Value Analysis:Major Steps in Customer Value Analysis:1. Identify the major attributes customers value.1. Identify the major attributes customers value.
2. Assess the quantitative importance of the different attributes.2. Assess the quantitative importance of the different attributes.
3. Assess companies’ & competitors’ performances on the different customer values against their rated importance.3. Assess companies’ & competitors’ performances on the different customer values against their rated importance.
4. Examine how customers in a specific segment rate the company’s performance against a specific major competitor 4. Examine how customers in a specific segment rate the company’s performance against a specific major competitor on an attribute-by-attribute basis.on an attribute-by-attribute basis.
5. Monitor customer values over time.5. Monitor customer values over time.
11-11
Value Category
FactorWeight
Co. A.1 - 1.0Grade
Co. ATotal%Impact
Co. B.1 - 1.0Grade
Co. BTotal%Impact
Co. C.1 - 1.0Grade
Co. CTotal%Impact
Morale 10% .6 6% .8 8% .4 4%
Quality 40% .4 16% .7 28% .3 12%
Ease of Use 20% .8 16% .6 12% .6 12%
Reliability 20% .4 8% .8 16% .4 8%
Image 10% .8 8% .6 6% .5 5%
Total 100% 54% 70% 41%
Total Influenceon Revenue $ 1 Mil $540K $700K $410K
Cost ofInvestment $200K $300K $250K
Net Benefit $340K $400K $160K
Net Value of Attributes versus Expenses