lec12- comp strat & spec mark

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Competitive strategies

Lecture # 12

November 23, 2009


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Class Objectives for Today

Illustrate the need for balancing customer andcompetitor orientations in becoming a truly market-

centered organization.

Differentiate between the main orientations.

Explain the uniqueness of marketing services.

Discuss organization marketing.

Identify basic elements of person marketing, place

marketing and idea marketing.


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Competitive PositionsFirms competing in a given target market, at any point in

time, differ in their objectives and resources

Some firms are large,others small.

Some have many

resources, others arestrapped for funds.

Some are mature andestablished, others new

and fresh

Some strive for rapidmarket share growth,others for long-termprofits.

The firms occupydifferent competitivepositions in the targetmarket.


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Competitive Positions

Market Positions

1. Market Leader

The company thathas the largestmarket share within

its industry

2. Market Challenger

A runner-upcompany to the

market leader thatis fighting hard toincrease its marketshare in anindustry.

3. Market Follower

A runner-un firm thatwants to hold its sharein an industry without

rocking the boat

4. Market Nicher

A firm that servessmall segments that

the other firms in anindustry overlook orignore


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Market Leader Strategies

The leader has the largest market share Leads the other firms in price changes, new-product

introductions, distribution coverage and promotionspending. To remain #1, leading firms can take any ofthree actions:

They can find ways to expand total demand

They can protect their current market share

through good defensive and offensive actions.

They can try to expand their market share further,even, if market size remains constant.


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Market Challenger Strategies

Firms that are second, third or lower in an industry aresometimes quite large themselves

E.g. include:-Colgate, Avis and Hewlett-Packard.

These runner-up firms can adopt one of two competitivestrategies:

They can challenge the leader and other competitors inan aggressive bid for more market share

(market challengers)

They can play along with competitors and not rock theboat (market followers).


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Market Challenger Strategies A market challenger

must first define whichcompetitors tochallenge and itsstrategic objective.

The challenger canattack the marketleader, a high-risk butpotentially high-gainstrategy.

Its goal might be:-

to takeover marketleadership or

to wrest more marketshare.

Although it might seem that themarket leader has the mostgoing for it, challengers oftenhave what some strategists calla second-mover advantage.

The challenger observes whathas made the leader successfuland improve upon it.

A challenger may launch a full

frontal attack matching thecompetitors product, advertisingprice, and distribution efforts.

It attacks the competitor strengthsrather than its weaknesses.

The outcome depends on who has

the greater strength and endurance.


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Market Follower Strategies

Rather than challenging head-

on, the challenger can make an

indirect attackon the

competitors weaknesses or

on gaps in the competitors

market coverage. Eg. Netflix

found a foothold against giant

Blockbuster in the DVD rental

market by renting to theconsumers through the mail and

offering no late fees.

Southwest Airlines

challenged American and

other large carriers by

serving the overlooked

short-haul, no frillscommuter segment at

smaller, out-of-the-way

airports.

Such indirect challenges

make good sense when the

company has fewer

resources than the

competitor.


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Market Follower Strategies Not all runner-up companies

want to challenge the marketleader.

Challengers are never takenlightly by the leader.

If the challengers lure is lowerprices, improved service, oradditional product features, theleader can quickly match theseto defuse the attack

The leader probably hasmore staying power in anall-out battle for customers.E.g.. A few years ago,when Kmart launched its

renewed low-price blue-light special campaign,directly challenging Wal-Marts everyday lowprices,

it started a price-war that it

couldnt win. Wal-Marthad little trouble fendingoff Kmarts challenge,leaving Kmart worse offfor the attempt. Thus manyfirms prefer to follow

rather than challenge theleader.


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A follower can gain many advantages. The market leaderoften bears huge expenses of developing new products and

markets, expanding distribution, and educating the market.

By contrast, as with challengers, the market follower can learn

from the leaders experience.

It can copy or improve on the leaders products and programs,usually with less investment.

Although the follower will probably not overtake the leader, it

often can be as profitable.


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Following is not the same as being passive or a carbon copyof the leader.

A market follower must know how to hold current customers

and win a fair share of new ones.

It must find the right balance between following closelyenough to win customers from the market leader but

following at enough of a distance to avoid retaliation.

Each follower tries to bring distinctive advantages to its target

marketlocation, services, financing. The follower is often a major target of attack by challengers.

Therefore, the market follower must keep its manufacturing

costs and prices low or its product quality and services high.

It must also enter new markets as they open up.


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Market Nicher Strategies

Almost every industry includes firms that specialize in

serving market niches. Instead of pursuing the whole

market, or even large segments, these firms target

subsegments.

Nichers are often smaller firms with limited resources. But

smaller divisions of larger firms also may pursue niching

strategies.

Firms with low shares of the total market can be highly

successful and profitable through smart niching.


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Why is niching profitable?

The main reason is that the market nicher ends up

knowing the target group so well, that it meets theirneeds better than other firms that casually sell to that

niche.

As a result, the market nicher can charge a

substantial markup over costs because of the added

value.

Whereas the mass marketer achieves high volume,

the nicher achieves high margins.


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Nichers try to find one or more market niches that aresafe and profitable.

An ideal market niche is big enough to be profitable and

has growth potential. It is one that the firm can serve

effectively

Often times, the niche is of little interest to majorcompetitors and the firm can build the skills and

customer goodwill to defend itself against a major

competitor as the niche grows and becomes more

attractive.


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The key idea in niching is specialization. A market nicher canspecialize along any of several markets, customer, product, or

marketing mix lines. Eg. it can specialize in serving one type

ofend user, similar to a law firm specializing in the criminal,

civil or business law markets.

The nicher can specialize in serving a given customer-size

group. Many nichers specialize in serving small and mid-size

customers who are neglected by the majors.

Some nichers focus on one or few specific customers, selling

their entire output to a single company such as Wal-Mart or

GM. Still others specialize by geographic market, selling only

in a certain locality, region, or area of the world.


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Market Nicher Strategies Quality - price niches operate at the

low or high end of the market. Eg.Hewlett-Packard specializes in thehigh-quality, highprice end of thehand-calculator market

Service nichers offer services

not available from other firms. Eg.

LendingTree provides online lending

and reality services, connecting homebuyers and sellers with national

networks of mortgage lenders andrealtors who compete for the

customers business. When lenders

compete, it proclaims, You Win.

Niching carries some majorrisks. Eg the market nichemay dry up, or it might growto the point that it attractslarger competitors.

That is why manycompanies practice multipleniching.

By developing two or moreniches, a company increasesits chances for survival. Evensome large firms prefer amultiple niche strategy toserving the total market.


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Balancing Customer and Competitor

Orientations

Whether a company is a market leader, challenger, follower, or

nicher, it must watch its competitors closely and find the

competitive marketing strategy that positions it more

effectively. Companies must continually adapt its strategies to

the fast-changing competitive environment.

The question now arises: Can the company spend too much

time and energy tracking competitors, damaging its customer

orientation? The answer is yes. A company can become socompetitor-centered that it loses its even more important focus

on maintaining profitable customer relationships.


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Orientations

A competitor-centered company is one that spends much of its timetracking competitors moves and market shares and trying to find

strategies to counter them. Their moves are mainly based on

competitors actions and reactions.

This approach has pluses and minuses. On the positive side, the

company develops a fighter orientation, watches for weaknesses in its

own position, and searches out competitors weaknesses.

On the negative side, the company becomes too reactive. Rather thancarrying out its own customer relationship strategy, it bases its own

moves on competitors moves. As a result it may end up simply

matching or extending industry practices rather than seeking

innovative new ways to create more value for customers.


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Balancing Customer and Competitor Orientations

A customer-centered company, by contrast, focuses more oncustomer developments in designing its marketing strategies and

on delivering superior value to its target customers.

The customer-centered company is in a better position to

identify new opportunities and set long-run strategies that make

sense.

By watching customer needs evolve, it can decide what

customer groups and what emerging needs are the mostimportant to serve. Then it can concentrate its resources on

delivering superior value to target customers.


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Orientations

In practice, todays companies must be market-centeredcompanies,watching both their customers and their competitors. But they must not

let competitor watching blind them to customer focusing.

Companies have moved through four orientations over the years, In thefirst stage they were product oriented, paying little attention to either

customers or competitors.

In the second stage, the became customer-oriented and started to pay

attention to customers.

In the third stage, when they started to pay attention to competitors,

they became competitor oriented.

Balancing ustomer an ompetitor


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Balancing ustomer an ompetitorOrientations

Today companies need to be market oriented payingbalanced attention to both customers and competitors.

Rather than simply watching competitors and trying to beat

them on current ways of doing business, they need to watchcustomers and find innovative ways to build profitable

customer relationships by delivering more value than

competitors do.

Marketing begins with a good understanding of consumers

and the marketplace.


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SPECIALIZED MARKETING

Lecture 12

November 23 & 30th


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Specialized Marketing

In addition to tangible products and services, in recent yearsmarketers have broadened the concept of a product toinclude other market offerings organizations, persons,places, and ideas.

Organizations often carry out activities to sell theorganization itself. Organization marketing consists ofactivities undertaken to create, maintain, or change theattitudes and behaviour of target consumers toward anorganization.

Business firms sponsor public relations or corporate imageadvertising to polish their images and market themselves tovarious publics.


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People can also be though of as products.

Person marketing consists of activities undertaken tocreate, maintain, or change the attitudes and behaviourtoward particular people.

People ranging from presidents, entertainers, primeministers, CEOs, and sport figures to professionals such asdoctors, lawyers, and architects use person marketing tobuild their reputations.

Businesses, charities and other organizations use well-knownpersonalities to help sell their products or causes.

S i liz d M k ti


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Place marketing involves activities undertaken to create,maintain, or change the attitudes and behaviour towardparticular places.

Cities, states, regions and even entire nations compete to

attract tourists, new residents, conventions, and companyoffices and factories. Texas advertises

Its Like a Whole Other Country and New York state shoutsI Love New York.

In practising place marketing, strategies include forging

alliances with tourist boards, airline companies etc. thereare synergies of efforts with various sectors such as travel,tourism, culture and entertainment sector.

Eg Brand JAMAICA competing with other tourism destinations


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Ideascan also be marketed. In one sense, all marketingis the marketing of an idea, whether it is the general ideaof brushing your teeth or the specific idea that Cresttoothpastes create smiles every day. The focus howeveris on the marketing of social ideas. This area has been

called social marketing.

The Social Marketing Institute defines social marketingas the use of commercial marketing concepts and tools inprograms designed to influence individuals behaviour toimprove their well-being and that of society.



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Social marketing programs include public healthcampaigns to reduce smoking, alcoholism, drug abuse,

and overeating.

Other social marketing efforts include environmentalcampaigns to promote wilderness protection, clean air,conservation.

Still, others address issues such as family planning, humanrights, HIV/AIDS, and racial equality.

The Ministry of Health has developed numerous socialadvertising campaigns, involving issues ranging frompreventive health, education, and personal safety toenvironmental preservation.



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Social marketing involves much more than just

advertising it employs the use of a broad range ofmarketing tools.

Social marketing goes well beyond the promotional P ofthe marketing mix to include every other element to

achieve its social change objectives.

Specialized marketing also employs the use ofmarketing services agencies are the marketing researchfirms, advertising, agencies, media firms, and marketing

consultant firms that help companies target andpromotes its products to the right target market.

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