The Nature of Competition MKT 455 Marketing Strategy Perspectives on Competition in Marketing MKT 455 Substitute means of obtaining same benefits Marketing Strategy Takes customer point of view Considers products to be bundles of benefits Competitive Strategy The more shared benefits, the more intense the competition The Nature of Competition The Nature of Competition MKT 455 MKT 455 Marketing Strategy Marketing Strategy Perspectives on Competition in Marketing Perspectives on Competition in Marketing Key question: Substitute means of obtaining same benefits More “business-centric” view of competition Views organizations as collections of Whose customers do we attempt to win to our brand? resources Rivalry for resources Recognizes competition exists in all phases of business Defining A Firm’s Competition Defining A Firm’s Competition MKT 455 MKT 455 Marketing Strategy Marketing Strategy “Levels” of Competition “Levels” of Competition Product Form Competition Most direct Generic Competition Competitors share many physical similarities. Less Direct Competitors often based Competitors share fewer on image. Starbucks physical similarities. Caribou Boston Stoker McDonald’s Dunkin’ Donuts Home Brewed Coffee 1
Defining A Firm’s Competition Defining A Firm’s Competition MKT 455 MKT 455 Marketing Strategy Marketing Strategy “Levels” of Competition “Levels” of Competition Useful to view levels of competition in context of relevant benefits . Product Form Competition Generic Competition Budget Competition gourmet taste good taste good taste aroma budget friendly Budget Competition stimulation stimulation good health Least Direct hedonism reassurance So-called because competing brands sophistication come from same parts of Juice Tea consumers’ budgets. personal connection personal connection Soda friendship friendship Defining A Firm’s Competition Defining A Firm’s Competition MKT 455 MKT 455 Marketing Strategy Marketing Strategy Methods for Defining Competition Methods for Defining Competition Judgmental Methods Judgmental Methods Judgmental Methods rely on a minimum of data or analysis. Behavioral Methods Some informal data gathering may be Use data on customer purchase or Substitution Index incorporated into judgments. other marketplace behavior. n ik · n .. F ik = Frequently comes from scanner or n i. · n .k Salesforce opinions where: panel data. n ik = switch from i on first occasion Used to measure changes in Polls of managers or executives to k on second occasion consumer consideration sets. n .. = total number of consumers One metric is called the n i. = bought i on first occasion “Substitution Index.” n .k = bought k on second occasion Defining A Firm’s Competition Defining A Firm’s Competition MKT 455 MKT 455 Marketing Strategy Marketing Strategy More on Perceptual Mapping Methods for Defining Competition Methods for Defining Competition Measurement asks people to rate similarity of selected brands. Judgmental Methods Judgmental Methods How similar or different do you think Duffy’s Family Restaurant is to Behavioral Methods Behavioral Methods Thai Breezes Restaurant in terms of the following characteristics? Very Very Perceptual Methods Perceptual Methods Similar Different overall price level 1 2 3 4 5 service quality 1 2 3 4 5 Based on customer perceptual judgments of brand Based on customer perceptual judgments of brand similarity. food quality similarity. 1 2 3 4 5 Requires primary research and can utilize many Requires primary research and can utilize many Continue for all comparisons of all selected brands restaurants. approaches. approaches. One useful perceptual approach is “Perceptual Mapping.” One useful perceptual approach is “Perceptual Mapping.” 2
Defining A Firm’s Competition Analyzing Defined Competition MKT 455 MKT 455 Marketing Strategy Marketing Strategy More on Perceptual Mapping Methods for Defining Competition D’Aveni (2007, HBR ) describes Price Position Maps Judgmental Methods Data produce “Similarities Matrix” Different in purpose to Perceptual Mapping (Don’t Confuse!) Behavioral Methods Duffy’s 0 Thai Breezes 3.9 0 Plots price against ability to deliver primary desired benefit. Perceptual Methods The Keys 4.7 6.7 0 Bones Bar B Que 4.4 2.8 4.7 0 Price Based on customer perceptual judgments of brand Mission Steakhouse 14.0 12.4 18.5 15.2 0 F similarity. H G Jordan’s 4.9 6.9 0.2 4.9 18.7 0 Requires primary research and can utilize many A C D E (Lower values indicate greater similarity.) approaches. B One useful perceptual approach is “Perceptual Mapping.” Delivery of Primary Desired Benefit Analyzing Defined Competition Analyzing Defined Competition MKT 455 MKT 455 Marketing Strategy Marketing Strategy D’Aveni (2007, HBR ) describes Price Position Maps D’Aveni (2007, HBR ) describes Price Position Maps Different in purpose to Perceptual Mapping (Don’t Confuse!) Different in purpose to Perceptual Mapping (Don’t Confuse!) More on the Independent Variable: “Delivery of Primary Desired Benefit” Plots price against ability to deliver primary desired benefit. Plots price against ability to deliver primary desired benefit. Determined Empirically with survey or panel data and regressed against price. Price Price Price = ƒ(Benefit A, Benefit B, . . . ) F F H H G G Benefit with strongest ability to predict price is considered “primary benefit.” A C D A C D E E B B Delivery of Primary Desired Benefit Delivery of Primary Desired Benefit Analyzing Defined Competition Analyzing Defined Competition MKT 455 MKT 455 Marketing Strategy Marketing Strategy D’Aveni (2007, HBR ) describes Price Position Maps D’Aveni (2007, HBR ) describes Price Position Maps Different in purpose to Perceptual Mapping (Don’t Confuse!) Different in purpose to Perceptual Mapping (Don’t Confuse!) Plots price against ability to deliver primary desired benefit. Plots price against ability to deliver primary desired benefit. ● ● Motorola Models LG Models Price Price ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Delivery of Advanced Functionality Delivery of Advanced Functionality 3
Analyzing Defined Competition Analyzing Defined Competition MKT 455 MKT 455 Marketing Strategy Marketing Strategy Marketing Strategy D’Aveni (2007, HBR ) describes Price Position Maps D’Aveni (2007, HBR ) describes Price Position Maps Different in purpose to Perceptual Mapping (Don’t Confuse!) Different in purpose to Perceptual Mapping (Don’t Confuse!) Plots price against ability to deliver primary desired benefit. Plots price against ability to deliver primary desired benefit. ● ● I-Phone Price Price ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Samsung Models ● ● Delivery of Advanced Functionality Delivery of Advanced Functionality Analyzing Defined Competition Analyzing Defined Competition MKT 455 MKT 455 Marketing Strategy Marketing Strategy D’Aveni (2007, HBR ) describes Price Position Maps D’Aveni (2007, HBR ) describes Price Position Maps Different in purpose to Perceptual Mapping (Don’t Confuse!) Different in purpose to Perceptual Mapping (Don’t Confuse!) Plots price against ability to deliver primary desired benefit. Plots price against ability to deliver primary desired benefit. ● Price Helps identify competitor strategy and predict competitor trends. ● ● ● ● ● ● ● ● ● The same axes can be used to plot a single ● ● ● brand or product over time. ● ● ● ● Product introductions, improvements or enhancements can be plotted for perceived Delivery of Advanced Functionality primary benefits. Analyzing Defined Competition Analyzing Defined Competition MKT 455 MKT 455 Marketing Strategy Marketing Strategy Example: I-Pod PC Dell, Sandisk, I-Pod D’Aveni (2007, HBR ) describes “Competitive Position Maps” D’Aveni (2007, HBR ) describes Price Position Maps Launch Compatible I-Tunes Sony Launch Photo I-Touch Price ● ● Different in purpose to Perceptual Mapping (Don’t Confuse!) I-Touch Different in purpose to Perceptual Mapping (Don’t Confuse!) 60Gb Photo ● ● ● ● 10Gb ● ● 20Gb 30Gb 40Gb 40Gb Photo 60Gb Photo ● ● ● Plots price against ability to deliver primary desired benefit. Plots price against ability to deliver primary desired benefit. ● ● 20Gb 5Gb 10Gb 15Gb 40Gb Photo ● ● ● ● 10Gb ● 20Gb 15Gb 5Gb Helps identify competitor strategy and predict competitor trends. Helps identify competitor strategy and predict competitor trends. ● 6Gb Mini ● 4Gb Mini 4Gb Mini ● The same axes can be used to plot a single 1Gb Shuffle brand or product over time. Perceived Functionality Product introductions, improvements or enhancements can be plotted for perceived primary benefits. 4
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