Lec12- Comp Strat & Spec Mark
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Transcript of 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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Market Follower Strategies
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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Market Follower Strategies
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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Market Nicher Strategies
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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Market Nicher Strategies
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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Market Nicher Strategies
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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Balancing Customer and Competitor
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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Balancing Customer and Competitor
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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Specialized Marketing
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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Specialized Marketing
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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Specialized Marketing
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.
Specialized Marketing
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Specialized Marketing
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.
Specialized Marketing
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Specialized Marketing
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.