978-0132539302 Chapter 9 Lecture Note Part 1

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Chapter 9 – Crafting the Brand Positioning and Competing

Effectively

I………………………………Chapter Overview/Objectives/Outline

A. Overview

achieve Points-of-Difference

In the marketplace, many companies develop effective products, channels, pricing, and

advertising. However, many of these companies lose in the marketplace. There may be many

reasons, but a critical variable may be an inability to understand the competitive environment

and to gather and utilize data on that environment.

should identify its competitors by using both an industry and market-based analysis.

A company should gather information on competitor strategies, objectives, strengths, weak-

nesses, and reaction patterns. The company should study and understand competitor strategies

in order to identify its closest competitors and take appropriate action. The company should

choose and time its moves.

The firm should collect, interpret, and disseminate competitive intelligence continuously.

Company marketing executives should be able to obtain full and reliable information about any

competitor that could have bearing on a decision. As important as a competitive orientation is

in today’s markets, companies should not overdo their focus on competitors. Changing

considerations are practicing effective market orientation.

B. Teaching Objectives

Stimulate students to recognize and evaluate the critical issues in positioning a product,

along with the research and analysis that goes with it.

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Understand how to identify competitor strategies.

Understand how to determine competitor objectives.

Understand how to estimate competitor reaction patterns.

Know how to design competitive intelligence systems.

Know how to select competitors to attack or avoid.

C. Chapter Outline

I. Introduction

II. Developing and Establishing a Brand Positioning

Positioning is the act of designing the company’s offering and image to occupy a

distinctive place in the mind of a target market. The result of positioning is the

firms have defined their value propositions.

A. Competitive frame of reference –

the competitive analysis focus.

with and which function as close substitutes.

3. Examine competition from both an industry and a market point of view.

a) Industry – group of firms offering a product or class of products

that a re close substitutes for one another.

b) Market approach – define competitors, as companies that satisfy

the same customer need. Refer to the Marketing Insight: High

Growth through Value Innovation.

c) Dynamic markets may require multiple frames of reference

B. Points-of-parity and points-of-difference

1. Points-of-difference (PODs) are attributes or benefits consumers

calories with a great taste)

2. Three criteria determine whether a brand association can function as a

point-of-difference

a) Desirable to consumer

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b) Deliverable by the company

c) Differentiating from competitors

3. Points-of-Parity (POPs) are associations that are not necessarily unique

not necessarily sufficient for brand choice. Category POPs are

dynamic

points-of-difference

C. Choosing POPs and PODs

also have the capability to deliver

2. Consumer criteria for POD – relevant, distinct, believable

communicability, sustainability

4. Perceptual Maps can be used as part of the positioning strategy.

D. Brand Mantras

2. Define the product or benefit space

3. Clarifies what the brand is so employees can act accordingly

4. Good brand mantras communicate the category and clarify the brand’s

uniqueness.

E. Establishing Brand Positioning- ensure that consumers understand what the

brand offers and what makes it a superior competitive choice. Typical approach

is to inform consumers of a brand’s category membership before stating its

point-of-difference. Several ways to convey a brand’s category membership:

1. Announce category benefits – define how specific product or service

offerings link to benefits perceived by the respective category

2. Comparing to exemplars – associate brand with known brands in

category

3. Rely on product descriptor – descriptor that follows a brand’s name can

convey category origin (e.g. XM Satellite Radio places XM in category

that delivers radio via satellite)

III. Differentiation Strategies – Competitive advantage is a company’s ability to perform in

one or more ways that competitors cannot or will not match. A leverageable advantage

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can be used as a springboard to new advantages. TO be effective positioned, customers

must any competitive advantage as a customer advantage.

A. Dimensions of differentiation – products will vary in their ability to be

differentiated. They can be differentiated via:

1. Employee differentiation – e.g. better trained employees who provide

superior customer service

a) Competence (skill and knowledge)

b) Courtesy (respect and consideration)

c) Credibility (trustworthy)

consumers

e) Responsiveness (quick to respond)

f) Communication (ability to understand consumer need)

2. Channel differentiation – optimize value chain to maximize value

delivered to customer

a) Amount of market coverage

b) Expertise present throughout channel

integration relative to differentiation strategy

3. Image differentiation – appeal to consumer’s social and psychological

needs.

4. Services differentiation – deliver more effective and efficient solutions to

consumers

a) Ordering ease

b) Delivery – speed, accuracy, and care

c) Installation – making a product operational

services

f) Maintenance and repair – keeping products in good working

order

B. Rational and emotional Components of Differentiation – Brand positioning

should have both rational and emotional components with POD’s and POPs that

mind in this industry”.

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3. Share of Heart – Percentage of customers who named the competitor in

responding to the statement, “Name the company from which you would

prefer to buy the product”.

………………………………………………………………………………………………………….

A. Expanding the Total Market

1. When the total market expands, the dominant firm usually gains the

most.

2. A Market Leader growth may grow by looking for new customers by

using different strategies

use but do not

b) New-market segment strategy i.e. those who have never used it

c) Geographical-expansion strategy i.e. those who live elsewhere

3. A Market Leader may also try to increase the amount, level, or

frequency of product consumption

a) Increase package size generate more consumption

c) To increase frequency

(1) Identify additional opportunities to use the brand in the

same way

(2) Identify completely new and different ways to use the

brand

consumer’s minds

2. Flank Defense – erect outposts to protect a weak front or support a

possible counter attack

3. Preemptive Defense – attack competitor (s) first, achieve broad market

envelopment that signals competitors not to attack

4. Counteroffensive Defense – meet attacker frontally

competitor product

c) Lobby for political action to inhibit the competition

5. Mobile Defense – stretch into new territories

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“energy” company

b) Market Diversification – shift into unrelated industries

6. Contraction Defense – in planned contraction, give up weaker markets

and reassign resources to stronger ones

C. Increasing Market Share – Because the cost of buying higher market share may

far exceed its revenue value, firms should consider four factors first:

1. The possibility of provoking antitrust action – frustrated competitors are

likely to cry “monopoly” and seek legal action

2. Economic cost

a) Cost of gaining further share might exceed the ensuing value

b) Pushing for higher share is less justifiable when there are

unattractive segments, buyers who want multiple sources of

supply, high exit barriers and few economies of scale

c) Increase profitability by selectively decreasing market share in

weaker areas

3. Pursuing the wrong marketing activities

a) Firms that gain share typically outperform competitors in

new-product activity, relative product quality and marketing

expenditures

b) Cutting prices may not yield significant gains because

competitors may match price cuts

4. Effect of increased market share on actual and perceived quality – too many

customers increase the risks of strained resources resulting in overall

poor product quality and service delivery

V. Other Competitive Strategies – firms trailing market leader can attack the leader in an effort

to further market share, i.e. be a market challenger, or settle for being a market

follower.

A. Market Challenger Strategies

1. Frontal attack – match opponents marketing mix. Price cuts may work if

opponent does not retaliate and if the challenger can convince the market

that is mix is equal to the leader’s.

2. Flank attack

a) Identify shifts that are causing gaps the fill gaps

b) Attractive to challenger who is weaker than leader

3. Encirclement attack – launch offensive on multiple fronts

4. Bypass attack –shift battle ground to a place where challenger has

advantage

a) Diversify into unrelated products

b) Diversify into new geographical markets\leapfrog into new

technologies

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5. Guerrilla attack – small intermittent attacks, conventional and

unconventional. For example:

a) Selective price cuts

b) Intense promotional blitzes

c) Occasional legal action

B. Market Follower Strategies – not a financially attractive strategy

1. Can be profitable strategy as leader bears expense of developing new

product, establishing distribution and informing the market

2. May be attractive strategy when:

a) Few opportunities exist for product and image differentiation

b) Service quality is comparable

c) High price sensitivity exists

market

4. Cloning strategy – emulate leader’s solutions with slight variations

5. Imitating strategy – copy a few things from the leader but maintain

differentiation of packaging, advertising, pricing or location

6. Adapter strategy take leader’s products and adapt or improve them for

different markets

no interest to larger rivals

2. Larger firms may use niche strategy for some business units

3. Risks – niche may “dry-up” or be attacked

4. Nichers must create new niches, expand existing niches and protect

niches

VI. Executive Summary

II. Lectures

A. “Competitive Intelligence”

should consider the process and implications.

Teaching Objectives

To stimulate students to think about the need for and value of competitive analysis.

To present points to consider in proceeding with development of a competitive analysis

program.

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Discussion

INTRODUCTION

In the textbook and several of the applications exercises, it is clear that segmentation is an

important element in managing a new or existing market. Image, perceived rank, customer

perception, product features, and competitive advantages are the primary tools for positioning a

positioning choice.

There are many examples of positioning strategies that have either succeeded or failed. The

business literature is replete with winners and losers, but the process by which the positioning

strategy has been implemented proves by far to be the most critical variable for determining

success.

discussion, we will look at some of the issues and questions behind choosing the right

sources as well as approaches that might be useful in preparing the competitive

intelligence program that will do the job.

First, the Kotler text gives some excellent examples of how to scan the competitive

in perspective.

THE POSITIONING CONCEPT

Positioning as a strategy started with positioning the product itself. Positioning refers to efforts

to position the product in the mind of the consumer. As Reis and Trout pointed out in the 1960s

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For example, a shampoo cannot maintain a strong position by claiming as its primary benefit

its ability to get the consumer’s hair clean.

Many companies have repositioned, or are attempting to reposition, their products in recent

years. A growing number of firms have repositioned based on one or more service variables.

focusing on a specialty or specific service in their marketing as the means to get the customer

mentally repositioned on who and what they are, compared to their competitors.

To conclude, the primary means for promoting differences include focusing on those

differences that are important, distinctive, superior, communicable, preemptive, affordable, and

profitable.

reposition in the future. For example, few would argue that Trix is positioned as a kid

cereal or that Colgate fights cavities. Nevertheless, there likely will be disagreement

about what Colgate (P&G) is going to do now that it is losing market share, and fighting

cavities is a less important position than whiter teeth and other positioning variables used

hospitals, lawyers, and ice cream.

COMPETITIVE ANALYSIS

The logical starting point for the strategy analysis is to understand effectively the

competitive structure and attractiveness of the industry. It is important to recognize that

some industries are and will be more profitable than others. It is important also to know

Threat of new entrants

Rivalry among existing competitors

Bargaining power of suppliers

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Bargaining power of buyers

Threat of substitutes

loss of confidence that they could produce a profit against the existing competition. This,

in turn, led to massive dot-com failures, consolidation in the industry, and finally the

successful entrance of many major retailers with name, cash, and ability to stay the

course.

At this point, you should be able to develop a thorough analysis of the following, for the

past, present, and future:

Degree of industry concentration

Changes in type and mix of products

Company market shares and share changes

New technology substitution

Each firm’s vulnerability to new technology

In addition to these specific competitive characteristics, the firm should focus on the

various financial, economic, technological, and socio-political factors in the industry

Company Web sites and literature

Industry trade show observation and contacts

Online databases, including Lexis-Nexis, EBSCO, First Source, PROMPT, Trade &

Industry, and Investext, along with various other online sources, such as the TV networks,

Hoover, investment houses (Schwab, Merrill Lynch, etc.), The Wall Street Journal (WSJ),

BusinessWeek (BW), etc.

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what it takes to be a superior performer in industry. Information that may assist in this

process might include some or all of the following:

How the industry might change, in the short to long term.

How the competing firms within an industry differ in the way in which the

competitive forces influence each of the competitors.

This should lead to a clear understanding and listing of market position by product, citing

product strengths and weaknesses individually and in the overall product line.

Among the sources for this information are company Web sites, company product

literature, WSJ, BW, and online databases including DIALOG, LEXIS-NEXIS, and

Hoover.

analysis. Some of the better sources for this could include: Claims, World Patent Index,

Derwent, and IFI/Plenum Claims. Company Web sites and trade show industry contacts

also can provide valuable clues in this part of the effort.

The last piece of information needed in this section of the competitive intelligence

insight.

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