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p. 549
PPT 18-13
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PPT 18-14
Explain the fundamentals of competitive marketing
strategies based on creating value for customers.
COMPETITIVE STRATEGIES
Having identified and evaluated its major competitors, the
company now must design broad competitive marketing
strategies by which it can gain competitive advantage by
offering superior customer value.
Approaches to Marketing Strategy
No one strategy is best for all companies. Each company
must determine what makes the most sense given its
position in the industry and its objectives, opportunities, and
resources.
Even within a company, different strategies may be required
for different businesses or products.
Many large firms develop formal competitive marketing
strategies and implement them religiously. However, other
companies develop strategy in a less formal and orderly
fashion.
Approaches to marketing strategy and practice often pass
through three stages:
1. Entrepreneurial marketing: Most companies are
started by individuals who live by their wits. They
visualize an opportunity, construct flexible strategies
on the backs of envelopes, and knock on every door
to gain attention.
2. Formulated marketing: As small companies achieve
success, they inevitably move toward
more-formulated marketing. They develop formal
marketing strategies and adhere to them closely.
3. Intrapreneurial marketing: Many large and mature
companies get stuck in formulated marketing. These
companies sometimes lose the marketing creativity
and passion that they had at the start. They need to
reestablish within their companies the
entrepreneurial spirit and actions that made them
successful in the first place.
There will be constant tension between the formulated side
Learning Objective
2
p. 550
Photo: Boston Beer
Company
of marketing and the creative side.
Assignments, Resources
Use Discussion Question 18-2 here
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PPT 18-15
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PPT 18-16
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PPT 18-17
PPT 18-18
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PPT 18-19
PPT 18-20
PPT 18-21
PPT 18-22
Basic Competitive Strategies
Three decades ago, Michael Porter suggested four basic
competitive positioning strategies that companies can
follow—three winning strategies and one losing one.
Winning strategies are:
Overall cost leadership: The company works hard to
achieve the lowest production and distribution costs.
Differentiation: The company concentrates on
creating a highly differentiated product line and
marketing program.
Focus: The company focuses on serving a few
market segments well rather than going after the
whole market.
The losing strategy is:
Middle-of-the-road: The company tries to be good
on all strategic counts, but ends up being not very
good at anything.
More recently, Michael Treacy and Fred Wiersema have
offered a new classification of competitive marketing
strategies. It suggested companies gain leadership positions
by delivering superior value to their customers.
Companies can pursue any of three strategies—called value
disciplines—for delivering superior customer value.
Operational excellence: The company provides
superior value by leading its industry in price
and convenience.
Customer intimacy: The company provides
superior value by precisely segmenting its
markets and tailoring its products or services to
match exactly the needs of targeted customers.
Product leadership: The company provides
superior value by offering a continuous stream
of leading-edge products or services.
Some companies successfully pursue more than one value
discipline at the same time. However, such companies are
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Photo: Product
leadership, Tesla
p. 552
Photo: Customer
intimacy,
Nordstrom
rare—few firms can be the best at more than one of these
disciplines.
Assignments, Resources
Use Real Marketing 18.2 here
Use Video Case here
Use Discussion Question 18-3 here
Use Additional Projects 2, 3, and 4 here
Use Think-Pair-Share 4 and 5 here
Use Outside Example 2 here
p. 553
p. 53054
PPT 18-23
PPT 18-24
p. 554
PPT 18-25
PPT 18-26
p. 554-55
Competitive Positions
Firms competing in a given target market, at any point in
time, differ in their objectives and resources.
Firms can base their competitive strategies on the roles they
play in the target market—market leader (40 percent),
market challenger (30 percent), market follower (20
percent), or market nicher (10 percent). (Figure 18.2)
Table 18.1 shows specific marketing strategies that are
available to market leaders, challengers, followers, and
nichers. However, these classifications often do not apply to
a whole company, only to its position in a specific industry.
Market Leader Strategies
Most industries contain an acknowledged market leader.
Competitors focus on the leader as a company to challenge,
imitate, or avoid.
To remain number one, leading firms can take any of three
actions.
1. Find ways to expand total demand
2. Protect their current market share through good
defensive and offensive actions
3. Try to expand their market share further, even if
market size remains constant
Expanding Total Demand
The leading firm normally gains the most when the total
market expands.
Market leaders can expand the market by developing new
users, new uses, and more usage of its products.
p. 554
Key Terms: Market
leader, Market
challenger, Market
follower, Market
nicher
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Figure 18.2:
Competitive Market
Positions and Roles
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Table 18.1:
Strategies for
Market Leaders,
Challengers,
Followers, and
Nichers
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Ad: WD-40
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PPT 18-27
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PPT 18-28
Protecting Market Share
While trying to expand total market size, the leading firm
also must protect its current business against competitors’
attacks.
What can the market leader do to protect its position?
It must prevent or fix weaknesses that provide
opportunities for competitors.
It must always fulfill its value promise.
Its prices must remain consistent with the value that
customers see in the brand.
It must work to keep strong relationships with
valued customers.
It should “plug holes” so that competitors do not
jump in.
The best defense is a good offense, and the best response is
continuous innovation.
Expanding Market Share
Studies have shown that, on average, profitability rises with
increasing market share.
Some studies have found that many industries contain one
or a few highly profitable large firms, several profitable and
more focused firms, and a large number of medium-sized
firms with poorer profit performance. It appears that
profitability increases as a business gains share relative to
competitors in its served market.
Companies must not think that gaining increased market
share will improve profitability automatically. Much
depends on their strategy for gaining increased share.
p. 556
Photo: P&G
Assignments, Resources
Use Think-Pair-Share 6 here
Troubleshooting Tip
There may be a lack of understanding of strategies
that can be used to combat competition and how to
correctly identify competitors and their associated
strategies. This barrier can be overcome with careful
consideration of the material summarized by Table
18.1. It will be useful to assign specific students the
task of discussing specific strategies, options, and
competitive types from this section of the chapter.
The instructor will find that students will do a very
good job of explaining and characterizing when
given the task. This will allow the instructor the
opportunity to interject examples and correct
misperceptions. Time should be spent on this area
because of its importance to overall strategic
planning in marketing.
p. 557
PPT 18-29
Market Challenger Strategies
Firms that are second, third, or lower in an industry are
sometimes quite large.
These runner-up firms can adopt one of two competitive
strategies.
1. They can challenge the leader and other competitors
in an aggressive bid for more market share (market
challengers).
2. They can play along with competitors and not rock
the boat (market followers).
A market challenger must first define which competitors to
challenge and its strategic objective.
The challenger can attack the market leader, a high-risk but
potentially high-gain strategy. Its goal might be to take over
market leadership. Or, the challenger’s objective may
simply be to wrest more market share.
The challenger observes what has made the leader
successful and then improves upon it. This is known as the
“second-mover advantage.”
Alternatively, the challenger can avoid the leader and
instead challenge firms its own size, or smaller local and
regional firms. These smaller firms may be underfinanced
and not serving their customers well. The challenger must
choose its opponents carefully and have a clearly defined
and attainable objective.
How can the market challenger best attack the chosen
competitor and achieve its strategic objectives?
It may launch a full frontal attack, matching the
competitor’s product, advertising, price, and distribution
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PPT 18-30
p. 558
PPT 18-31
efforts. It attacks the competitor’s strengths rather than its
weaknesses.
Rather than challenging head-on, the challenger can make
an indirect attack on the competitor’s weaknesses or on
gaps in the competitor’s market coverage.
Market Follower Strategies
Not all runner-up companies want to challenge the market
leader. Challenges are never taken lightly by the leader.
A follower can gain many advantages. The market leader
often bears the huge expenses of developing new products
and markets, expanding distribution, and educating the
market.
By contrast, the market follower can learn from the leader’s
experience. It can copy or improve on the leader’s products
and programs, usually with much less investment. Although
the follower will probably not overtake the leader, it often
can be as profitable.
Following is not the same as being passive or a carbon copy
of the leader. Each follower tries to bring distinctive
advantages to its target market.
The follower is often a major target of attack by
challengers. Therefore, the market follower must keep its
manufacturing costs low and its product quality and
services high. It must also enter new markets as they open
up.
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.
Why is niching profitable? The main reason is that the
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p. 559
market nicher ends up knowing the target customer group
so well that it meets their needs better than other firms that
casually sell to this niche.
As a result, the 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. Nichers try to find one or
more market niches that are safe and profitable.
An ideal market niche is big enough to be profitable and has
growth potential. Perhaps most important, the niche is of
little interest to major competitors.
The key idea in niching is specialization. A market nicher
can specialize along any of several market, customer,
product, or marketing mix lines.
Niching carries some major risks. For example, the market
niche may dry up, or it might grow to the point that it
attracts larger competitors.
That is why many companies practice multiple niching. By
developing two or more niches, a company increases its
chances for survival.
Review Learning Objective 2: Explain the fundamentals
of competitive marketing strategies based on creating value
for customers.
p. 559
Ad:
FarmersOnly.com
Assignments, Resources
Use Discussion Questions 18-3 and 18-4 here
Use Critical Thinking Exercise 18-7 here
Use Think-Pair-Share 7 here
Use Outside Example 1 here
p. 559
PPT 18-32
PPT 18-33
Illustrate the need for balancing customer and
competitor orientations in becoming a truly
market-centered organization.
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 most
effectively. And, it must continually adapt its strategies to
Learning Objective
3
p. 560
PPT 18-34
PPT 18-35
PPT 18-36
PPT 18-37
the fast-changing competitive environment. The possible
orientations are a competitor-centered company, a
customer-centered company, and a market-centered
company.
A competitor-centered company spends most of its time
tracking competitors’ moves and market shares and trying to
find strategies to counter them.
This approach has pluses and minuses.
On the positive side, the company develops a fighter
orientation.
On the negative side, the company becomes too
reactive.
A customer-centered company focuses more on customer
developments in designing its strategies.
Clearly, the customer-centered company is in a better
position to identify new opportunities and set long-run
strategies that make sense.
In practice, today’s companies must be market-centered
companies, watching both their customers and their
competitors. But they must not let competitor watching
blind them to customer focusing.
Figure 18.3 (PPT 18-34) shows how companies might move
through four orientations over the years.
1. In the first stage, they were product oriented,
paying little attention to either customers or
competitors.
2. In the second stage, they became customer
oriented and started to pay attention to
customers.
3. In the third stage, when they started to pay
attention to competitors, they became competitor
oriented.
4. Today, companies need to be market oriented,
paying balanced attention to both customers and
competitors.
Review Learning Objective 3: Illustrate the need for
balancing customer and competitor orientations in
becoming a truly market-centered organization.
p. 560
Key Terms:
Competitor-centere
d company,
Customer-centered
company
p. 560
Key Term:
Market-centered
company
p. 560
Figure 18.3:
Evolving Company
Orientations
Assignments, Resources
Use Discussion Question 18-5 here
Use Online, Mobile, and Social Media Marketing
here
Use Marketing Ethics here
Use Additional Project 5 and 6 here
Use Small Group Assignment 2 here
Use Individual Assignment 2 here
Use Company Case here
