978-1292220178 Chapter 18 Lecture Note Part 2

p. 549

PPT 18-13

p. 549

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

p. 550

PPT 18-15

p. 550

PPT 18-16

p. 551

PPT 18-17

PPT 18-18

p. 551

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

p. 551

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

p. 554

Figure 18.2:

Competitive Market

Positions and Roles

p. 555

Table 18.1:

Strategies for

Market Leaders,

Challengers,

Followers, and

Nichers

p. 555

Ad: WD-40

p. 556

PPT 18-27

p. 556

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

p. 558

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

p. 558

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