Chapter 3: The Competitive Market
3.2 Competitive Advantage
Sustainable Competitive Advantages <ul><li>Methods by which a business holds on to customers, in spite of competition. </l...
Developing a Unique Selling Proposition <ul><li>Unique selling proposition – the one thing that a company’s product has th...
Lowering Production Costs <ul><li>A manufacturer can have sustainable competitive advantage by using cost- efficient, high...
Servicing a Niche Market <ul><li>A company provides a product or service for a small market and by doing so, keeps competi...
Creating Customer Loyalty <ul><li>Referred to as relationship marketing. </li></ul><ul><li>The consumer develops a strong ...
Non- Sustainable Competitive Advantages <ul><li>Can be used by companies to shift sales in their direction. </li></ul><ul>...
Promotion <ul><li>Top- of- the- mind  – the consumer is most likely to think about one brand of product or  service before...
Placement <ul><li>To compete, a product must have a placement in the market; it must be there. The more placement it has, ...
Quality <ul><li>A product can compete with other products in its category by being the best of its type. </li></ul><ul><ul...
Benefits of Use <ul><li>A product that can do more or perform better than another product will have a competitive advantag...
Price <ul><li>All features being equal, price is only a competitive advantage if its product or service is less expensive ...
Design Features <ul><ul><li>Every product has a  design component .  We often buy one product over another because we like...
Service Competition Section 3.3
Service Businesses  <ul><li>set up solely to perform a specific service for customers </li></ul><ul><li>Examples of servic...
Value-added Services <ul><li>Activities performed to support the sale of a product or service. (Can be offered by a servic...
Service businesses attempt to gain a competitive advantage using the following: <ul><li>Convenience </li></ul><ul><li>Degr...
Convenience <ul><li>Making some activity easier or more comfortable </li></ul><ul><li>Examples; pizza companies promising ...
Degree of Service <ul><li>The extras you add to your product or service. </li></ul><ul><li>A hair salon that offers the cu...
Selection <ul><li>Offering a greater selection </li></ul><ul><li>Selection can be  </li></ul><ul><li>Wide,  meaning that t...
Reputation <ul><li>It is important to maintain a good reputation. </li></ul><ul><li>Word of mouth can be beneficial or har...
Price <ul><li>If all other features are equal then the company that has the lowest price will have an advantage, at least ...
Sections 3.4, 3.5 and 3.6
The Product/Service Mix <ul><li>Retail and wholesale businesses are considered part of the service sector, because they:  ...
<ul><li>The right product/service mix can increase sales. </li></ul><ul><li>Examples Universities selling sweatshirts, sal...
Sec. 3.5  The Competitive Market <ul><li>Every new product introduce into the market has the potential to dislodge at leas...
The competitive market consists of <ul><li>All the products or services that compete with one another for consumers money ...
Market Size & Market Share <ul><li>The size of the market is the amount of money that people spent on a particular product...
Increasing Market Share (two ways) <ul><li>Increase the size of the overall market ( Ex. by getting people to drink more j...
Increase the Overall Size of the Market <ul><li>You compete on the basis of other nonprice factors in the marketing mix su...
To Take Sales Away From Competitors <ul><li>Pricing is one means of improving market share and market position. </li></ul>...
<ul><li>A shift in share points informs the marketing manager that either: </li></ul><ul><ul><li>Consumer Tastes are Chang...
The Market for Jeans <ul><li>A marketer might ask:  </li></ul><ul><li>“ Who buys jeans?  </li></ul><ul><li>At what price? ...
<ul><li>Depending on the answers to these questions, the market for jeans could be segmented: </li></ul><ul><li>By Age  je...
 
Sec. 3.6 Competing in International Markets <ul><li>Businesses use the same methods to compete in international markets th...
Research is the key when doing business in foreign markets <ul><li>Promotion  –is very challenging in international market...
<ul><li>Placement –  distribution can be an enormous challenge  </li></ul><ul><ul><li>May contract distributors within the...
<ul><li>Benefits of Use   - convincing consumers that your product has more benefits then the competitor’s (see example in...
<ul><li>Design -  must research the legal design requirements and standards.  </li></ul><ul><li>May have to change the siz...
Marketing Blunders <ul><li>In Spain, when Coors Brewing Company put its slogan, “Turn it loose” into Spanish; it was read ...
<ul><li>Nike  offended Muslims in June, 1997 when the &quot;flaming air&quot; logo for its Nike Air sneakers looked too si...
<ul><li>Coca-Cola, Ke-ke-ken-la, Ko-kou-ko-le </li></ul><ul><li>The name Coca-Cola in China was first rendered as  Ke-ke-k...
<ul><li>When Pepsi started marketing its products in China a few years back, they translated their slogan, &quot;Pepsi Bri...
<ul><li>Scandinavian vacuum manufacturer Electrolux used the following in an American campaign: “Nothing sucks like an Ele...
<ul><li>The American slogan for Salem cigarettes, &quot;Salem-Feeling Free&quot;, was translated into the Japanese market ...
<ul><li>PepsiCola lost it dominant market share to Coke in South East Asia when Pepsi changed the color of its vending mac...
<ul><li>Schweppes Tonic Water </li></ul><ul><li>In Italy, a campaign for Schweppes Tonic Water translated the name into  S...
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Chapter 3.2

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Chapter 3.2

  1. 1. Chapter 3: The Competitive Market
  2. 2. 3.2 Competitive Advantage
  3. 3. Sustainable Competitive Advantages <ul><li>Methods by which a business holds on to customers, in spite of competition. </li></ul><ul><ul><li>Developing a Unique Selling Proposition </li></ul></ul><ul><ul><li>Lowering Production Costs </li></ul></ul><ul><ul><li>Servicing a Niche Market </li></ul></ul><ul><ul><li>Creating Customer Loyalty </li></ul></ul>
  4. 4. Developing a Unique Selling Proposition <ul><li>Unique selling proposition – the one thing that a company’s product has that competing companies do not have and are not likely to develop. Some good current examples of products with a clear USP are: </li></ul><ul><li>Head & Shoulders : &quot;You get rid of dandruff&quot; </li></ul><ul><li>Olay : &quot;You get younger-looking skin&quot; </li></ul><ul><li>Domino's Pizza : &quot;You get fresh, hot pizza delivered to your door in 30 minutes or less -- or it's free.&quot; </li></ul><ul><li>FedEx : &quot;When your package absolutely, positively has to get there overnight&quot; </li></ul><ul><li>M&M's : &quot;The milk chocolate melts in your mouth, not in your hand&quot; </li></ul><ul><li>Wonder Bread : &quot;Wonder Bread Helps Build Strong Bodies 12 Ways&quot; </li></ul>
  5. 5. Lowering Production Costs <ul><li>A manufacturer can have sustainable competitive advantage by using cost- efficient, high technology systems. </li></ul><ul><li>Ex. Building a plant in a country with lower resource costs, fewer taxes, and lower cost of living that reduces labour expenses. </li></ul>
  6. 6. Servicing a Niche Market <ul><li>A company provides a product or service for a small market and by doing so, keeps competitors out of that market. </li></ul><ul><ul><li>Ex. Software packages that meet the very specific needs of particular profession or industry. Billing software (dentists), accounting software. </li></ul></ul>
  7. 7. Creating Customer Loyalty <ul><li>Referred to as relationship marketing. </li></ul><ul><li>The consumer develops a strong relationship with the product or the retailer and will not consider another brand. </li></ul><ul><li>Ex. Bakeries, service dept. at dealership, Heinz ketchup. </li></ul>
  8. 8. Non- Sustainable Competitive Advantages <ul><li>Can be used by companies to shift sales in their direction. </li></ul><ul><ul><li>Promotion </li></ul></ul><ul><ul><li>Placement </li></ul></ul><ul><ul><li>Quality </li></ul></ul><ul><ul><li>Benefits of use </li></ul></ul><ul><ul><li>Price </li></ul></ul><ul><ul><li>Design features </li></ul></ul>
  9. 9. Promotion <ul><li>Top- of- the- mind – the consumer is most likely to think about one brand of product or service before he or she thinks of any other. </li></ul><ul><ul><li>Ex. Roll up the Rim to Win </li></ul></ul>
  10. 10. Placement <ul><li>To compete, a product must have a placement in the market; it must be there. The more placement it has, the more competitive it is. </li></ul><ul><ul><li>Ex. Spring water in vending machine, Cola Wars, Doughnut Wars, Car Wars </li></ul></ul><ul><li>Category killers - Big retail stores that specialize in a specific product category </li></ul><ul><ul><li>Ex. Chapters, Future Shop </li></ul></ul>
  11. 11. Quality <ul><li>A product can compete with other products in its category by being the best of its type. </li></ul><ul><ul><li>Make products stronger, faster, lighter, easier to open, easier to close, etc. </li></ul></ul><ul><ul><li>Add features that will improve the product or taken away useless features. </li></ul></ul>
  12. 12. Benefits of Use <ul><li>A product that can do more or perform better than another product will have a competitive advantage. </li></ul><ul><li>Ex. Auto companies offer greater safety, or better service, great prestige, or better mileage. </li></ul>
  13. 13. Price <ul><li>All features being equal, price is only a competitive advantage if its product or service is less expensive than a competitors. </li></ul>
  14. 14. Design Features <ul><ul><li>Every product has a design component . We often buy one product over another because we like the way it looks. Package design is one way to compete for the customer’s attention. </li></ul></ul><ul><li>The shape of the bottle </li></ul><ul><li>The way a can opens </li></ul><ul><li>The picture on the box </li></ul><ul><li>The built-in handle on the jar </li></ul>
  15. 15. Service Competition Section 3.3
  16. 16. Service Businesses <ul><li>set up solely to perform a specific service for customers </li></ul><ul><li>Examples of service businesses: dentists, hairstylists, video rental stores, delivery businesses etc.) </li></ul><ul><li>Service businesses compete with other businesses that perform the same services. </li></ul>
  17. 17. Value-added Services <ul><li>Activities performed to support the sale of a product or service. (Can be offered by a service business or non-service business) </li></ul><ul><li>Example a store providing free home delivery of customers’ purchases, providing free tailoring for clothing that does not fit properly </li></ul>
  18. 18. Service businesses attempt to gain a competitive advantage using the following: <ul><li>Convenience </li></ul><ul><li>Degree of Service </li></ul><ul><li>Selection </li></ul><ul><li>Reputation </li></ul><ul><li>Price </li></ul>
  19. 19. Convenience <ul><li>Making some activity easier or more comfortable </li></ul><ul><li>Examples; pizza companies promising delivery in 30 minutes; places installing drive-through windows; grocery stores, fitness centres etc providing 24 hour service. </li></ul>
  20. 20. Degree of Service <ul><li>The extras you add to your product or service. </li></ul><ul><li>A hair salon that offers the customer a coffee, tea, glass of water, while they wait. </li></ul><ul><li>Some service companies also compete by offering fewer value-added services. (Budget airlines, the fewer the services the lower the cost.) </li></ul>
  21. 21. Selection <ul><li>Offering a greater selection </li></ul><ul><li>Selection can be </li></ul><ul><li>Wide, meaning that the store carries a large number of different brands or types of merchandise. </li></ul><ul><li>Or </li></ul><ul><li>Deep, meaning that the store carries a large quantity or one specific product or type of product. </li></ul>
  22. 22. Reputation <ul><li>It is important to maintain a good reputation. </li></ul><ul><li>Word of mouth can be beneficial or harmful. </li></ul><ul><li>First on the list of Wal-Mart negatives are its labor practices. WalmartWatch charges that Wal-Mart is anti-union, refuses to pay its workers a decent salary, has a second-rate health plan, and sells products from sweatshops and slave labor camps in China and other Third World countries. </li></ul>
  23. 23. Price <ul><li>If all other features are equal then the company that has the lowest price will have an advantage, at least for awhile </li></ul><ul><li>If the price is too low, customer’s may question the business’s reputation. ($5 haircuts) </li></ul>
  24. 24. Sections 3.4, 3.5 and 3.6
  25. 25. The Product/Service Mix <ul><li>Retail and wholesale businesses are considered part of the service sector, because they: </li></ul><ul><ul><li>don’t make products or add anything to the products they sell </li></ul></ul><ul><ul><li>provide a service to the consumer by carrying products consumers want and need </li></ul></ul><ul><ul><li>provide a service to the manufacturer by placing the products where customers can buy them </li></ul></ul>
  26. 26. <ul><li>The right product/service mix can increase sales. </li></ul><ul><li>Examples Universities selling sweatshirts, salons selling hair-care products, vets selling pet food etc.) </li></ul>
  27. 27. Sec. 3.5 The Competitive Market <ul><li>Every new product introduce into the market has the potential to dislodge at least one product that is already there because there is a limit to the number of consumers who use a particular type of product/service. </li></ul>
  28. 28. The competitive market consists of <ul><li>All the products or services that compete with one another for consumers money within a specific category. </li></ul>
  29. 29. Market Size & Market Share <ul><li>The size of the market is the amount of money that people spent on a particular product in one year. </li></ul><ul><li>Market share is the percentage that one company’s product takes of the total dollars spent by consumers on products in a specific market category. </li></ul><ul><li>Markets are broken into market segments (ex. Juice is a segment of the beverage category, and ready-to-drink chilled fruit juice found in vending machines or store coolers is a segment of the juice market category) </li></ul>
  30. 30. Increasing Market Share (two ways) <ul><li>Increase the size of the overall market ( Ex. by getting people to drink more juice) </li></ul><ul><li>Take sales away from a competitor (Ex. Convincing juice drinkers of brand X to drink brand Y) </li></ul>
  31. 31. Increase the Overall Size of the Market <ul><li>You compete on the basis of other nonprice factors in the marketing mix such as: </li></ul><ul><li>quality or uniqueness of product/changes in product design </li></ul><ul><li>increased advertising expenditures </li></ul><ul><li>convenience of business location/hours or possibly new distribution outlets altogether </li></ul><ul><li>level of service. </li></ul>
  32. 32. To Take Sales Away From Competitors <ul><li>Pricing is one means of improving market share and market position. </li></ul><ul><li>Nintendo’s GameCube systems sold for $80 less than other similar systems, which helped to increase its market share from 19% to 37% in 2003. </li></ul>
  33. 33. <ul><li>A shift in share points informs the marketing manager that either: </li></ul><ul><ul><li>Consumer Tastes are Changing </li></ul></ul><ul><ul><li>Competition is changing within the market segment </li></ul></ul><ul><ul><li>A Market Segment is a much narrower part of the broader market category that possesses and identifiable characteristic - the process of classifying customers according to needs and wants. </li></ul></ul>
  34. 34. The Market for Jeans <ul><li>A marketer might ask: </li></ul><ul><li>“ Who buys jeans? </li></ul><ul><li>At what price? </li></ul><ul><li>What special features do they want?” </li></ul>
  35. 35. <ul><li>Depending on the answers to these questions, the market for jeans could be segmented: </li></ul><ul><li>By Age jeans for kids, teens, and adults </li></ul><ul><li>By Price marketers need to reach different income levels (socioeconomic groups) </li></ul><ul><li>By Desired Features tight fit, comfortable fit, newest fashion, or a unique design. </li></ul>
  36. 37. Sec. 3.6 Competing in International Markets <ul><li>Businesses use the same methods to compete in international markets that they use in domestic markets: promotion, placement , quality , benefits of use , price and design . To be successful they must tailor their competitive efforts to fit in the foreign market. </li></ul><ul><li>(Wine & Dine Dinners) </li></ul>
  37. 38. Research is the key when doing business in foreign markets <ul><li>Promotion –is very challenging in international markets due to: </li></ul><ul><ul><li>Translations; ads, slogans, etc. may not translate properly </li></ul></ul><ul><ul><li>Sales promotion methods, such as coupons are regulated differently </li></ul></ul><ul><ul><li>More media restrictions and censorship Religious and cultural differences (Portrayal of women) </li></ul></ul>
  38. 39. <ul><li>Placement – distribution can be an enormous challenge </li></ul><ul><ul><li>May contract distributors within the country </li></ul></ul><ul><ul><li>set up own foreign office & hire local expert </li></ul></ul><ul><ul><li>Or form partnership with foreign business </li></ul></ul><ul><li>Quality – May or may not compare to the standards in another company. (cars in Europe have higher safety ratings then North American cars) </li></ul>
  39. 40. <ul><li>Benefits of Use - convincing consumers that your product has more benefits then the competitor’s (see example in book, pg 114) </li></ul><ul><li>Price – requires specialized knowledge, must know tariff rates, must also be able to calculate landed costs </li></ul>
  40. 41. <ul><li>Design - must research the legal design requirements and standards. </li></ul><ul><li>May have to change the size of the package </li></ul><ul><li>Or translate the label, instructions or other design features into one or more languages. </li></ul><ul><li>(Right hand driving controls for cars sold to Britain) </li></ul>
  41. 42. Marketing Blunders <ul><li>In Spain, when Coors Brewing Company put its slogan, “Turn it loose” into Spanish; it was read as “Suffer from diarrhea”. </li></ul><ul><li>When Braniff International Airways translated a slogan touting its upholstery, “Fly in leather”, it came out in Spanish as “Fly naked”. </li></ul>
  42. 43. <ul><li>Nike offended Muslims in June, 1997 when the &quot;flaming air&quot; logo for its Nike Air sneakers looked too similar to the Arabic form of God's name, &quot;Allah&quot;. Nike pulled more than 38,000 pairs of sneakers from the market. </li></ul>
  43. 44. <ul><li>Coca-Cola, Ke-ke-ken-la, Ko-kou-ko-le </li></ul><ul><li>The name Coca-Cola in China was first rendered as Ke-ke-ken-la . Unfortunately, the Coke company did not discover until after thousands of signs had been printed that the phrase means &quot; bite the wax tadpole &quot; or &quot; female horse stuffed with wax &quot; depending on the dialect. Coke then researched 40,000 Chinese characters and found a close phonetic equivalent, &quot; ko-kou-ko-le ,&quot; which can be loosely translated as &quot; happiness in the mouth .&quot; </li></ul>
  44. 45. <ul><li>When Pepsi started marketing its products in China a few years back, they translated their slogan, &quot;Pepsi Brings You Back to Life&quot; pretty literally. The slogan in Chinese really meant, &quot;Pepsi Brings Your Ancestors Back from the Grave.&quot; </li></ul>
  45. 46. <ul><li>Scandinavian vacuum manufacturer Electrolux used the following in an American campaign: “Nothing sucks like an Electrolux”. </li></ul><ul><li>A hair products company, Clairol, introduced the &quot;Mist Stick&quot;, a curling iron, into Germany only to find out that mist is slang for manure. Not too many people had use for the manure stick. </li></ul>
  46. 47. <ul><li>The American slogan for Salem cigarettes, &quot;Salem-Feeling Free&quot;, was translated into the Japanese market as &quot;When smoking Salem, you will feel so refreshed that your mind seems to be free and empty.&quot; </li></ul>
  47. 48. <ul><li>PepsiCola lost it dominant market share to Coke in South East Asia when Pepsi changed the color of its vending machines and coolers from deep &quot;Regal&quot; blue to light &quot;Ice&quot; blue as Light blue is associated with death and mourning in SE Asia. </li></ul>
  48. 49. <ul><li>Schweppes Tonic Water </li></ul><ul><li>In Italy, a campaign for Schweppes Tonic Water translated the name into Schweppes Toilet Water . </li></ul>

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