Competitive Dynamics & Strategies

Competitive Dynamics

• Marketers aim to be long-term market leaders, but changing economic conditions, new competitor campaigns, and evolving buyer needs often require strategy adjustments.
• Different market positions can inform varied marketing strategies.
• Competition is intensifying due to:
• Global competitors seeking growth.
• Online platforms expanding distribution.
• Private labels offering lower prices.
• Brand extensions by mega-brands.
• Consequently, product and brand success fluctuates, requiring marketers to adapt.

Competitive Strategies for Market Leaders

• Market leaders hold 40% of the market share, while challengers, followers, and nichers hold 30%, 20%, and 10% respectively.
• Market leaders typically drive price changes, new product launches, distribution, and promotion.
• Despite brand recognition, dominant firms lacking legal monopolies must stay vigilant.
• A powerful product innovation or a major marketing investment by a competitor may shift the market.
• Rising cost structures can threaten a leader’s position.

When Your Competitor Delivers More for Less

• Companies that combine low prices and high quality are popular with consumers everywhere.
• Mainstream companies must focus on cost control and product differentiation.
• Differentiation should focus on openings left by value players' models.
• Effective pricing involves a transaction-by-transaction battle for consumers that assumes value-oriented competitors are always cheaper.

Expanding Total Market Demand

• Market leaders usually see more gains when the total market is expanded.
• Leaders should seek ways to bring in new customers and to get existing customers to increase their usage.
• New customers can be found among those who:
• Might use the product but currently don’t.
• Have never used it.
• Live elsewhere.
• Increased usage can be achieved by increasing the amount, level, or frequency of consumption, sometimes through packaging or product redesign.

Protecting Market Share

• Dominant firms must defend their current business while expanding the total market.
• The most effective response is continuous innovation in products, customer service, distribution and cost cutting to improve customer strength and value.
• Distinctions include:
• Responsive marketing satisfies a stated need.
• Anticipative marketing anticipates future needs.
• Creative marketing offers solutions customers hadn't requested.
• Proactive companies shape the market rather than just adapt to customer needs
• They have skills of responsive anticipation and innovative solutions.
• They create offers to serve unmet needs.
• Redesign relationships and educate customers.
• These firms must practice “uncertainty management” by being ready to take risks.

Defensive Marketing

• Market leader must not leave major flanks exposed, regardless if it launches offensives of its own.
• Aims of such a strategy include:
• Reducing the probability of attack.
• Diverting attacks to less-threatening areas.
• Minimizing the intensity of attacks.
• A dominant firm can use six defense strategies:
• Position Defense: Occupying the most desirable market space in consumers' minds.
• Flank Defense: Erecting outposts to protect weak fronts.
• Preemptive Defense: Attacking first with guerrilla action or broad market envelopment.
• Counteroffensive Defense: Meeting an attacker frontally or hitting its flank.
• Mobile Defense: Stretching its domain over new territories through market broadening and diversification.
• Contraction Defense: Giving up weaker markets and reassign resources to stronger ones.

Increasing Market Share

• Competition has turned fierce in many markets because one share point can be worth millions of dollars.
• Increasing the share doesnt automatically create higher profits, especially for service companies without economies of scale.
• A company should consider four factors:
• Provoking antitrust action if further gains are made.
• Economic cost, which may outweigh the value.
• The danger of pursuing the wrong marketing activities in order to gain share on the market.
• The effect of increased market share on actual and perceived quality of the offering.

Other Competitive Strategies

• Runner-up or trailing firms can either attack the leader as a way to create more market share, or not "rock the boat" as market followers.

Market-Challenger Strategies

• Many challengers have gained ground or even overtaken the leader due to the market leader running business as usual and challengers setting higher aspirations.
• Strategic objective is to usually increase market share by attacking:
• The market leader if it is not serving the market well.
• Firms its own size that are not doing a good job.
• Small local and regional firms.

Choosing a General Attack Strategy

• Includes:
• Frontal Attack- Matching its opponent's marketing mix.
• Flank Attack- Identifying a shift that is causing gaps and rushing to fill the gaps.
• Encirclement Attack- Launching a grand offensive on several fronts.
• Bypass Attack- Attacking easier markets instead.
• Guerrilla Attacks- Attack the opponent.
• Any aspect of the marketing program such as lower-priced or improved products & services can be used for attack.

Market-Follower Strategies

• Imitation strategy can be as profitable as a strategy of product innovation.
• Followers must know how to hold customers and win a fair share of new ones.
• The follwer must bring distinctive advantages to its target market, keep manufacturing costs low, and enter new markets so that it has a growth path, but doesn't encourage competitive retaliation.
• Broad strategies include the:
• Counterfeiter that duplicates the leader's product and sells on the black market or through disreputable dealers.
• Cloner that emulates the leader's products, name, and packaging, with slight variations.
• Imitator that copies some things from the leader but differentiates on packaging, advertising, pricing, or location.
• Adapter that takes the leader's products and adapts or improves them.

Market-Nicher Strategies

• An alternative to being a follower in a large market is to be a leader in a smaller market, or niche.
• Some firms may use niching strategies for some of their business units or companies.
• Firms with low shares of the total market can become highly profitable through smart niching.
• Nichers have three tasks:
• Creating niches.
• Expanding niches.
• Protecting niches.
• Risk factors include a niche drying up or being attacked.

Product Life-Cycle Marketing Strategies

• A company's strategy must shift as the product, market and competitors shift over its life cycle.
• asserts that products have a limited life
• product sales pass through distinct stages
• profits rise and fall at different stage
• products require different strategies in each life-cycle
• product life-cycle curves are typically divided into 4 stages:
• Introduction- slow sales growth as product is introduced.
• Growth- a rapid market acceptance and profit improvement.
• Maturity- a slowdown in sales growth
• Decline- sales show a downward drift and profits erode

Style, Fashion, and Fad Life Cycles

• Styles are basic mode of expression that go in and out of vogue.
• Fashions are currently accepted styles that pass through four stages.
• Fads are fashions that come quickly into pubic view, peak early and decline very fast.

Marketing Strategies: Introduction Stage and the Pioneer Advantage

• Sales tend to grow slowly at the introduction stage, which last a while to roll out a new product.
• Profits are low and promotional expenditures are at the highest ratio to sales.
• Pioneer’s Advantage: Early users will recall the pioneer’s brand name. Aims at the middle of the market and has a better shot at capture more users. Customer inertia plays a role.
• Pioneer’s may not be advantage if new produces are to crude, improperly positioned, appears before strong demand, etc.

Marketing Strategies: Growth Stage

• The growth stage is marked by a rapid climb in sales.
• Additional consumers and competitor enter and introduce new products.
• Companies should now maintain or rise promotional expenditures as competitor meet education for the market.
• Sales rise in this stage much faster. Profits also increase rapidly and helps to reduce product price.
• The firm must watch for deceleration rate of growth to find new strategies.
• Firm has to follow:
• Improves product quality and ads new features.
• Ads new models and flanker products.
• Enter various new market segments.
• Shifts from awareness to loyalty communications.
• Lowers prices to attract more sensitive buyers.

Marketing Strategies: Maturity Stage

• Sale growth will slow and the product enters relaitve maturity, which is the stage most products stay in most of the time.
• Sales are in three phases in this stage:
• Growth
• Stable
• Decay
• Industry will experience over capacity and intense competition. The giants may begin to dominate.
• May be a time to harvest of divest if there are declining profits.

Marketing Strategies: Decline Stage

• Some firms simply withdraw the products and look for new products, etc.

Marketing in an Economic Downturn

• Tough times are always common as part of economic cycles. Here are some guidelines to improve the odds for success during an economic downturn.
• Explore the upside of increasing investment because those increasing marketing during a recession have improved fortunes when compared to their cutting back investments.
• Get closer to customers as the consumer preference changes drastically such as wanting to see certain brands over new ones.
• Review budget allocations as its an opportunity to review spending, and allocating on promising and eliminated poor areas of the budget.
• Put forth the most compelling value proposition which provides customer appreciation and makes sure financial benefits exceed competition.

Fine-tune Brand and Product Offerings

• Ensures it has the right products to the right consumers at the right location and time.
• These brands are clearly differentiating, targetting and based on prospects. This can benefit from luxurious and lower-priced brands and sub-brands.