Strategic Marketing

Chapter One
Market Situation Analysis
Introduction
Before developing a marketing strategy, it is important to conduct a situation analysis to
determine the health of your business. This analysis serves as a useful tool for determining your
business's strengths and weaknesses, and any opportunities and threats (SWOT) that can affect
its health. The results can be eye-opening to what’s really going on within your business and help
determine your business's strategy within the marketplace.
Definition of Situation Analysis
Situation analysis is basically the process of critically evaluating the internal and external
conditions that affect an organization, which is done prior to a new initiative or project.
It provides the knowledge to identify the current opportunities and challenges to your
organization, service or product. This in turn helps with devising a strategy to move forward from
your current situation to your desired situation.
Importance of situation analysis,
 Helps define the nature and scope of a problem
 Helps identify the current strategies and activities in place to overcome the problem
 Helps understand the opinions and experiences of stakeholders
 Helps give a comprehensive view of the current situation of the organization
 Helps detect the gaps between the current state and desired state
 Provides information necessary to create a plan to get to reach the goals
 Helps identify the best courses of action to take during the project
 Helps make sure that efforts and actions are not repeated and wasted unnecessarily

Situation Analysis Steps/ How to Do a Situation Analysis

Following are the steps in a situation analysis. By completing them, you will be able to get a
thorough understanding of the conditions surrounding your organization.

1. Conduct a Customer Analysis

This should be the first step in a market situation analysis. Do thorough research on your target
market to understand the demographics, locations, trends, interests, challenges etc. A customer
profile can help you organize the information properly.

2. Consider the Product and Product Distribution Situation

Examine your current products and services and their ability to cater (Provide, satisfy) to the
needs of your customers.
If you have distributors, you should also analyze them in terms of distribution channels, the needs
of distributors, type and size of distributors and also the various benefits received by the
distributors and the company itself.

3. Analyze the Competitive Advantage

In or to determine your competitive advantage, you need to identify your core competitors, their
product positioning, their strengths and weaknesses.

4. Scan Your Environment

Investigate how internal factors such as available resources, skills of employees etc. and external
factors such as economic and political trends, can affect the performance of your organization.
The PESTLE analysis as well as the SWOT analysis can serve as useful environmental scanning
tools.
At the end of a proper environmental scan you will be able to identify the opportunities and
challenges in the face of new development.

Situation Analysis Tools

There are many tools used to do a situation analysis, and the following tools are the ones most
typically used.

1. SWOT Analysis
The SWOT analysis is a tool that can be used to scan the internal and external environment of an
organization. It helps identify strengths you can take advantage of and weaknesses you can take
action on, as well as opportunities and threats for success.
The SWOT analysis is also frequently used to assess the same factors about the organizations,
products and services of your competitors.

2. PESTLE Analysis
The PESTLE analysis is another environmental scanning techniques that help provide insight into
the external situation of an organization from many different angles. It focuses on political,
economic, social, technological, legal and environmental factors.
Political factors – impact of government policies, trading policies or elections

Economic factors – impact of economic trends, taxes, or import/export ratios

Social factors – impact of demographics, lifestyles, or ethnic issues

Technological factors – impact of advancing technology or technology legislations

Legal factors – impact of employment laws or health and safety regulations

Environmental factors – impact of climate change or environmental regulations
3. 5 C Analysis
This situation analysis tool helps assess the organizational environment from 5 different areas
that may affect your marketing decisions.

 Customers; market segments, customer requirements and demands, market size and growth,
retail channel and information sources, buying process, consumer trends, etc.
 Competitors; current and potential customers, customer products and positioning, their
strengths and weaknesses, market share etc.
 Company; products or services, brand image, goals, company culture, strengths and
weaknesses, technology and experience etc.
 Collaborators; distribution channels/ distributors, suppliers, alliances etc.
 Climate; political factors, economic factors, socio-cultural factors, technological factors,
environmental factors, and legal factors

4. VRIO Analysis
The VRIO analysis is another situation analysis tool that can be used to evaluate the resources of
a company such as financial resources, human resources etc. It Stands for Value, Rareness,
Imitability, Organization.

Competitor Analysis
A competitor analysis — also called a competitive analysis — identifies your industry
competitors and evaluates their strategies to determine areas of opportunity for your business.
The information you uncover can give you the insights you need to create your own marketing
strategies, based on your points of distinction from your competition.
But before you dive into your research, you need to clearly define your goals. When you’re doing
a competitive analysis, you should aim to:
 Understand competitors’ operations and marketing strategies
 Identify the strengths and weaknesses of your competition and the overall industry
 Uncover how customers feel about your competition
 Develop a competitive strategy catered toward your target market

How to do a competitor analysis

There are a number of things that you can examine in a competitor analysis. You may just want
to look at your competitors’ marketing. Maybe you want to look at product offering or pricing
strategy. But whether you’re looking at a specific piece of your competitors’ business or the
industry as a whole, you may want to go through these 8 steps.
8 Stepped Process of Analyzing Competitors
Process of Analyzing Competitors
A detailed and systematic process of analyzing competitors, as described by Philip Kotler,
consists of eight steps.
1. Identifying Competitors:
Process of analyzing competitors begins with knowing who our competitors are. A company can
easily identify its competitors. For example, Coca-Cola knows that Pepsi-Cola is its main
competitor, Hero Honda knows that Bajaj Auto is its major competitor; Sony knows that Philips
and LG are its competitors.
Major Competitors:
But, more meaningfully, we can identify two major types of competitors, industry concept of
competitors and market concept of competitors.
1) Industry Concept Competitors:
Competitors deal with industrial products. On the basis of production process, number of
sellers and degree of differentiation, entry and mobility barriers, exit and shrinkage barriers,
cost structure, degree of vertical integration, and degree of globalization, there are different
industries in which a number of companies operate.
2) Market Concept of Competitors:
They deal with consumer products. It indicates competitors trying to satisfy the same
customers’ needs. It includes the companies offering the products that can satisfy particular
need of the same segments.
2. Identifying Competitors’ Strategies:
After exactly recognizing who are our competitors, the next step is to get insight into competitors’
strategies. A firm needs to identify the strategic group – a group of firms that follows the same
strategy in a given target market.
A company requires a full profile of each of the competitors in terms of following aspects:
1. Competitors’ main business
2. Marketing activities of competitors
3. Technology and manufacturing methods used by them
4. Resources capabilities – financial, technological, and human resources
5. Product mix – types, qualities, and features
6. Customer services
7. Pricing policies
8. Distribution network
9. Sales force strategy
10.Publicity and public relations efforts
11.Advertising and sales promotion strategies, etc.
Knowing competitors’ strategies helps a company revise its strategies to satisfy customer needs
and wants better.
3. Determining Competitor’s Objectives:
After identifying competitors and their strategies, a firm must ask: What are their objectives?
Competitor’s objectives may be:
1. To maximize current and/or long-term profits
2. To satisfy customers
3. To increase market share
4. To maximize cash flow
5. To achieve and/or maintain technological leadership
6. To achieve and/or maintain quality leadership
7. To achieve and/or maintain service leadership, etc.

4. Assessing Competitors’ Strengths and Weaknesses:

Clearly, effectiveness of competitors’ strategies in achieving objectives depends on resources and
capabilities. To assess competitors’ strengths and weaknesses, a firm must gather data on key
criteria.
Key criteria used to assess competitors’ strengths and weaknesses include:
1. Competitors’ sales
2. Customer awareness
3. Customer loyalty
4. Market share
5. Product quality
6. Distribution system
7. Profit margin and return on investment and cash flow
8. Sale force efficiency
9. New investment capacity
10.Future plan
11.Capacity utilization, etc.
5. Estimating Competitors’ Reaction Patterns:
Knowledge of competitors’ strategies, objectives, and strengths and weaknesses can help
manager anticipate (project) their likely reactions to the company’s strategies. Additionally, each
competitor has certain philosophy of doing business, specific culture, and guiding beliefs that
determine its reaction pattern.
6. Designing Competitive Intelligence System:
Information regarding competitors is very critical for designing marketing strategies and
improving them over time. Market intelligence is the system or arrangement that provides regular
information on competitive dynamics. A firm must carefully design its market (competitive)
intelligence system to avail necessary information regarding competitors on regular basis. In fact,
customers, dealers, suppliers, and other stakeholders must be given incentives to spot competitive
information and pass it on the relevant officials of the firm.
Designing competitive intelligence system involves four steps:
i. Setting up Intelligence System:
A fully fledged setup – consisting of needed staff, resources, and facilities – is designed to deal
with information need. A qualified, capable, and experienced manager is assigned the duty to
manage this department.
ii. Collecting Data:
Necessary data are collected from relevant respondents, like customers, sale force, suppliers,
dealers, market research firms and trade associations. Likewise, data are collecting from rivals’
employees and from those who interact with rivals. Online sources can also be used. A company
must develop effective and smart ways of collecting data without violating the contemporary
legal provisions.
iii. Evaluating and Analyzing Data:
When collected data seem adequate, they are checked for validity and reliability. Then, they are
suitably analyzed using suitable methods, and properly interpreted and organised underling
reasonable assumptions. The information is properly presented in forms of soft copy (in forms of
CD) and/or hard copy (in forms of report). If needed, the professional experts are contacted for
proper analysis and interpretation.
iv. Disseminating and Responding:
Important information is circulated to decision-makers. In the same way, managers are responded
actively as and when they inquire about competitors. Useful information is stored for the future
reference.
7. Selecting Competitors to Attack and Avoid:
Now, managers find is easy to design competitive strategies. They can judge to whom they can
effectively compete within the market. Sometimes, managers conduct customer value analysis to
assess the company’s strengths and weaknesses relative to competitors. The basic purpose of such
analysis is to determine the benefits the customers in target market want, and how they perceive
relative value of competitors’ offers.
8. Balancing Customer and Competitor Orientations:
The last but much conclusive step of competition analysis process is to balance customer-
orientation and competitor-orientation. A company must watch every movement of its
competitors to grow and/or safeguard its interest. But, it should not be so competitor-centered
that it loses its customer focus. It must maintain a balance between customer and competitor
orientation.

Estimating Competitors Reaction Patterns

Identifying a competitor's objectives and strengths/weaknesses goes a long way toward helping
managers anticipate its likely reactions to other companies' strategies (for example, a price cut,
a promotion step-up, or a new-product introduction). In addition, each competitor has a certain
philosophy of doing business, a certain internal culture, and certain guiding beliefs. One needs a
deep understanding of a competitor's mind-set to have hope of anticipating how it might act or
react.

Most competitors fall into one of four categories:

1. The laid-back competitor: A competitor that does not react quickly or strongly to a rival's
move. For example, when Miller introduced its Lite beer in the late 1970s, Anheuser-Busch
rested on its laurels as beer-industry leader. Later, as Miller became more aggressive in its
marketing and its Lite beer claimed a 60% market share, Anheuser-Busch roused itself to
develop its own light beer.
Reasons for a lack of response to competitive moves vary. Laid-back competitors may feel their
customers are loyal; they may be milking the business; they may be slow in noticing the move;
they may lack the funds to react. Rivals must try to assess the reasons for the competitors' laid-
back behavior.

2. The selective competitor: A competitor that reacts only to certain types of attacks and not
to others. It might respond to price cuts but not to advertising expenditure increases. Oil
companies such as Shell and Exxon are selective competitors, responding only to competitors'
price cuts but not to promotions, for instance. Knowing what a key competitor reacts to gives its
rivals a clue as to the most feasible lines of attack.
3. The tiger competitor: A competitor that reacts swiftly and strongly to any assault on its
terrain. Thus P&G does not let a new detergent come easily into the market. A tiger competitor
is signaling that another firm had better not attack because the defender will fight to the finish. It
is always better to attack a sheep than a tiger. Lever Brothers found this out during its first foray
into the "ultra" detergent market pioneered by Proctor & Gamble. Ultras are more concentrated
detergents that come in smaller bottles. Retailers like them because they take up less shelf space,
yet when Lever introduced its Ultra versions of Wisk and Surf, it couldn't get shelf space for long.
P&G vastly overspent Lever to support its own detergent brands.11
4. The stochastic competitor: A competitor that does not exhibit a predictable reaction
pattern. Such a competitor might or might not retaliate on a particular occasion; there is no way
of predicting this decision on the basis of its economic situation, history, or anything else. Many
small businesses are stochastic competitors, competing on certain fronts when they can afford to
wage a battle and holding back when competition is too costly.
Some industries are characterized by relative accord among the competitors, and others by
constant fighting. Bruce Henderson thinks that much depends on the industry's "competitive
equilibrium." Here are some of his observations about the likely state of competitive relations.

Competitive Positioning
Competitive positioning is about defining how you’ll “differentiate” your offering and create
value for your market. It’s about carving out a spot in the competitive landscape, putting your
stake in the ground, and winning mindshare in the marketplace – being known for a certain
“something.”
A good positioning strategy is influenced by:
 Market profile: Size, competitors, stage of growth
 Customer segments: Groups of prospects with similar wants & needs
 Competitive analysis: Strengths, weaknesses, opportunities and threats in the landscape
 Method for delivering value: How you deliver value to your market at the highest level
Why define your competitive position?
It’s important to be aware that as a business, you occupy a perceived position in the
market whether you like it or not! Your customers and competitors all have beliefs about
your position, and these perceptions will act as reality until you set the record straight.

Occupying a compelling competitive position will help you to focus on, and articulate
how your strengths address real market needs better than the competition. By claiming
and defending a position of power relative to your competition, you can shape perception
in the market and define the rules of engagement.
A competitive position provides
 Clarity in the minds of the sellers – desired perception and why you are better than
the competition
 Clarity in the minds of management and production - expectation for the products
or services
 Clarity in the minds of the buyers – what's so special about your company and it's
products
Understand your competitive position
Once you take stock of your competitive position, you’l l learn that there are at least
three critical positions in the market that you need to be concerned with:
1. Know where you are now! - Your current competitive position
2. Know where the competition is! - The position(s) of your competitor(s)
3. Know where you want to be! - The ideal position in the market

By understanding your competitive position in the market relative to the competition,

you can design messaging (that includes your unique sales proposition) and develop
marketing plans that play to your strengths.
The competitive positioning process
Finding a positioning is a bit of a process that requires lots of data, competitive, brand
and product analysis, and answers to some basic positioning questions. The process at a
deeper level can help a company investigate into issues that may be hindering the brand
or find solutions that may get a brand back on track.
 Collect perceived data
Survey your customers, vendors, employees, and other stakeholders to get a general
idea of who they think you are as a company and what you do well, or poorly.
 Really learn your market
Understand the factors that will affect buyers now, and in the coming years. What
are your customers looking for? Price? Quality? Speed? Reliability?...
 Make an honest assessment
Understand your true strengths, weaknesses, opportunities, and threats - Do a
SWOT exercise. What do you have to do to get new customers without losing the
old ones.
 Analyze the hell out of the competition
Study their marketing claims, their reviews, their websites - Do a SWOT on the
companies you are losing business too.
 Refine and set goals
Develop a position relative to the competition that will meet market needs and
potential trends. Plan your strategy based on where you are now, and how you will
evolve toward your ideal competitive position in the future.
What's next
Once you've chosen a competitive position, there are 2 steps that are required to make
sure you commit to it.

First, you need to develop messaging for marketing materials that reinforce the chosen
position.

And Second, you need to ensure that everything you do to manufacture or sell that
product is done consistently company-wide in order to hold onto the desired position.
Developing the messaging
The first step to creating effective messaging is to come up wit h a Unique Sales
Proposition (USP) also known as a Unique Value Proposition (UVP), a statement that
sets your business/products apart from the competition in a positive way. It essentially
makes a promise to prospective customers that you do things in a certain way, and that
your products and services will produce expected results.

Once your USP/UVP has been defined, you can use it to creatively express the sentiment
of the product or brand.
Chapter 2
Competitors and their Marketing Strategies
Introduction:
Philip kotler, the eminent writer, has discussed the military-type marketing strategies for
competitors. He adopted many terms from military science to suggest suitable strategic actions
against the enemy.
He is the only expert and writer on this topic who provides sufficient insights into the competitive
dynamics. The entire portion of the article is based on Kotler’s views.
Competitive Positions:
Normally, a firm occupies one of six positions in the target market:
1. Dominant:
The firm has control over other competitors. Naturally, it can enjoy more freedom to select
suitable strategic options.
2. Strong:
The firm doesn’t control behaviour of other competitors, but can take independent actions without
endangering its long-term position. Other competitors’ actions do not have a notable impact on
its position.
3. Favourable:
The firm is in position to exploit opportunities to improve its position. It has to constantly adjust
its strategies to continue enjoying the better-than-average opportunities. It has to remain alert and
struggle constantly.
4. Tenable (Average):
The firm has satisfactory performance, but has to suffer due to dominant and strong competitors.
It has less-than-average opportunities to improve its position.
5. Weak:
The firm has unsatisfactory performance. However, there exists opportunities to improve its
position. It must change or adjust constantly to exist.
6. Nonviable (non-survivable):
The firm has unsatisfactory performance and has no opportunity to improve its performance and
position.
Major Types of Competitors:
On the basis of market position, market shares, brand image, resources capacities, and domination
power (degree of control over others), there are broadly four types of competitors, such as:
1. Market Leaders
2. Market Challengers
3. Market Followers
4. Market Nichers.
Every company must formulate different strategies to react with different competitors. Let us
analyse relevant marketing strategies for different position holders. Figure 2 shows broad
strategies for different competitors.

Marketing Strategies for Market Leaders:

Market leader has the largest market share in the relevant product in the industry. It has a
dominant position in the market. Obviously, it leads other firms in new product development,
price change, distribution coverage, promotional activities, and novel experiments.
The leader may or may not be respected by other firms, but other firm has to acknowledge its
dominance. Other firms can challenge, follow or avoid the market leader. In India, well-known
market leaders are Maruti Suzuki in cars, Hero Honda in two-wheelers, Hindustan Unilever in
consumer packages goods, Coca-Cola in soft-drink, McDonald’s in fast food, Life Insurance
Corporation in life-insurance, and so forth.

Strategies:
It is hard task to remain the number one in market.
The firm desiring to maintain market- leader position has to adopt one or more of following
three major strategies:
1. Expanding Total Market
2. Defending Current Market Share
3. Expanding Market Share
1. Expanding Total Market:
The leader normally gains more when the total market expands. Naturally, when total market or
the industry expands, major player will gain more.
Total market can be expanded in four different ways:
i. Add New Users:
The leader firm must try to add new users. Every product class has potential to attract new buyers
who are either not aware of the product or are resistant due to high price and lack of desired
features.
ii. Discover New Uses:
Another option to expand the total market consists of discovering and promoting new uses of the
existing products. The strategy can be applied to industrial products as well as consumer products.
A wise firm can get idea regarding new uses of product from customers tactfully.
iii. More Usage per Occasion/Time:
The third strategy to expand the market consists of convincing the present users to use more of
the product per use occasion. It is more applicable to edible-class products. Similarly, it can be
extended to durable products, too.
iv. More Frequent Uses:
Sometimes, a company tries to convince users to use the product more frequently to increase
consumption. If a particular product is used once in a day, it can be used twice or thrice in a day.
2. Defending (Maintaining) Current Market Share:
This strategy is based on the theme: ‘Customer-retention is more profitable than customer-
creation.’ At any cost, the current market share must not be endangered. While expanding total
market, a market leader must continuously defend its current market share against rivals’ attacks.
There are six defense strategies:
i. Position Defense:
The most basic defense strategy is to build an impregnable (indestructible, unconquerable, or
unbeatable) fortification (protecting fort) around one’s territory to keep the opponents away. It
involves continuous innovation, diversification, price-cuts, improving distribution, and
strengthening promotional efforts.
ii. Flank Defense:
Here, the purpose is to protect weak sides or fronts. Flank defense consists of erecting/setting
outposts to protect weak fronts that are vulnerable to be attacked. Such protection attempts serve
as invasion base for counterattack, if needed. Quality improvement, introduction of low-price
products, aggressive sales force, etc., can make sense.
iii. Preemptive or Preventive Defense:
The basic idea of preemptive defense is to launch the attack before the enemy starts attacking. It
is like: To attack the enemy earlier to avoid enemy’s attack. Playing the psychological games is
very common to discourage competitors’ maneuver (movement).
The company leaks the news by any of the media that it is considering to cut price and/or planning
to build another plant. Such news intimidate (threaten) the competitors who decide to cut price or
enter the market with the existing or new product.
iv. Counteroffensive Defense:
Counteroffensive indicates responding enemy’s attack with a counterattack. The leader cannot
remain passive when competitor’s attacks in forms of price-cut, product modification, promotion
blitz (bombardment), or any time of invasion on its sales territories. Leader firm has to undertake
frontal, i.e., head-on attack in case of rapid erosion of market share.
v. Mobile Defense:
Mobile defense – also called shifting defense – is much more than simply protecting the
territories. The leader stretches or expands its domain (area) over new territories that can serve as
the future centers for offense as well as defense. A leader will deploy its resources in such a way
to avoid the future invasion and create an impression in mind of competitors that leader is capable
to safeguard its territories.
vi. Contraction Defense:
Sometimes, even large companies can no longer defend all territories. The best strategy in this
situation is a planned contraction, i.e., strategic withdrawal. Planned contraction doesn’t mean
market abandonment (fleeing from the market), but rather giving up weaker territories and
concentrating on stronger territories.
3. Expanding Market Share:
Instead of expanding total market and defending current market shares, sometimes, the market
leader prefers to improve profitability by increasing market share. The extent to which the
increased market share results into improved profitability depends on a lot of variables. Here,
company must do something to snatch the market share from the pockets of competitors.
There are several ways to expand market share:
i. Adding New Product Lines:
In order to expand market share, the market leader can add new and diversified product lines to
make the product mix comprehensive and attractive. However, there must be adequate demand
for new product lines.
ii. Expanding Existing Product Lines:
It is a product line extension strategy. It calls upon expanding current product lines by adding
new models, varieties or items with attractive features (colours, sizes, shapes, weights, get-ups,
etc.) and superior qualities (durability, taste, usefulness, safety, convenience, status, etc.) This
strategy can attract more customers.
iii. Improving Product Qualities:
Market share can be increased by improving qualities of current products so that customers
expecting better qualities can be attracted.
iv. Increasing Promotion Efforts:
Heavy advertising, aggressive sales force, effective sales promotion, and attractive publicity
efforts can help expanding market share faster relative to competitors.
v. Improving Distribution System:
Market share can be expanded via better distribution system. Both direct and indirect channels
and overall physical distribution system must be modified. Similarly, effective distribution
system can bring down overall selling costs which can further improve profitability.
vi. Deploying Aggressive Sale Force:
Effective personal selling efforts also have positive impact on sales volume, market share, and
profitability as well.
vii. Applying Price-cut:
To attract price-sensitive customers, leader can practice price-cut strategy. This strategy is
profitable only when the per cent of sales-rise is more than per cent of price-cut.
viii. Improving Production Efficiency:
A leader must improve production efficiency to reduce overall costs. Due to improved production
efficiency, a firm can sell better-quality products even at low price.

Marketing Strategies for Market Challengers:

Market challengers are known as runner-up firms. They occupy second, third and lower ranks in
an industry. Bajaj Auto in two-wheelers, Tata Motors and Hyundai in cars, Reliance Petro and
Essar Oils in refineries, Pepsi-Cola in soft-drink, Procter and Gamble in consumer packaged
goods, Vodafone in cellular service providers, Sony and Samsung in cell-phone instruments, etc.,
are some of the market challengers in India.
Market challengers are capable to attack the leader and other competitors. Sometimes, capable
challengers can overtake the leader, too. Let us examine three-staged marketing strategies
available to market challengers. Figure 4 shows the market challengers’ three-stage marketing
strategies.

Strategies:
The challenger can exercise following strategies:
1. Defining Strategic Objectives and Opponents:
First of all, a market challenger firm must define its strategic objectives. Normally, most of market
challengers’ strategic objective is to increase market share. Then, the challenger has to decide on
the opponents to attack. Like market leaders, the challengers cannot fight against all opponents.
Therefore, a challenger firm has to select the specific opponent to attack.
A market challenger can attack any of the following opponents:
i. Attacking the market leader.
ii. Attacking the firms of its own size that are not doing the job well and are underfinanced.
iii. Attacking the small local and regional firms that are not doing the job well and are
underfinanced.
2. Choosing General Attack Strategies:
Once strategic objectives are defined and opponents are selected, the challenger can apply
following attacking options:
i. Frontal Attack:
A frontal or “head-on” attack is an aggressive attack strategy. A challenger attacks the opponent’s
strengths rather than its weaknesses. The outcomes depend on who has more strengths and
endurance. This option is preferred by the firm with greater resources, otherwise it is proved as a
suicide mission.
Frontal attack involves attacking opponent’s products, advertising and pricing, and lowering
production costs with heavy investment, etc. IBM’s attack on Microsoft is the best example of
frontal attack. This attacking option is widely practices in Banking, insurance, cell-phones,
airways, etc.
ii. Flank Attack:
The challenger concentrates on opponent’s less-secured, rear-side or weak spots to attack. It is a
side-attack rather than a front attack strategy. This option is particularly attractive to an aggressor
with less resources than opponents. There are two strategic dimensions of a flank attack –
geographical and segmental.
In geographical attack, the challenger spots (locates) areas where the opponent is
underperforming. And, in segmental attack, a challenger spots the markets, which are not served
by the leaders. The firm tries to fill the gap by finding needs and satisfying them. Naturally, flank
attacks are more likely to be successful than the frontal attacks.
iii. Encirclement (All-round) Attack:
Encirclement attack is a form of all-rounded and comprehensive attack. It involves launching a
grand offensive attack on several fronts, so that the opponent must protect its fronts, sides, and
rears simultaneously.
The challenger may offer the market everything the opponent offers. This attack is meaningful
only when the aggressor commands superior resources and firmly believes that such attack will
break the opponent’s will.
iv. Bypass Attack:
It is the most indirect attacking option to harm others. It indicates bypassing (i.e., ignoring or
avoiding) the enemy and attacking easier markets to broaden one’s resource base. This is the
easiest way to face the leader.
v. Guerrilla Attack:
This type of warfare contains making small and intermittent (sudden and irregular) attacks on
enemy’s different territories. A firm may undertake a few major attacks or continuous minor
attacks for longer time. It is more preparation for war than war itself.
Ultimately, the guerrilla attack must be backed by a stronger attack to beat the opponent. It is also
expensive and requires a good deal of resources. However, it is less expensive compared to other
attacks. The purpose of such attack is to confuse, harass and demoralize opponents, and finally
make permanent place in the market. Guerrilla attacks include selective price cuts, intense
promotional efforts, more attractive service offers, occasional legal actions, etc. Normally, such
attacks are practiced by smaller firms against lager firms.
3. Choosing Specific Attack Strategies or Attacking Tools:
The five main attack strategies – frontal attack, flank attack, encirclement attack, bypass attack,
and guerrilla attack – are very broad.
These strategies consist of many specific attack strategies, some of them have been described
as under:
i. Price-Discount Strategy:
It consists of offering a comparable product at a lower price.
ii. Cheaper-good Strategy:
It consists of offering average or low quality products at much lower price. The strategy works
successfully only when there are sufficient number buyers who are interested in the low-priced
and low-quality products.
iii. Prestige-good Strategy:
It consists of launching the high quality products and selling them at premium price. This strategy
succeeds if specific group of buyers are ready to pay high price for superior quality-prestigious
products.
iv. Product-proliferation Strategy:
It consists of attacking leader by launching a large number of product varieties to give buyers
more choice.
v. Product-innovation Strategy:
It consists of adopting product innovation to attack leaders’ position.
vi. Improved-services Strategy:
It consists of offering the customers new and better services with same products. Such strategy is
widely practiced in consumer durables.
vii. Distribution-innovation Strategy:
It consists of attacking leaders by discovering new ways or channels of distribution. A challenger
can apply door-to-door selling, online selling, direct selling, opening stores at convenient places,
etc., instead of tradition way of distribution.
viii. Manufacturing-cost-reduction Strategy:
It consists of reducing manufacturing costs by more efficient purchasing, lower labour costs,
modern production equipment, and improved technology. The market challenger can apply lower
cost to aggressive pricing.
ix. Intensive Advertising and Promotion:
It consists attacking the leader by increasing advertising and promotional expenditures. The
success of the strategy depends on how far challenger can exhibit superiority over the leader.
Chapter 3
Marketing Strategies for Market Followers:
The firms prefer to follow leader rather than to challenge are called the followers. They do not
face the leader directly. Some followers are capable to challenge but they prefer to follow. In
some capital goods industries like steel, cement, chemical, fertilizer, etc., product differentiation
is low, service qualities are similar, and price sensitivity is high. They decide to provide similar
offers by copying the market leader. But, one must be aware that followership is not always
rewarding path to pursue.
Followers must keep manufacturing cost low and offer better quality products with satisfactory
services. At the same time, they must enter new markets as and when there are opportunities.
They have following strategic options:
1. Counterfeiter or Fraudster:
It is a simple way to follow the leader. The follower who wants to be counterfeiter duplicates the
leader’s product as well as package and sells it in the market through disrepute distributors.
Products are marketed secretly to avoid legal complications.

The product seems exactly similar to original product except basic quality and features. This is
common strategy in auto-parts and electronics products. People, knowingly or unknowingly, buy
such duplicate products as they are made available at low price.
2. Cloner or Emulator:
The doner clones (emulates) the leader’s products, distribution, advertising and other aspects.
Here, product and packaging may be identical that of leader, but brand name is slightly different,
such as “Colgete” or “Colege” instead of “Colgate” and “Coka-Cola” instead of “Coca-cola.”
This strategy is widely practiced in computer business also. The cloned products are openly sold
in the market due to different brand names.
3. Imitator:
Some followers prefer to imitate/copy some aspects from the leader, but maintain differentiation
in terms of packaging, advertising, sales promotion, distribution, pricing, services, and so forth.
Customers can easily distinguish imitated product from original one. The leader doesn’t care for
imitator until imitator attack the leader aggressively. Quite obviously, such products are sold at
low price.
4. Adaptor:
Some followers prefer to adapt the leader’s products and improve them. They make necessary
changes/improvements in the original products and develop little different products. The adapter
may choose to sell the products in different markets (country or area) to avoid direct confrontation
with the leader.
Many Japanese companies have practiced this strategy and developed superior products.
Followers can earn more as they do not bear innovation expenses. In the same way, they can
conserve advertising and other promotional expenses. However, to be follower of a leader is not
always better option to pursue.

Marketing Strategies for Market Nichers (Tiny Firms):

A niche is a more narrowly defined small market (limited number of buyers) whose needs are not
being well-served by existing sellers. It is a small segment that has distinctive needs and is,
mostly, ready to pay high price. Marketers can identify niches by dividing a segment into sub-
segments or by dividing a group with a distinctive set of traits.
They may seek a special combination of benefits. Niches (small groups of buyers) are fairly small
and normally attract a few competing firms (nichers). A nicher is the small firm serving only
small specific groups of customers called as the niches. The firm’s marketing efforts to serve the
niches successfully is called nichemanship.
Nichers understand their niches’ needs so well and minutely that their customers are willing to
pay a premium price. They design special products with distinctive features, qualities, uses, and
value for special group of limited customers. They have the special skills to serve the niches in a
superior fashion and can gain certain economies through specialization.
For example, a footwear company can create niches by designing shoes for different sports (like
crickets, hokey, athletes, golf, etc.), 3nd exercises (like cycling, running, jogging, waking, etc).
In the same way, niches can be created in hotels, cosmetics, cloths, airways, hospitals, and others.
Nichers can gain comparatively high returns. They can achieve high margin while large
companies can achieve high volume.
Nichers have to perform three main tasks – creating niches, expanding niches, and protecting
niches. They have to remain alert for all the time as they can be invaded any time by the large
competitors.
Strategies:
Specialization is the basic idea to serve niches. Nichers can apply specialization on various
aspects.
They can practice one or more of following marketing strategies:
1. End-user Specialist:
It is very popular and widely used option to serve niches. The firm prefers to operate one-type of
end-use customers, for example, a legal advisory firm can handle only criminal cases, or a fashion
designer can work only for a few film stars.
2. Vertical Level Specialist:
The firm can specialize at vertical level of production or distribution, for example, producing only
raw-materials for specific companies, only warehousing services, or it may concentrate only on
retailing. It can serve only a part of the total process.
3. Customer Size Specialist:
The firm can sell products only to small, medium, or large size customers. For example, a firm
can supply one or two components only to large companies.
4. Specific Customer Specialist:
A firm supplies its products only to distinct group of buyers. For example, designing special two-
wheeler for handicapped people or serving special foods to people who are suffering from certain
diseases like diabetes.
5. Geographic Specialist:
The firm serves customers of only specific region or area of the world, for example, specific need
of the people living in the hilly area.
6. Product or Product Line Specialist:
The firm produces or sells only one product or product line, for example, it sells only socks, ties,
or tie pins. A small finance company deals with only car loans or personal loans.
7. Event Specialist:
The firm concentrates its efforts only on particular events or occasions like marriage, grand
inauguration, birthday, anniversary, or some festivals. It offers goods or services for celebrating
the events of target buyers.
Designing and Managing Services
A service is any act or performance one party can offer to another that is essentially intangible
and does not result in the ownership of anything. Its production may or may not be tied to a
physical product. Service industries are everywhere.
Categories of Service Mix
The service component can be a major or minor part of the total offering. Five categories of
offerings are:
1. Pure tangible good - a tangible good such as toothpaste, with no accompanying services.
2. Tangible good with accompanying services - a tangible good, like a cell phone,
accompanied by one or more services.
3. Hybrid - an offering, like a restaurant meal, of equal parts goods and services.
4. Major service with accompanying minor goods and services - a major service, like air travel
with additional services or supporting goods such as drinks.
5. Pure service - primarily an intangible service, such as babysitting or psychotherapy.
Distinctive Characteristics of Services
Four distinctive service characteristics greatly affect the design of marketing programs:

Intangibility - Unlike physical products, services cannot be seen, tasted, felt, heard, or smelled
before they are bought.
Inseparability - Services are typically produced and consumed simultaneously.
Variability - Services are highly variable because the quality depends on who provides them,
when and where, and to whom.
Perishability - Services cannot be stored, so their perishability can be a problem when demand
fluctuates.
The New Services Realities
1) A Shifting Customer Relationships
Savvy services marketers must recognize three new services realities: the newly empowered
customer, customer coproduction, and the need to engage employees as well as customers.
1. Customer Empowerment - customers are more sophisticated about buying support
services and are pressing for "unbundled services" so they can select the elements they
want.
2. Customer Coproduction - the reality is that customers do not merely purchase and use a
service: they play an active role in its delivery. Their words and actions affect the quality
of their service experiences and those of others, and the productivity of frontline
employees.
3. Satisfying Employees as Well as Customers - Excellent service companies know that
positive employee attitudes will promote stronger customer loyalty. Employees thrive in
customer-contact positions when they have an internal drive to (1) pamper customers, (2)
accurately read customer needs, (3) develop a personal relationship with customers, and
(4) deliver quality service to solve customers' problems.

2) Managing Service Quality

Service quality is tested at each service encounter. Two important considerations in delivering
service quality are managing customer expectations and incorporation self-service technologies.

3) Managing Customer Expectations

Customers form service expectations from many sources, such as past experiences, word of
mouth, and advertising. In general, customers compare the perceived service with the expected
service. If the perceived service falls below the expected service, customers are disappointed.
Successful companies add benefits to their offering that not only satisfy customers but surprise
and delight them. The service-quality model in the following figure highlights five gaps that can
cause unsuccessful service delivery.
Fig. Service-Quality Model
4) Managing Product-Support Services
Manufacturers of equipment - small appliances, office machines, tractors, mainframes, airplanes
- all must provide product-support services, making this a battleground for competitive
advantage. Some equipment companies such as Caterpillar and John Deere, make a significant
percentage of their profits from product-support services. In the global marketplace, companies
that make a good product but provide poor local service support are seriously disadvantaged.
5) Identifying and Satisfying Customer Needs
In general, customers have three worries about product service. First, they worry
about reliability and failure frequency. The second issue is downtime. The third issue is out-of-
pocket costs. A buyer considers all these factors and tries to estimate the life-cycle cost, which is
the product's purchase cost plus the discounted cost of maintenance and repair less the discounted
salvage value. Product companies must understand their strategic intent and competitive
advantage in developing services. To offer the best support, a manufacturer must identify the
services customers value most and their relative importance. It should also plan for delivering
service after the purchase.
6) Personal Point of View
It is a very hard subject for most companies to approach these days because the consumers are
getting greedier and causing all the root problems related to services. Companies need to be more
creative in ways to handle the consumers' needs as well as making profits. I personally think,
United States consumers are really hard to handle when it comes down to services. They demand
more and complain more with hardly satisfying desires.
Strategic Marketing
Chapter 4
Competitive market strategies
Emerging Industries
It is very challenging to operate business firms in an emerging industry.

Before we proceed toward identifying the strategic challenges in an emerging industry, let us
define it first.

And, then we would explore the strategy-making challenges in the emerging industry, be followed
by identification of possible strategies to pursue in the emerging industry for success.

Emerging Industry Defined

An emerging industry is an industry which is at its early stage of development. It is an embryonic
or’ infant industry.’ It is just beginning to develop or emerge.

An emerging industry is characterized by few competitors, high growth potential, the uncertainty
of demand, the dominance of proprietary technology, wide differences in product quality, low
entry barriers, difficulty in having ample supply of raw materials, and so on.

Although growth potential in the emerging industry is high, the actual growth at this stage is slow.
Slow growth is mainly attributed to customers’ unfamiliarity with products.

Other reasons usually include high prices due to the producers’ inability to achieve economies of
scale and weak distribution channels.

Features of an Emerging Industry

 New and unproven market.

 Proprietary technology.
 Low entry barriers.

 Experience curve effects may permit cost reductions as volume builds.

 Buyers are first-time users.

 Marketing involves inducing initial purchase and overcoming customer concerns.

 Possible difficulties in securing raw materials.

 Firms struggle to fund R&D, operations and build resource capabilities for rapid growth.
Characteristics of Emerging Markets
Some common characteristics of emerging markets are illustrated below:

1. Market volatility
Market volatility stems from political instability, external price movements, and/or supply-
demand shocks due to natural calamities. It exposes investors to the risk of fluctuations in
exchange rates, as well as market performance.

2. Growth and investment potential

Emerging markets are often attractive to foreign investors due to the high return on
investment they can provide. In the transition from being an agriculture-based economy to a
developed economy, countries often require a large influx of capital from foreign sources due to
a shortage of domestic capital.

Using their competitive advantage, such countries focus on exporting low-cost goods to richer
nations, which boosts GDP growth, stock prices, and returns for investors.

3. High rates of economic growth

Governments of emerging markets tend to implement policies that favor industrialization and
rapid economic growth. Such policies lead to lower unemployment, higher disposable income per
capita, higher investments, and better infrastructure. On the other hand, developed countries, such
as the USA, Germany, and Japan, experience low rates of economic growth due to early
industrialization.

4. Income per capita

Emerging markets usually achieve a low-middle income per capita relative to other countries, due
to their dependence on agricultural activities. As the economy pursues industrialization and
manufacturing activities, income per capita increases with GDP. Lower average incomes also
function as incentives for higher economic growth.

Emerging Markets List

There is no universal consensus on exactly which countries qualify as emerging markets.
However, there are several different lists that have become generally accepted for establishing
emerging market countries.
According to the Morgan Stanley Capital International Emerging Market Index, 24 developing
countries qualify as emerging markets - including Brazil, Chile, China, Colombia, Czech
Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan,
Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey, and
United Arab Emirates. The index follows the market caps of the companies on the countries'
stock markets.
Strategy-Making Challenges in Emerging Industry
Michael Porter has pointed out several strategy-making challenges that managers face while
competing in emerging industries. These are as follows:

 Doubts exist about the functioning, growth, and size of the market. Managers cannot make
useful projections of sales and profits due to a lack of historical data. Thus, they mostly depend
on guesswork.
 Proprietary technology dominates the industry. The owners of the technology usually do not
allow others to use it. Success mostly depends on patents and unique technical expertise.
 Uncertainty prevails regarding the product attributes that may win customer acceptance.
Uniformity is difficult to find in product quality and product performance. Therefore,
competition in the industry centers around each company’s strategic approach to technology,
product design, and marketing.
 Entry into the emerging industry is relatively easy. As a result, financially and professionally
strong companies may enter into the industry if there is a high growth prospect.
 In an emerging industry, all buyers are first-time users of products. Therefore, marketing
managers must try to induce an initial purchase.
 In an emerging industry, the products are first-generation products (absolutely new). Thus,
many potential customers defer their purchase until the quality improves.
 The firms in the emerging industry most often fail to attract the suppliers of raw materials to
gear up their production. This happens due to the immature stage of the industry. This creates
hurdles in getting a regular and adequate supply of raw materials.

Strategy Options in Emerging Industries

Several strategy options are available to entrepreneurs in the emerging industry;
1. A low-cost strategy is viable to discourage potential competitors from entering the industry.
Even a company can use price-cuts to attract price-sensitive buyers.
2. Differentiation strategies may be adopted based on technological or product superiority.

3. A company may adopt a cooperative strategy (strategic alliance) by forming a partnership

with key suppliers of materials and components.

4. A company may form Strategic affiance with other companies having the technological
expertise to outcompete strong competitors.

5. Acquisition strategy may be followed to acquire special skills or capabilities so that the
company can weaken the competitors based on technological superiority.

6. A company may enter into a joint venture agreement (if there are financial constraints) to
cover greater geographical areas or pursue new customer groups.
Declining Industries
A declining industry is defined as one that has experienced an absolute decline in unit sales over
an extended period of time. Although the accepted product life cycle and portfolio model
strategies in this situation are to harvest (i.e., eliminate investment and generate maximum cash
flow), the alternative strategies available to firms in a declining industry are more complex. There
are a variety of successful strategies ranging from heavy reinvestment to exiting before the decline
is recognized, i.e., from heavy harvest to no harvest at all.

Structural Determinants of Competition in Decline

There are a number of conditions that influence the decline in profitability, the ease of withdrawal,
and the volatility of competition between the remaining firms in a declining industry.

Conditions of Demand
Uncertainty - Perceptions about the nature of the decline affect the end-game competition. If
most firms believe industry demand will level off or revitalize, they will try to hold on despite
shrinking sales. This situation creates a high probability of warfare. However, if most firms
believe demand will continue to decline, the industry will reduce capacity in a more orderly
fashion. The stronger a firm's position in the industry and the higher the exit barriers it faces, the
more optimistic it will be about the future.

Rate and Pattern of Decline - A slow decline in sales might be viewed by some firms as a short-
term fluctuation, rather than a downward trend. A more rapid decline makes it more difficult to
misinterpret the trend, and can make the abandonment of entire plants and divisions more likely.
Customers who fear the loss of a key input may also shift to substitute products, accelerating the
rate of decline.

Structure of Remaining Demand Pockets - A structural analysis of the industry can reveal
pockets of demand that can provide profitability to the remaining firms in a declining industry. If
the pockets of demand are made up of buyers who are price-insensitive, have little bargaining
power, or have high switching costs , the surviving firms can remain profitable. Porter mentions
the cigar, and leather industries as examples. However, these demand pockets might be vulnerable
to substitutes, powerful suppliers and other threats.

Causes of Decline - Industries decline for various reasons including substitute products created
from technological innovations, demographics (e.g., a decline in the customer group), or changes
in buyer needs or taste.

Exit Barriers
Exit barriers can keep firms in declining industries even though profits are low or nonexistent.
Durable and Specialized Assets - Assets that are designed specifically for a particular business,
company, or location create an exit barrier because of their limited value. In some cases the
liquidation value of assets is low enough to support the decision to stay in business. In other cases,
specialized assets can be sold in overseas markets where the industry is at a different stage of
development.

Fixed costs of Exit - Fixed costs associated with exit include the cost of labor settlements,
requirements to maintain the availability of spare parts, cost of relocating managers and
employees, cancellation penalties for breaking long-term contracts, and various hidden cost such
as a decline in employee productivity, and customers and suppliers losing interest in keeping their
promises.

Strategic Exit Barriers - Strategic exit barriers include situations where the business is part of
an overall strategy involving a group of businesses, or where exiting from a business hurts the
company's relationship with suppliers or distribution channels in other areas. Exiting may also
hurt the firm's ability to raise capital by negatively affecting the firm's financial credibility. An
additional barrier exist when the business is part of a vertically integrated business.

Information Barriers - Where the firm's business units are interrelated (e.g., sharing assets,
having buyer-seller relationships), it becomes more difficult to determine the true performance
of the business units.

Managerial or Emotional Barriers - Exit may become difficult because of the emotional effects
on managers who equate their own success and wellbeing to the success of the business.

Government and Social Barriers - Government, community, and political pressure can make it
difficult to divest, along with a manager's social concern for employees and local communities.

Mechanism for Asset Disposition - When assets in a declining industry are disposed of within
the industry (sold to someone who will keep the firm competing at a lower investment base), or
government subsidies are provided to underperforming firms, competition becomes worse for the
original firms that remain in the industry.

Volatility of Rivalry
Price warfare among firms that remain in a declining industry will be more intense if the product
is perceived as a commodity, fixed costs are high, firms are locked in by exit barriers, some firms
believe it is strategically important to maintain their position, the relative strengths of firms are
balanced, and firms are uncertain about their competitive strengths.

Strategic Alternatives in Decline

There are four basic alternative strategies for firms in a declining industry.

Leadership - Seek a leadership position in terms of market share. Tactics include aggressive
actions (e.g., pricing, marketing), purchasing market share and retiring competitor's capacity
(reducing exit barriers), reducing exit barriers in other ways (providing spare parts for
competitor's products), demonstrating a strong commitment to remain in business, and raising the
cost of competitors staying in business by reinvestment in new products or process improvements.
Niche - Create or defend a strong position in a particular segment. Identify and invest in a demand
pocket using some of the tactics mentioned above for a leadership strategy.

Harvest - Manage a controlled disinvestment, taking advantage of the firms strengths. A harvest
strategy is difficult to manage but includes an attempt to optimize cash flow, along with tactics
such as eliminating or limiting investment, reducing the number of models and channels,
eliminating small customers, and reducing service (delivery time, repair, sales assistance etc.).

Quick Divestment - Liquidate as early in the decline phase as possible. The underlying
assumption is that the firm can maximize its investment recovery by selling early or in some cases
before the decline. Exit barriers such as image and interrelationships may be a problem, but are
less for those who divest early.

Choosing a Strategy for Decline

A crude framework for choosing a strategy in a declining industry is provided in the graphic
below. Although it is not clear from the illustration, the framework has three dimensions. One
question the firm needs to answer is whether the industry environment is conducive to an orderly
decline phase. A second question relates to the firm's strengths
relative to competitors for competing in the remaining demand
pockets. The illustration shows the strategy choices for the four
combinations of answers to these two questions. However, there
is a third question that relates to the firm's strategic need to
remain in the business. The answer to this question can skew the
decision away from those indicated in the illustration. For
example, a greater need for cash flow might push the firm toward
a harvest strategy even though the other factors point to a
leadership or niche strategy.

Pitfalls in Decline
Choosing a strategic position based on the framework above is not as easy as it appears and many
firms tend to make an inconsistent choice. In addition, there are other potential pitfalls in a
declining industry.
Failure to recognize decline - The tendency for managers to be optimistic about the industry
coupled with exit barriers can prevent firms from acting objectively about the future.

A war of attrition - Competitive warfare can lead to disaster.

Harvesting without clear strengths - Firms in the lower right block of the illustration above
who choose a harvest strategy usually collapse.

Preparing for Decline

Some actions in the maturity phase that may improve a firms position in the decline phase include
minimizing investments or other actions that increase exit barriers, emphasize market segments
where demand will be favorable during decline, and create switching costs in these segments.
Fragmented Industry
A fragmented industry is related to an industry environment, quite different from the other three
types of the industry environment.

Thus, it cannot be included in the ‘industry life cycle‘ that includes emerging, maturing, and
declining industry environments.

Because of its uniqueness, we will discuss here the meaning of fragmented industry including its
situational factors and then discussions will be devoted to the possible strategic options in a
fragmented industry

Fragmented Industry Defined

A fragmented industry is one where the industrial or service units remain scattered all over the
country or over a particular geographical region and none of the units has a substantial market
share.
As Thompson and Strickland observed; “A number of industries are populated by hundreds, even
thousands, of small and medium-sized companies, many privately held and none with a
substantial share of total industry sales.”

The notable features of a fragmented industry include:

 Absence of market leaders;

 None of the units has a king-sized market share;

 No single unit has widespread buyer recognition.

Examples of the fragmented industry are many. Some of them are health clinics, restaurants,
hotels, automobile repairing, furniture- making, garments, computer software development,
boutiques, pottery, and real estate.

Strategy Options in a Fragmented Industry

The type of strategic options that a firm can employ would vary depending on the extent of
competition.

Before finalizing on the options, a firm should take into consideration the basic characteristic
features of a fragmented industry such as low-entry barriers, competition from substitutes, weak
bargaining power of firms due to their relatively small size, and the like.

Such an industry environment may call for a niche strategy rather than a mass-market strategy.
Differentiation strategies may also be suitable for firms. We can summarize the strategy
options of a firm in a fragmented industry as follows;
Focus strategy

For a firm in a fragmented industry, niche strategy (to operate a business in a well-defined
small segment of a big market), may be better suited. This is expected to offer a better
competitive advantage.

A firm may either focus on one product category or it may focus on specific types of customers.
The product-category-based niche strategy enables a firm to specialize by product type.

Thus, it can concentrate on the production or distribution of a specific product.

When a firm adopts a niche strategy based on customer type, the firm can specifically cater to the
needs of specific types of customers who want products with unique need-satisfying features.

For example, a software firm may specialize in the development of only Accounting Information
Systems or Retail Software. 5M InfoTech Limited is a firm of this type. It specializes in the
production of hospital/clinic management and hotel management.

Similarly, a hotel may focus on only foreign tourists or low-cost-lover customers.

Focusing on Limited Geographical Area

A firm may concentrate its operation, within a particular geographical area. Supermarkets,
convenience stores, or repair shops often undertake this strategy.

Low-Cost Strategy

Many supermarkets and local stationery/ grocery stores adopt low-cost strategy very
successfully. They charge low prices for their products and thus are able to attract customers.
This strategy is better suited when price competition is high.

Operating Standardized Outlets

Some firms in a fragmented industry follow the strategy of operating standardized outlets in
different locations.
However, these outlets (or operational shops/stores/sales centers) must be operated very
efficiently. This strategy is successfully pursued by two international giant fast-food chains –
Pizza Hut and Kentucky Fried Chicken (KFC).

Balancing Customer and Competitor Orientations

Organizations must continually adapt their strategies to fit the fast-paced and ever-changing
environment. A competitor-centered company is one that spends most of its time tracking
competitors’ moves and market shares and trying to find strategies to counter them.
1). Advantages include:
A). A fighter orientation.
b). Alertness.
2). Disadvantages include:

A). the company becomes too reactive.

b). Strategy is built on what others do. Bases goals on what others do.

c). Lessens innovation. It only matches or extends what others does.

1. Market Orientation
Market orientation is a business approach wherein the processes of product development and
creation are focused on satisfying the needs of consumers. It is a type of marketing orientation
technique that designs products with qualities that consumers want, which is completely different
from the conventional marketing approach.
In the conventional approach, the business prioritizes the promotion of existing products by
establishing features that can be key selling points. Companies like Amazon and Coca-Cola use
market orientation principles while companies in the luxury goods market, such as Louis Vuitton
or Chanel, follow the conventional approach.
Understanding Marketing Orientation
Marketing orientation is the business approach that dictates all the processes within that
organization. It outlines how the company’s core offering is presented to its users and how the
marketing teams are empowered.
Although marketing teams have a say in the marketing strategies adopted, the marketing
orientation is determined by the priorities of upper-level management. The different types of
marketing orientation are as follows:
1). Product-oriented—pay little attention to either customers or competitors.
2). Customer-oriented—started to pay attention to customers.
3). Competitor-oriented—when they started to pay attention to customers, they became
competitor-oriented.
4). Market-oriented—this advanced form balances attention between customers and
competition. This method finds new ways to deliver satisfaction to customers and, therefore,
overcomes competition. Find innovative ways to deliver more value than competitors do.
How Does Market Orientation Work?
The 4 stages to market orientation
 Initiation: in this stage, executives and other important stakeholders first identify an external
threat to the business, such as failing to meet its financial performance targets. They then
identify specific initiatives that need to be implemented as part of the transformation process.
 Reconstitution: the plan is presented to all employees simultaneously. It must include a
description of the values that have been identified and adopted to guide the company’s
behavior, as well as the specific changes that are going to take place.
 Institutionalization: only when a market-oriented culture is fully incorporated within the
company, has it reached this stage.
Employees are rewarded as the business’ performance in the marketplace improves. Cultural
values are reinforced with seminars and other training programs. All members of the company
become involved in its decision-making process.
 Maintenance: the aim here is to prevent any deterioration in the organization’s market
orientation approach.
Job applicants are carefully screened to make sure they fit the restructured image, workers
become involved in activities that remind them of the company’s process of cultural change.
Examples of Market-Oriented Companies
Amazon consistently changes the virtual marketplace and adds features to address the concerns
expressed by consumers. One such feature is the rating and review system introduced by the
online retailer to boost credibility.
The company launched Amazon Prime to address issues with delivery charges. In addition, it
created the Amazon Locker, which is a self-pickup service for consumers who may not be present
in the shipping address indicated at the time of delivery.
Coca-Cola performs extensive research to come up with new flavors for its consumers. For users
who are worried about sugar content, the company launched the zero-calorie Diet Coke and
undertook several acquisitions of “healthy” brands, such as Dasani, etc.
2. Customer orientation
Customer orientation is a business approach in which a company solves for the customer first. It's
all about focusing on helping customers meet their goals. Essentially, the needs and wants of the
customer are valued over the needs of the business. For customer service, this means your support
team is focused on meeting customer needs.
Rather than implementing a customer orientation approach, some companies choose to use a sales
orientation methodology. This means that your business would value the needs and wants of the
company over the customer.
A customer orientation approach is useful for several reasons. For one, as mentioned above, it's
more cost-effective to retain customers than it is to acquire new ones.
Additionally, the happier your customers are, the more likely they are to become ambassadors for
your brand. Below we've outlined eight steps to help you get started.
How To Implement Customer Orientation
1. Recruit the right people.
Who you hire is of the utmost importance for your customer service team. Instead of hiring for
skills, which you can teach, hire for attitude and friendliness. Plus, look for empathetic people
who can problem solve. Finding the right people can make or break a customer support team.
2. Value your employees.
Customer support can often be a thankless job. But it shouldn't be. Don't forget to treat your
employees well. If they're happy coming to work, it makes it easier for them to focus on the
customers.
3. Provide excellent training.
Your entire team needs to be trained on the customer first approach. In regards to customer
support, training should focus on product knowledge, troubleshooting, and customer care.
4. Lead by example.
The entire leadership and management team needs to fully embrace a customer orientation
approach. If they don't, your team won't feel comfortable to implement this strategy.
5. Understand the customer.
It's important to understand your customer. For customer support, this means empathizing with
customers who are upset. Listen to them. It's important that your customer support team truly
understands your customers needs.
6. Iterate your process.
Keep in mind that your customers' needs are always changing and evolving over time. Your
company should evolve and change with them. With a customer orientation approach, your
business should always be focused on figuring out how you can accommodate changing needs,
and hopefully anticipate them.
7. Empower your staff.
Your customer support team should have the authority to resolve most customer complaints. Plus,
your support staff should be empowered to suggest changes to management that would benefit
customers in the long run.
8. Receive feedback.
Since customer needs are always changing, you'll have to talk to your customers about what they
need and want. Customer support is in a unique position to do this. Your customer support team
will have a pulse on what customers are upset about and what changes can be made.
Ultimately, you have to be steadfast in your philosophy, teach it, and implement it. A customer
orientation approach only works if you walk the walk.
In customer service, you can show a customer orientation approach by responding promptly and
respectfully to customer complaints. You can help customers and solve their problem, even if it
doesn't directly benefit your company.
Let's look at some examples of how companies have successfully implemented a customer
orientation approach.
Customer Orientation Examples

Implementing a customer orientation approach is all about walking the walk. Let's look at how
these companies have successfully done this.

1. HubSpot

At HubSpot, solving for the customer is one of the guiding principles for its employees. It's
painted on the walls, it's in the culture code, and it's visible throughout the entire hiring and
recruiting strategy.

In fact, HubSpot created a Customer Code to figure out what matters most to customers. In this
document, HubSpot listed the 10 things that are most important to customers. Those include:

 Treat your customers like people, not personas

 Solve for your customers success, not your systems
 Ask for feedback, and act on it
 Do the right thing even when it's hard

For example, HubSpot offers consistent company wide messaging, provides instructions for how
to adopt certain strategies on your team, asks customers for feedback, nurtures customer
relationships, and solves customer needs.

2. Apple

A great example of customer orientation in regard to products is Apple. In fact, Apple is almost
always coming out with new products that solve customers wants and needs before they even
express them.
Apple has become known for anticipating and even dictating customer wants. As a retailer, they
have to be in tune with what their customers want.
For example, Apple developed the iPod before people knew they wanted a smaller device that
could hold all their music. Imagine a world where we still had to use portable CD players or MP3
players.
Chapter 5
1. Industry Segmentation and Competitive Advantage
2. Product Differentiation and Brand Positioning
3. Competitive Pricing
4. Competitive Advertising
5. Role of Sales Promotion in competitive Marketing

1. 1. Market Segmentation
Marketing
Introduction:
Markets consist of buyers who differ in one or more respects. They may differ in their wants,
resources, geographical locations, attitudes and buying practices. It is therefore necessary for a
marketer to segment his/her market.

Market Segmentation
Market segment – A group of individuals, groups or organizations sharing one or more similar
characteristics that cause them to have relatively similar product needs and buying characteristics.

Benefits of Market Segmentation

There are a number of reasons organizations undertake segmentation:

1. Products are designed to be responsive to the needs of the marketplace: Segmenting

markets facilitates a better understanding of customer’s needs, wants and other characteristics.
2. Increase Profits: Different consumer segments react in contrasting ways to prices, some are
far less price sensitive than others. Segmentation allows an organization to gain from the best
price it can in every segment, effectively raising the average price and increasing profitability.

3. Effective Resource Allocation: Organizations are more capable of making products that
customers want and can afford.

4. There is Product Differentiation: Various products are made to meet the needs of each
customer segment.

Requirements of Good Market Segments

In addition to having different needs, for segments to be practical they should be evaluated against
the following criteria:
1. Identifiable: The marketer should be able to identify which consumers are members of a
particular market segment. The consumers in the segment should respond in the same way to a
particular marketing mix. There must be some common characteristics that the consumers have.

2. Measurable: The characteristics that are common to the groups of consumers should be
measured in terms of size, purchasing power and other characteristics.
3. Substantial: The segment should be large enough to generate sales volume that ensures
profitability; otherwise it will not be economical to design a unique marketing mix for it. Is the
market worth the effort?

4. Accessible: The segments must be reachable through communication and distribution

channels.

5. Durable: The segments should be relatively stable to minimize the cost of frequent changes.

6. Responsive: Market segments must be defined in their willingness to purchase a product in

response to variations in the marketing mix.
7. Compatible with Corporate Image: The market must be compatible with the firm’s
objectives and corporate image.

Variables / Bases For Segmenting Consumer Markets

The following variables are commonly used to segment consumer markets:

1. Geographic Segmentation: This calls for dividing the market into different geographical units
such as Nations, States, Regions – West, North, Central, South, e.t.c.
• Countries, Cities or Neighborhoods
• Attention should be paid to variations in geographical needs and preferences.
• Geographical segmentation assists the seller to position retail outlets in most appropriate
locations as well as simply identifying the needs on the basis of the consumers own location.

2. Demographic Segmentation: This consists of dividing the market into groups on the basis of
demographic variables such as:- Age, sex, family size, family life cycle, income, education,
occupation, religion, race and nationality.

These variables are the most popular for distinguishing customer groups because,

• Consumers’ wants and preferences are closely related to them.

• They are easier to measure than most other types of variables.

i. Age: Consumer needs and wants change with age. Hence the market should be segmented as
young, old, e.t.c.

ii. Gender: This can be employed to segment such markets for clothes deodorants, lotions,
magazines, e.t.c. Thus the markets can be for either men or women, male or female
iii. Family life cycle (FLC): The product needs for a household vary according to marital status
and the present ages of children. Thus family life cycle can be divided into:

• Single,
• Young, married with no children,
• Young, married with young children,
• Older married with children, e.t.c.

iv. Income: Marketers can segment the market according to the distribution of income e.g. under
1000 shillings per month, 2000/=, 4000/= per month, e.t.c.

v. Occupation: Variables include; bankers, teachers, farmers, clerks, students, housewives,

secretaries, e.t.c. A marketer can choose to specialize in the needs of one occupation group.

vi. Education: Some primary education, Some high school education, College
education, University education e.t.c.
vii. Religion: e.g. Muslims, Christians e.t.c.
viii. Race: e.g. white, black e.t.c.

a) Nationality: e.g. Asians, Africans e.t.c.

b) Social class: Social class has a strong influence on people’s preferences, Marketers designing
products and/or services for specific social classes build in those features that appeal to the target
social class.

ix. Ethnic groups: Arab, Afghan, Jewish,

x. Generation: Consumer is profoundly influenced by the generation in which it grows up. This
influences one’s inclination to Music, politics, e.t.c.

3. Psychographic Segmentation: Psychographics are psychological profiles of different

consumers developed from research, sometimes referred to as A.I.O. (Attitudes, interests and
opinion profiles)

In psychographic segmentation, buyers are divided into different groups on the basis of their:
Motives, Lifestyle and/or Personality characteristics.

People within the same demographic group can exhibit very different psychographic profiles.

Consumers can thus be sub-divided on the basis of the following psychographic variables:
i. Lifestyle: Consumers’ lifestyles are derived from their activities, interests and opinions. Each
life style group is influenced by different marketing mixes.

ii. Personality: Type of personality groups may include;

• Authoritarian
• Ambitious
• Assertive
• Self-confident
• Extrovert/Introvert
4. Behavioral Segmentation: Buyers are divided into groups in the basis of their,
Knowledge, Attitude, Use or Response to a product.

In this respect, behavioral variables that are used to segment consumer markets include:
i. Occasions Benefits: Buyers can be distinguished according to occasions when they

• Purchase a product or
• Use a product

E.g. Occasions when public transport is used mostly. Occasion segmentation can help firms
expand product usage.
ii. Benefits: Buyers are classified according to different benefits they seek from the product.
Variables here include:

• Economy (Low price)

• Medical (Decay prevention)
• Bright teeth
• Good taste, e.t.c. for toothpaste.

Benefit segmentation requires determination of:

The major benefits that people seek from the product

• The kind of people who look for such benefit

• The major brands that deliver each benefit.

iii. User Status: Many markets can be segmented into

• Non-users.
• Ex-users,
• Potential users,
• First time users and
• Regular users of a product

All these people require different marketing approaches.

iv. Usage Rate: Markets can be segmented into
• Light,
• Medium and
• Heavy user group of products.
v. Loyalty Status: A market can be segmented by customer loyalty patterns.

According to the loyalty status, the buyers can be divided into:

• Hard core loyals: Consumers who buy one brand all the time
• Soft core loyals: Consumers who are loyal to two or three brands
• Shifting loyals: Consumers who shift from favoring one brand to another.
• Switchers: Consumers who show no loyalty to any brand

A company should
• Study the characteristics of its hard-core customers e.g. whether middle class, larger families,
e.t.c.
• By studying soft-core loyals, the company can pinpoint which brands are most competitive with
its own.
• By looking at customers who are shifting away from its brands, a company can learn about its
marketing weaknesses.
• The company should be aware that what appears to be brand loyalty purchase may reflect.
• Habits,
• Indifference,
• A low price or
• Non-availability of other brands.

vi. Buyer Readiness Stage: At any given time, people are in different stages of readiness to buy
a product;

• Some people are aware,

• Some are informed,
• Some are interested,
• Some are desirous of buying,
• Some intend to buy.

All these make a big difference in designing the marketing programme.

vii. Attitude: People in a market can be classified according to their degree of enthusiasm for a
product.

Five attitude classes can be distinguished e.g.

• Enthusiastic,
• Positive,
• Indifferent,
• Negative and
• Hostile.

viii. Volume Segmentation: Involves grouping businesses by size and Purchase patterns
Variables for Segmenting Industrial / Business Markets
Industrial markets can be segmented using the same variables for consumer markets e.g.
geographic, demographic and behavioral. Other variables that may be used include volume
segments.

1. Demographic
• Industry – Which industries should we serve?
• Company size –Which size companies should we serve?
• Location – What geographic areas should we focus on?

2. Operating Variables
• Technology – What customer technologies should we focus on?
• User-non-user status – Should we focus on heavy, medium, light users or non-users?
• Business capabilities – Should we serve business needing many or few services?

3. Purchasing Approaches
• Nature of existing relationship.- Should we serve companies with which we have strong
relationships or simply go after the most desirable companies?
• Power structure – Should we serve companies that are engineering dominated, financially
dominated,? E.t.c.
• Purchasing criteria i.e. focus on quality, price, service e.t.c.

4. Situational Factors
• Urgency – Should we serve companies that need quick and sudden delivery or service
• Specific application: Should we focus on certain applications of our product rather than all
applications.
• Size of order.- Should we focus on large or small orders.

5. Personal Characteristics
• Buyer-seller similarity – Should we focus on companies whose people and values are similar to
ours?
• Attitude towards risk – Should we focus on risk takers or risk avoiding customers?
• Loyalty – Should we focus on companies that show high loyalty to their suppliers?
1.2. Competitive advantage
Definition
Competitive advantage means superior performance relative to other competitors in the same
industry or superior performance relative to the industry average.

What is competitive advantage?

Competitive advantage refers to factors that allow a company to produce goods or services better or
more cheaply than its rivals. These factors allow the productive entity to generate more sales or
superior margins compared to its market rivals.

Competitive advantages are attributed to a variety of factors including cost tructure, branding, the
quality of product offerings, the distribution network, intellectual property, and customer service.

An organization that is capable of outperforming its competitors over a long period of time has
sustainable competitive advantage.

How a company can achieve it?

An organization can achieve an edge over its competitors in the following two ways:

 Through external changes. When PEST factors change, many opportunities can appear that,
if seized upon, could provide many benefits for an organization. A company can also gain an
upper hand over its competitors when its capable to respond to external changes faster than
other organizations.

 By developing them inside the company. A firm can achieve cost or differentiation
advantage when it develops VRIO resources, unique competences or through innovative
processes and products.

External Changes
Changes in PEST factors. PEST stands for political, economic, socio-cultural and technological
factors that affect firm’s external environment. When these factors change many opportunities
arise that can be exploited by an organization to achieve superiority over its rivals. If opportunities
appear due to changes in external environment why not all companies are able to profit from that?
It’s simple, companies have different resources, competences and capabilities and are differently
affected by industry or macro environment changes.

Company’s ability to respond fast to changes. The advantage can also be gained when a
company is the first one to exploit the external change. Otherwise, if a company is slow to respond
to changes it may never benefit from the arising opportunities.
Internal Environment
VRIO resources. A company that possesses VRIO (valuable, rare, hard to imitate and organized)
resources has an edge over its competitors due to superiority of such resources. If one company
has gained VRIO resource, no other company can acquire it (at least temporarily). The following
resources have VRIO attributes:

 Intellectual property (patents, copyrights, trademarks)

 Brand equity
 Culture
 Know-how
 Reputation

Unique competences. Competence is an ability to perform tasks successfully and is a cluster of

related skills, knowledge, capabilities and processes.

Innovative capabilities. Most often, a company gains superiority through innovation. Innovative
products, processes or new business models provide strong competitive edge due to the first
mover advantage. For example, Apple’s introduction of tablets or its business model combining
mp3 device and iTunes online music store.

Two basic types

M. Porter has identified 2 basic types of competitive advantage: cost and differentiation
advantage.

Cost advantage. Porter argued that a company could achieve superior performance by producing
similar quality products or services but at lower costs. In this case, company sells products at the
same price as competitors but gains higher profit margins because of lower production costs.

Differentiation advantage. Differentiation advantage is achieved by offering unique products

and services and charging premium price for that. Differentiation strategy is used in this situation
and company positions itself more on branding, advertising, design, quality and new product
development (like Apple Inc. or even Starbucks) rather than efficiency, outsourcing or process
innovation. Customers are willing to pay higher price only for unique features and the best
quality.

2. 1. Product Differentiation
What is Product Differentiation?
Product differentiation is a process used by businesses to distinguish a product or service from
other similar ones available in the market.
The goal of this tactic is to help businesses develop a competitive advantage and define
compelling unique selling propositions (USPs) that set their product apart from competitors.
Who is Responsible for Product Differentiation?
While many schools of thought suggest differentiation is marketing’s responsibility, that is not
necessarily true. In fact, virtually every department within an organization can play a role in
product differentiation.

Which teams are responsible for differentiation?

 Marketing
 Product Management
 Engineering
 Sales
 Support and Success

This is because any aspect of your product can be a differentiating factor. We usually think first
of marketing because it’s marketing who focuses on product positioning and is often the first
touchpoint for a customer or prospect. However, differentiation is more than just how marketing
positions the product—every single customer touchpoint is an opportunity for differentiation.

What are Types of Product Differentiation?

There are several different factors that can differentiate a product, however, there are three main
categories of product differentiation. Those include horizontal differentiation, vertical
differentiation, and mixed differentiation.

Horizontal Differentiation
Horizontal differentiation refers to any type of differentiation that is not associated with the
product’s quality or price point. These products offer the same thing at the same price point. When
making decisions regarding horizontally differentiated products, it often boils down to the
customer’s personal preference.
Examples of Horizontal Differentiation: Pepsi vs Coca Cola, bottled water brands, types of
dish soap.

Vertical Differentiation
In contrast to horizontal differentiation, vertically differentiated products are extremely
dependent on price. With vertically differentiated products, the price points and marks of quality
are different. And, there is a general understanding that if all the options were the same price,
there would be a clear winner for “the best.”

Examples of Vertical Differentiation: Branded products vs. generics, A basic black shirt from
Hanes vs. a basic black shirt from a top designer, the vehicle makes.

Mixed Differentiation
Also called “simple differentiation,” mixed differentiation refers to differentiation based on a
combination of factors. Often, this type of differentiation gets lumped in with horizontal
differentiation.

Examples of Mixed Differentiation: Vehicles of the same class and similar price points from
two different manufacturers.

What are the Factors of Product Differentiation?

Now that we’ve looked at the categories of product differentiation, let’s look at the specific factors
that can differentiate products. A product’s unique selling proposition (USP) can be literally
anything that makes it unique or different from others out there. Here’s a few examples of ways
companies can differentiate their products from others in the market.

 Quality: How does the quality, reliability, and ruggedness of your product compare to
others on the market?
 Design: Have you done something different with your design? Is it minimalistic and sleek?
Easy-to-navigate?

 Service and interactions: Do you offer faster support than anyone else on the market?
Does your team provide custom onboarding? How are your customers’ interactions with
your team different from those of your competition?

 Features and functionalities: Does your product do something the competition does not?
Is it faster than anything else out there? Is it the only one to offer a certain integration?

 Customization: Can you customize parts of the product that competitors cannot?

 Pricing: How does your product’s price or pricing model differ from that of the
competition? Cheaper is not the only differentiating factor to consider with product pricing.

How Do You Develop a Product Differentiation Strategy?

Ready to start focusing on product differentiation but not sure where to start? Here are a few steps
to get you headed in the right direction.

1. Know your market. Take note of the market your product serves. Who are the competing
organizations and what do they offer? What types of key customer needs are not being met
with existing options?

2. Work with your entire team to establish ways you can potentially distinguish your product
from others in the market. Take inventory of the benefits and values your product brings
to customers and establish how important those values are.
3. Identify opportunities to further differentiate the product from others. Assess where they
may belong in your organization’s strategic product roadmap.
2.2. Brand Positioning
Definition of Brand Positioning
Brand Positioning can be defined as the positioning strategy of the brand with the goal to create
a unique impression in the minds of the customers and at the marketplace. Brand Positioning has
to be desirable, specific, clear, and distinctive in nature from the rest of the competitors in
the market.

Distinguishing the brand from other brands can be in terms of associated brand attributes, benefits
to users, and/or market segment emphasis, among other factors.

Steps to create Brand Position

1) Identify the current standing
Identification of current brand positon is vital for the management of the company and
the branding department to carefully understand and identify the current positioning of the brand
and have an analysis how is it working in the favour of the brand and its attainment of the overall
business aims and objectives.
If the answer is no, then the management of the company needs to figure out the gaps in the
current Brand Positioning and check if there is a need for the repositioning of the brand.

2) Identify the direct competition

The next step in the line of creating the Brand Positioning is identifying the brands in the
marketplace that pose a direct threat to the brand. The brand needs to analyze and understand the
core value, brand strengths, nature of products and services offered, ethos, and fundamentals of
the competitive brands plus spot their unique selling propositions and the factors that make them
different and unique in the market and in the minds of the customers.

3) Understand the standing of the competitor brands

The further step involves understanding the positioning of the competitor brands, basically
figuring out their vision statement, mission statement, core values, brand fundamentals, and the
entire brand architecture. It is very important to intricately study the positioning and brand
strategies of the competitor brands in order to come up with the positioning that is unique and
distinctive giving a competitive edge in the market.

4) Identify the uniqueness of the company

This step involves the in-depth introspection of the brand within and identify the core values,
fundamentals on which the brand is formulated, strengths, value propositions, long-term vision,
and the features and attributes that make the brand unique and different from the rest of the brands
in the market offering the similar lines of products and services.
5) Develop the unique selling propositions
In continuation to the previous step, the next stage to the Brand Positioning encompasses
developing the unique selling propositions depending on the features, objectives, attributes, core
values, and strengths of the brand that will give the brand a unique and distinctive identity in the
market and in the customer’s minds.

6) Formulate the messaging statements

Next on the line is working on the messaging statements such as mission statement, vision
statement, and the tagline or the brand slogan that is attached with the official logo of the brand.
All the messaging statements should be clear, crisp, and unique in line with the attributes and
inherent nature of the brand.

Importance of Brand Positioning and strategy :

1) Market differentiation
The unique and creative Brand Positioning not only clears the clutter (disorder) from the market
but also gives the factor of differentiation to the brand as compared to its direct and indirect
competitors.

2) Justifies the pricing strategy

Yet another benefit of the Brand Positioning is that it helps the management of the company to
justify the pricing strategy. If the pricing of the products offered by the brand is high owing to the
feature of quality and class, and the Brand Positioning is formulated in such a way that showcases
the factors of quality and class, the pricing part gets automatically justified in the minds of the
customers.

3) Competitive advantage
A strong Brand Positioning that tactfully and strategically highlights the core values, strengths,
attributes, and the unique selling propositions of the brand enjoys the facet of competitive
advantage that results in accomplishing the objectives of higher sales, increased market share,
customer loyalty, attracting the new set of customers, and elevated profits.

4) Makes the brand more creative

There are quite many brands in the market offering the similar lines of products and services to
the same target market and audience but it is the Brand Positioning that makes one brand different
and unique from the other. And if the brand is able to come up with the innovative and novel
positioning strategy and execution, the brand is adorned with the tag of the creative brand.
3. Competitive Pricing
Competitive pricing strategy is a pricing policy based on the use of competitors’ prices as a
benchmark to set prices. This type of strategy is often referred to as competition-based or
competitor-based pricing. In most cases, the business come to a competitive pricing strategy after
a cost-plus approach turns out to be no longer relevant.
Competitive pricing analysis is an evaluation of the consumers reaction to new prices by
means of research based on historical data or poll. Most often, price analysis examines
customers' response to a price without considering the costs and potential profits for the business.
Analysis

1. Determine Quality of Data

Complete and accurate data is crucial in order to analyze competitors. We surveyed our clients
from several different countries to determine the following criteria as crucial to high-quality data:
 Depth of comparisons. Retailers need to take everything into account regarding product
information: color, technical characteristics and other product attributes are vital for high-
quality data, and are also not available on product cards.

 Percentage of errors. Most data matching is done using automation and is prone to a degree
of error as a result. Manual comparison enhances automatic solution and ensures better results.
 The ratio of planned and delivered data. Data can be incomplete since the procedure may
lack information which is not available on the competitor’s website. This means that the
amount of data estimated before collection may exceed the amount of usable data that is
delivered.

 Constantly updated data. Retailers should use the data collected no later than two hours
before repricing.

 Data delivery time. Product and pricing data should be delivered to the retailer’s internal
system every 20-30 minutes to make comparison analysis more effective.

2. Define Data Parameters

Next, the company must determine important parameters of competitive data they need to want
to collect and analyze for their pricing process. Just a few examples to illustrate what kind of
parameters are typically monitored:
 Price Index. This displays the retailer’s position in the market for a given product or class of
products over a certain period of time. Price index visualizes how market dynamics affect
sales and delivers data on prices listed by competitors.
 Competitors’ promo activity. In the same study, Forrester Consulting indicated that at least
a third of customers are trying to find discounts before buying an item. This means it is
essential to continuously monitor discounts and sales of others in the industry to optimize
promotional offers.
 Product availability. By monitoring competitors and their product stocks, retailers can adjust
their prices based on the supply of an item or class of items on the market at a given point in
time.

3. Categorize Competitors
Once a retailer has thorough data about their competitors, the retailer needs to classify competitors
according to several factors including but not limited to target audience and product quality. There
are three main categories that market competition can be divided into:

 Primary — direct competitors who pursue the same buyer category.

 Secondary — competitors who focus on upscale/downscale versions of the retailer’s
assortment.

 Tertiary — companies selling products which are indirectly relevant to those of the retailer.
Analyzing this level of competition helps retailers willing to expand their assortment.
Categorizing competitors makes market analysis less time-consuming and allows retailers to
focus their attention in the right direction in terms of competition. Beyond that, the competitive
landscape for each product is not stable as other retailers change their strategy and new players
enter the market. What it means is that the competitive analysis and categorization are ongoing
processes that should be done more or less often depending on the product type or market
segment.
4. How to Do a Smart Pricing Analysis: Use Machine-Based Pricing Tools
Modern retail companies are increasingly leaning towards procedures to collect and analyze data.
Machines have significant benefits over manual approaches:

 Improved accuracy
 Can process large amounts of complex data
 Scheduled delivery
 Provide precise pricing recommendations.

Arguably, the most important aspect of implementing automation into the pricing process is that
it allows retail teams to switch from routine tasks to strategic tasks regarding pricing strategy and
price management. When it comes to automated pricing systems' implementation, most retailers
are afraid of extra costs. The fact is that these solutions are instead a means of cost reduction.

5. Track Competitors’ Online Activity

To have a better understanding of the market, retailers should monitor their competitors and their
platforms such as official websites and social media accounts. There are several aspects
businesses need to examine:

 Product descriptions
 Visual presentation
 Social media activity
 If the websites and social media accounts are mobile-friendly
 Customer support and feedback options
 Response rate

In addition, retailers can sign up for official newsletters and become a follower of their
competitors on social media. Businesses need to understand what attracts clients to their
competitors’ products.

How is competitor based pricing calculated? / pricing strategy option

In a competitor based pricing strategy you have two different types of competitors you need to
be aware of while grouping them together, they’re

 Direct competitors: Direct competitors offer similar products or services and compete
for the same market share.

 Indirect competitors: Indirect competitors offer products or services which will overlap
with yours and partly solve the problems in a completely different way. They may be
products that might have only one or two similar functionalities as yours and don’t
compete for the same market share in a wholesome way.

After finding out your product fit in the market, you need to now understand competitive pricing
and analyze how to price the product. There are three methods as to how you can price your
product after doing a thorough analysis of your competitors

 Pricing above the competition: Offering products or services priced superior to your
competitors. It is usually done when you feel the products or services you offer are a
notch above your competitors.

 Pricing on the same level: Also known as price matching. You price your product
similar to that of your competitors. But here, your primary focus should be on the added
value your product has to offer even though your product and its features are the same as
your competitors.

 Pricing below the competition: Pricing below competition shouldn't be a strategy, if at

all, your product is limited in terms of features and functionality. It can also be adopted
when you want to provide a competitive price for your customers in order to grab their
attention, increase sales and your brand value.
4. Competitive advertising
Competitive advertising is a type of advertising that involves a company creating a visual
illustration directly or indirectly showing a contrast between its product and a similar product
offered by its competitors.
This is for the purpose of influencing the consumer's buying choice, while hoping to obtain a
larger market share.

The different types of competitive advertising include:

• Comparative Advertising

This is an attempt by a company to compare its product with that of a competitor. A good example
is when a bank uses the results of an independent test to show why it is more popular than other
banks.

• High quality product

You'd easily understand the concept of competitive advertising when you picture a two-
competitor market. For example, if there are two popular noodles in the market, you'd notice that
the prices of the products will be similar.
When one of the brands wants compete with the other, it might create an advert showing how it's
noodles is of a better taste (or higher quality).

• Market-wide ranking

In a country like the United States, a brand needs to show the superiority of its product over
competitor products in order to influence consumer choice.

• Negative advertising

Negative advertising is when a brand skips the comparison, and instead talks on how a competitor
does not represent the right choice for the consumer.
In some instances, the advertiser might offer its own product as an alternative without
commenting on why it represents a better choice for the consumer.
Examples of Competitive Advertising
Some practical examples of competitive advertising in real life include:

• Auto manufacturers

An auto manufacturer can talk about how its product is the most fuel efficient in its class. A good
example of competitive advertising among vehicle brands was the event that took place during
the 2019 Halloween when BMW released an ad that read, “Now every car can dress up as its
favourite superhero.” featuring a Mercedes with a BMW cover over it.
The add was very hilarious (funny), and became even more when Daimler AG replied with a
tweet saying; “Nice one, @BMWUSA. That’s a really scary costume! Especially that radiator
grille…”
The moral of the story is that you should be careful on whom you launch competitive ads against.
Your competitor might still be able to use the ads against you.

5. Role of Sales Promotion in Competitive Marketing

Meaning and definition of sales promotion
Sales Promotion means any steps that are taken for the purpose of obtaining or increasing sales.
Sales promotion means and includes all the activities that are performed by a producer, a dealer
or a businessman to increase his sales. The main purpose of sales promotion activities is to
encourage and persuade consumers to buy a particular product.
Sales Promotion encompasses all the tools in the marketing mix whose major role is persuasive
communication.Philip Kotler

Functions of Sales Promotion

Sales promotion is the direct inducement or incentive to the salesforce, the distributor, or the
consumer, with the primary functions of creating an immediate sale. Functions of Sales promotion
vary widely. To help ensure the proper application of sales promotion, Specific functions must
be set.

These functions and objectives of sales promotion may be as follows:

1. Stimulate Trial Purchase
When a firm wants to attract new users, sales promotion tools can reduce the consumers’ risk of
trying something new. A reduced price or offer of a rebate (discount, refund) may stimulate trial
purchase.

2. Stimulate Repeat Purchases

In package coupons goods for the next purchase or the accumulation of points with repeated
purchases, can keep consumers loyal to a particular brand.

3. Stimulate Larger Purchases

Price reductions or two for one sale can motivate consumers to stock up on a brand, thus allowing
firms to reduce inventory or increase cash flow.

4. Introduce a New Brand

Because sales promotion can attract attention and motivate trial purchase, it is commonly used
for a new brand introduction.
5. Combat or Disrupt Competitors Strategies
Because sales promotions often motivate consumers to buy in larger quantities or try a new brand,
they can be used to disrupt competitors marketing strategies.
If a firm knows that one of its competitors is launching a new brand or initiating a new advertising
campaign, a well-timed sales promotion offering deep discounts or extra quantity can disrupt
the competitors’ strategy.
6. Contribute to Integrated Marketing Communications
In conjunction with advertising, direct marketing, public relations, and other programs being
carried out by a firm, sales promotion can add yet another type of communication to the mix.

Sales promotions suggest an additional value, with price reductions, premiums, or the chance to
win a prize.

This is an additional and different message within the overall communications efforts.

7. Increasing Consumption of an Established Brand

Sales promotions can generate some new interest in an established brand to help increase sales to
defend market share against competitors.

8. Defending Current Customers

With more new brands entering the tee market every day and competitors attempting to take away
their customers, many companies are turning to sales promotion plans to hold present customers
and defend their market share.

9. Targeting a Specific Market Segment

Most companies focus their marketing efforts on specific market segments and are always
looking for ways to reach their target audiences.

10. To Attract New Customers

Demonstrations of products such as vacuum cleaners or food processors can show people how
easy they are to use and how well they perform.

11. To Get Greater Retailer Cooperation

A sporting goods manufacturer gets additional shelf space by setting up a point of purchase
displays, training retailers’ salespeople, and providing tote bags (carry bags) to be given away
with purchases.