Stretergic Management Final 1
Stretergic Management Final 1
Stretergic Management Final 1
<SEMESTER>
<STRETERGIC MANAGEMET>
<M-306>
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CONTENT
STRUCTURE
1.0 Learning Objectives
1.1 Introduction
1.2 Analysis of Market Situation
1.2.1 Market Analysis- An Overview
1.2.2 Purpose for analyzing the Market Situations
1.2.3 The 5 Cs of Market Situation Analysis is as follows
1.2.4 SWOT Analysis
1.2.5 Advantages of Market Analysis
1.2.6 Disadvantages of Market Analysis
1.2.7 Internal Market Situation Analysis
1.2.8 External Market Situation Analysis
1.2.9 Other Methods of Market Situation Analysis
1.2.10 Design of Market Situation Analysis
2.0 INTRODUCTION
We've come across the terms market and marketing many times in business world. Both
are similar sounding terms and refer to the same topic. 'Market' and 'marketing,' on the other
hand, are two distinct concepts that are related to one another. Market evaluation and
situation analysis give you a "road map" to help you make better decisions as you carry out
your market development strategies. Marketing research is the function that connects the
consumer, customer, and general public to the marketer through information that is used to
identify and define marketing opportunities and problems, generate, refine, and evaluate
marketing actions, track marketing performance, and improve understanding of marketing as
a process. While developing the market strategy it is necessary to do market research. Market
research is the process of acquiring, analyzing, and interpreting data in order to assist in the
resolution of marketing problems. We employ market research for a variety of reasons. It
assists us in making informed decisions, such as establishing the feasibility of introducing a
new product before investing time and money into it. With market situation analysis it is
important to analyze the competitor’s. Competitive market research focuses on identifying
and analyzing key market indicators that might help you distinguish your products and
services from those of your competitors. Comprehensive market research lays the
groundwork for a successful sales and marketing plan that sets your firm apart from the
competition.
Marketing as a commercial discipline is a relatively new development. Exchanges have
occurred throughout history, from the period of barter to the contemporary complicated
marketing system. Over decades, marketing concepts have evolved significantly. Even after
marketing was elevated to the status of a full–fledged business discipline.
More than any other corporate activity, marketing is concerned with the client. It is centred
on the consumer. Establishing relationships based on the perceived worth of the consumer
and Many individuals believe that marketing is synonymous with selling and advertising.
And it's understandable — we're inundated with television advertising, newspaper
advertisements, direct mail offers, sales calls, and online solicitations on a daily basis.
However, selling and advertising are merely the tip of the iceberg when it comes to
marketing. They are two of several marketing roles and are frequently not the most critical.
There are two marketing principles that provide us with a comprehensive understanding of
marketing. They are as follows:
A) The conventional marketing idea.
B) Contemporary marketing idea
Marketing, in the conventional sense, refers to the activities that result in the transfer of
ownership of commodities and the management of their physical distribution. It encompasses
all operations aimed at ensuring the flow of products and services from producers to
consumers, as well as those aimed at the establishment of time, place, and possession utilities.
However, marketing as a modern idea is more than a physical process or collection of
actions. It embodies a distinct corporate concept that has arisen in recent years: customer
creation. Here, the client is both the catalyst and the objective of all marketing activity.
Marketing is concerned with determining and satisfying personal and social needs. It is
defined as profitably addressing customer demands. Customer creation entails identifying
consumer wants and developing the firm to suit them. In other words, a business takes
deliberate and coordinated attempts to ascertain what the community's members need and
how it may best provide those requirements. It generates what the customer demands, in the
quantity required, at a price the consumer is willing to pay for the satisfaction delivered in the
form of goods and services, via channels that meet the consumer's need for goods and
services. Thus, the current philosophy of marketing is centred on the consumer and his or her
delight. As a result, it is referred regarded as a consumer-oriented idea. Satisfaction is
important to contemporary marketing. The pricing methods used, the promotional techniques
used, the design, shape, and size of the product, and the location of sales are all determined
after researching the customers' lifestyles, cultures, purchasing behaviours, and media
consumption habits, among other things.
Marketing brings together manufacturers and customers for mutual gain. Production is
pointless if the things created are not distributed to customers via an effective marketing
strategy. When we look around, we see marketing in the advertising that fill our television
sets. brighten our periodicals, fill our mailboxes, and provide life to our online sites. At home,
at school, at play, and at work. We encountered marketing in nearly everything we do. All of
this is facilitated by a vast network of people and activities vying for our attention and
dollars.
Marketing management analysis is the process of a company's marketing components being
decided, planned, and controlled in terms of the marketing idea, somewhere inside the
marketing system. Before delving into some of the process's finer points, some background
on two points will be useful.
The marketing notion is easy in theory, but putting it into practice is sometimes difficult, if
not impossible. The above-mentioned comment by Adam Smith is most congruent with it.
The idea is that if a corporation openly integrates the many components of its marketing
operations in order to suit the preferences of its consumers, it may more successfully fulfil its
own aims.
To someone who is inexperienced with corporate practice, the necessity for adopting the
notion and the ability to do so appear to be so self-evident that they don't need to be
discussed.
Within the marketing system, this marketing management process takes place "somewhere."
After seeing the marketing system shown, you realize that "somewhere" may be any of the
many, many enterprises that make it up—manufacturing, wholesaling, and retailing. Every
single one of them employs marketing management.
Assume, for simplicity's sake, that we're just interested in the manufacturing level in the
sense that the manager we're looking at works in a marketing management job there.
Situation analysis requires an examination of an organization's internal environment, or
microenvironment. The state of an organisation, whether it is a business or any other sort of
organisation.
The internal and external dynamics of an organisation are expressed in terms of its internal
and external dynamics. environmental variables When both forms of data are analysed, a
conclusion is reached. management can have a thorough grasp of the internal and external
surroundings the organization's overall situation When it comes to the external world, Factors
that exist outside of the organisation are depicted.The exterior circumstances, as well as the
interior environmental elements, depict the internal situation.the organization's circumstances
Internal environmental analysis can be beneficial.Managers determine an organization's
internal strengths and shortcomings. In terms of numerous internal environmental elements,
the organisation. Each factor in various sections of the organisation is investigated.
The hard truth of today's more competitive marketplace cannot be avoided. Every customer
that a company wants to recruit is a competitor. The company competes for the attention and
engagement of customers. It competes for their time and attention during the purchasing
process. It fights for consumers' willingness to cope with the technological complexity
inherent in many goods and the resulting demand for services, as well as the dollars they are
prepared to pay on a product or service. A terrific concept or a distinctive product are not
prerequisites for successful consumer marketing.
Consumers who desire or need the goods and have the financial means to purchase it are the
starting point for marketing. These customers, on the other hand, don't just buy a product;
they buy a market offering, which is a collection of values. A product, product services,
transaction services, brand, packaging, pricing, credit terms, price reductions, advertising,
personal sales help, shop or company location availability, inventory selection, and
transportation services are all part of that market offering. The key problem for the marketing
executive in building a successful competitive position in the European consumer
marketplace today is combining and matching these many parts of the market offering into an
adequately integrated and unified whole.
But, before any of this can happen, the company must compete for the attention of customers
and establish a recognisable comparative position in their thoughts that is consistent with
their cultural background.
A market analysis is a quantitative and qualitative valuation of a market. The aim of market
analysis is to recognize the important characteristics of a market and to find out the market
structure at a certain point in time. Analyzing the market situation can help you to understand
your target audience and the conditions of the market. This can help you to differentiate
yourself from the competition and be distinct you in a crowded market. A market analysis
provides information about other industries, customers, your competitors, and other market
variables. Market situation analysis involves assessment of the situation and trends in a
specific market. If you are in the process of business planning and to launch a new product in
a market, you need to assess the situation in that market. The purpose of this is to help the
business determine the areas where marketing efforts are most needed, and to enable you to
make your business plans and implement them accordingly. Market Situation Analysis should
be based on cold, hard, verifiable facts.
The 'where are we now' situation analysis or audit is a method for a corporation to determine
its own strengths and weaknesses in relation to external opportunities and dangers. As a
result, it is a method of assisting management in choosing a position in that environment
based on existing facts.
A company's external environment encompasses a wide range of factors. The environment is
said to be divided into two parts: the macro-environment and the micro-environment. Social,
cultural, legal, economic, political, and technical elements make up the macroenvironment.
Strategic marketing planning is critical in order to design the most appropriate marketing
strategy to build and sustain Shloer in a continuously changing marketplace, taking into
account elements such as demography, green concerns, and bigger societal and
environmental challenges.
Both the company's internal environment (controllable factors affected by management) and
the external environment in which it works (uncontrollable variables management cannot
influence) must be investigated, as shown. The information gathered is then organised and
evaluated using the SWOT analysis, which matches the company's vulnerabilities and
strengths to the risks and opportunities it faces in the environment. As a result, the firm may
build on its strengths, mitigate any weaknesses, seize market opportunities as they emerge,
and avoid any threads as far as conceivable pressures are considered. Other environmental
restrictions, such as market structure, suppliers, consumers, market trends, public, and
competition, are included in the Micro-environment.
The internal environment, which includes an evaluation of the company's marketing mix
(product, price, site, promotion) and service mix (people, process management, physical
evidence), is also critical. Other criteria covered in an internal environment analysis include
sales, profitability, market share, and customer loyalty.
Internal auditing studies a company's own resources and makes recommendations on its
strengths and deficiencies. Internal factors are mostly under the control of the firm, and as a
result, organizations should make every effort to avoid any difficulties that may arise as a
result of them. Internal organizational competencies are clearly demonstrated to be important
in product creation and strategic formation.
After taking into account both internal strengths and weaknesses as well as external
environmental effects (opportunity and dangers), every organization is in a position to design
an efficient marketing plan. Failure to comprehend both external and internal capacities may
result in total failure.
1. Market size (actual and potential): The size of important submarkets; the prospective
market includes the use gap.
2. Market growth rate: The forces that drive sales, as well as growth rate projections. 3.
3. Profitability of the market: Existing rivals, supplier power, customer power,
replacement products, and potential entrants all influence the level of competition.
4. Cost structure: Examine the value added by the production stage and track how it
changes over time, as well as the impact of the learning curve.
5. System of distribution
6. Developments and trends
7. Critical success factors: What abilities and competences are required today and in the
future to compete?
8. The market's competitive nature: the type of competition among current enterprises,
whether new entries or the availability of substitute products pose a danger, and how
influential consumer and supplier groupings are.
The following are the four primary factors to consider when assessing the current market
situation:
Consumer – Because this time the focus is on the customer, demographics such as
type, number, age, and so on will be examined. It will dig even further, considering
the value drivers that motivate customers to behave in a certain way. The
investigation will also examine into the decision-making processes of the participants
in the study.
Competitor – Because competition is an important part of any firm, it is necessary to
incorporate it in the market condition study. The company's and its shares' market
positions will be compared to those of competitors in this examination. It will also
have to determine the competitors' strengths and shortcomings.
Collaborators - In addition to the company and its competitors, there are a number of
additional parties who play an important, if indirect, role in the company's activities.
Other players such as distributors, suppliers, consultants, subsidiaries, and joint
ventures, to name a few, are among the collaborators.
Climate - When assessing the climate, concentrate on external elements that may
have an impact on how you do business. Industry trends, societal trends, legal trends,
and new or developing technology will all be discussed.
It also contains a business, i.e. its strengths, weaknesses, opportunities and the threats that it
faces.
Strength: Strength is referred to all the positive contributions to the favorable result
of an organization. These contributing aspects can be tangible or immaterial, but they
must be under the company's control. Human resources, capital resources,
infrastructure, brand recognition, and other factors should all be taken into account.
Weaknesses: Weaknesses are defined as any internal elements that prohibit an
organization from attaining its goals. In other words, the factor which may jeopardize
the success of the company is a weakness. For example, employees can be the greatest
asset of company if they are skillful, well-trained, and motivated to their job. On other
side, workers without ample skills and motivation will be a big obstacle for the
company to reach the top position. Similar to strengths, there are some elements that
should be reviewed to find out weaknesses as early as possible.
Opportunity: An opportunity is defined as an external factor that has a favorable
impact on or contributes to a company's success. For example, if you're an online
retailer, the rise of mobile devices is a boon to your business's ability to expand and
earn consumer recognition.
Threat: Threats are external factors that exist as disadvantages, requiring
businesspeople to devise effective strategies for dealing with them or change their
plans to overcome these obstacles. For example, a rapid economic downturn may pose
a challenge for businesses, as they will have to work harder to get people to consume
their goods. Some hazards even cause businesspeople to abandon their plans to attain
certain objectives.
Risk reduction: Knowing your market may help you decrease business risks since
you'll have a better awareness of important market trends, key industry players, and
what it takes to succeed, all of which will inform your business decisions.
Targeted products or services: When you know exactly what your customers want
from you, you'll be in a far better position to serve them. You may utilize this
information to adjust your business's offerings to your consumers' demands once you
know who they are.
Emerging trends: Being the first to discover a new opportunity or trend is a key part
of staying ahead in business, and employing a marketing analysis to remain on top of
industry trends is a wonderful way to position you to take advantage of this
knowledge.
Market forecasts: A market prediction is an important part of most marketing
assessments since it predicts future numbers, attributes, and trends in your target
market. This provides you an estimate of how much money you'll make, allowing you
to change your company plan and budget accordingly.
Benchmarks for evaluation: Outside of basic metrics, it can be tough to assess your
company's success. A market study gives standards against which you can assess your
firm and how well it is performing in comparison to the competition.
Marketing analytics: Marketing analytics can provide context for prior blunders and
industry abnormalities in your company. In-depth analytics, for example, can explain
what factors influenced a product's sale or why a certain statistic performed the way it
did. Because you'll be able to examine and define what went wrong and why, you'll be
able to prevent repeating the same mistakes or encountering similar anomalies in the
future.
Marketing optimization: An annual marketing study may help you with this because
it can guide your continuing marketing efforts and show you which elements of your
marketing require improvement and which are functioning well in comparison to
other companies in your sector.
Marketing Environment: Successful marketers are those who can direct their
organizations through the unstable marketing environment, and do it better than
competitors. In marketing and strategic management, competitive analysis is an
evaluation of present and potential competitors' strengths and weaknesses. To
identify opportunities and risks, this analysis gives both an offensive and defensive
strategic perspective.
Merry down PLC was founded in 1946 as a cider maker in Heathford, East Sussex. In
the early 1990s, it purchased Shloer manufacturing and was the first firm to import
alcopops, in the shape of Two-Dogs, into the UK. Due to increased competition in the
alcopops market, the firm lost £516,000 in pre-tax profits in 1997 and handed
distribution of Two Dogs to Scottish and Newcastle.
In 1999, the company rebranded itself as Shloer, which boosted its soft drink market
performance. Sales grew in 2001 as a result of the company's current successful
strategy of increasing the size and frequency of existing customers' purchases while
also introducing new consumers to the brand through efficient marketing
communications.
While the firm continues to make traditional ciders, it is hoping to profit from Shloer's
recent popularity. It explores possibilities that will boost growth for the long-term
benefit of shareholders by sticking to its original 40-year-old formula of natural fruit
juices and water.
Performance
Profitability and Sales
Merrydown PLC's overall financial performance has improved during the previous five years.
Table 1 indicates that between 2000 and 2001, the company's revenues climbed by 12% to
£17.63 million, while pre-tax profit increased by 41% to £1.05 million. Earnings per share
climbed by 86 percent to £2.92, with final dividends increasing to £0.75 in the company's
favour, while net cash increased to £2.80 million, enhancing liquidity. In addition, the firm
has a £3 million committed overdraft to cover all projected working capital needs and allow
room for future developments.
Increased Shloer sales, which surged by 47 percent to £8.5 million the previous year,
contributed significantly to the improved sales performance in 2001. Shloer is presently at the
maturity stage of its product life cycle, despite its rapid sales growth. The Product Life Cycle
(PLC) idea highlights four different periods in a product's sales history, known as
Introduction, Growth, Maturity, and Decline, and shows how profits grow and decline at each
step. The idea serves as a great tool for evaluating the brand's current and future orientation.
By determining where it is in its life cycle, relevant solutions for dealing with possible
dangers and opportunities in that stage may be identified (Brassington and Pettitt, 2001).
Shloer's product life cycle depicts how sales and profitability have evolved through time and
are likely to continue to do so in the future. Low sales growth and fragmented marketplaces
characterise the mature stage, as established rivals strive to obtain a competitive edge in
specific areas. Recent methods have mirrored those recommended at this level of the PLC.
Product modification tactics, such as expanding the selection of flavours, package design, and
size, have previously been used to relaunch Shloer in order to increase sales volumes. Market
modification techniques, such as promoting new and varied applications through recipes and
drinking situations, have effectively improved sales by drawing new customers to the brand
and motivating existing customers to buy more Shloer in the future.
Share of the Market
Shloer's market performance has improved over the previous three years, with a 1.5 percent
gain in its value share of the adult soft drinks market. Shloer is now being purchased by 7.7%
of all households, indicating that the brand has significant development potential.
Customer loyalty is important.
Over the previous three years, the firm has been able to increase Shloer's loyalty. In 2000,
independent research found a strong favourable response to the company's new branding, as
well as high levels of consumer recognition and satisfaction. Summer sales have also grown,
although they are still at their peak during the Christmas season.
Customer loyalty is divided into six categories, according to Wind (1982):
1. Existing customers who will continue to buy the brand.
2. Existing consumers who may switch brands or cut back on their use.
3. Occasional users who, given the correct incentives, may be convinced to expand their
usage.
4. Occasional users who may reduce their use as a result of competing products.
5. Non-users who could consider purchasing the brand if it is changed.
6. Non-users who have strong unfavourable sentiments about the product and are unlikely to
change their minds.
The bulk of Shloer's existing clients fit into groups 3 and 4 (occasional users). As a result,
competitors' comparable goods might erode their loyalty to Shloer, signalling that resources
should be put in a targeted marketing mix to convert them into heavy users.
Positioning
Shloer is marketed as a grown-up soft drink in the adult soft drink market, with a focus on
ladies over the age of 25. The Mc Kinsey Matrix may be used to illustrate its current market
position in order to analyse the current strategy based on its business strength in terms of key
performance indicators and market competitive dynamics.
Figure 3 shows a model that takes into account two dimensions: market attractiveness for
competitors (in terms of cash flow, market size, sales growth rate, competition, and so on)
and business strengths relative to competitors (in terms of company size, growth, marketing
capability, market share, customer loyalty, and so on). Three zones have been established,
each implying a distinct marketing strategy. When the firm's position and market
attractiveness are both good, the company should most likely spend and try to grow. Zone 3
has a more pessimistic outlook and suggests that either harvesting or divestiture techniques
be adopted. Zone 2 denotes that just a few investment decisions should be made if there are
special grounds for doing so (Aaker, 1998).
Shloer is roughly in Zone 1 and is represented by the letter X. Because of the industry's
maturity, the degree of market attractiveness is predicted to decline during the following three
years, as shown by the arrow. Indicating that resources should be directed to investing in the
near future for future growth.
Planning
The corporation is devoted to investing extensively in marketing operations and has a long-
term vision of Shloer's brand growth. In the year 2000, more staff were hired in marketing,
category management, and sales strategy, and production and brand management teams were
separated into distinct operating divisions to focus management resources on these major
operations. Furthermore, all marketing efforts are placed along the M25, a significant traffic
artery, to allow clients and agencies convenient access.
Marketing Combination
Product
Shloer is a beverage made from premium fruit juice (about 55%) and carbonated water, with
vitamin C and no artificial sweeteners or preservatives. In April 1999, it was relaunched. to
allow growth with a wider selection of flavours and more modern packaging within new
commercial channels It's now available in a 1-liter glass container as well as a single-serve
275ml glass bottle. red grape, white grape, raspberry & cranberry, white grape & peach,
white grape & peach, white grape & peach, white grape & peach, white grape & peach, white
grape & peach, white grape & peach, white grape white grape & elderflower, and grape &
apple A flask-shaped 330ml silver wrapped flask is also included. Shloer2gO was introduced
in 2000 and comes in three flavours: orange & lemon, apple, and grapefruit, as well as exotic
fruits, to appeal to impulsive purchasers. Since 1999, capital investment in plant and
equipment, as well as bottling operations, has kept systems running smoothly. up to date, and
high capacity and manufacturing standards were maintained. An honourable distinction
winning the Gold Award from the British Retail Consortium in 2000. Place Shloer is
distributed throughout the UK by SHS Sales and Marketing Ltd in supermarkets and off
licences. as well as pubs. Merrydown PLC has established a good working connection with
the firm. SHS invested in extra resources in the year 2000 to improve their administration and
representation.significant accounts on their behalf, in order to assist in the expansion of
distribution within the Irish Republic
.Price Shloer demands a premium price in line with its present image, with prices
ranging from £2 to £3. a one-liter bottle However, robust competition precludes price
hikes from compensating promotional expenditures. Promotion Since 2000, support
for the brand has more than quadrupled, according to the present approach. A total of
£2 million was spent on advertising and marketing. In 2001, pull-strategies were
prioritised in order to illustrate Shloer's value to customers directly, with the help of a
few well-targeted trade promotions. promotions. Shloer is marketed as "the adult soft
drink" that is "sparkling, refreshing, and more than a little bit fruity" in television and
print advertisements. The brand is marketed as being excellent for people who are
looking for a unique way to express themselves. Summer days are hazy and lethargic,
perfect for lounging in the garden with friends and as a self-indulgent adult
refreshment (www.shloer.com). Commercials aired on GMTV and Channel 4 starting
in November. 5, in combination with advertisements in Hello, the BBC Good Food
Guide, and Elle for women's magazines, In-store marketing, sampling, and PR events,
such as the Shloer garden at the Chelsea Flower Show, were also sponsored.
4) Implicit Competitors — Different drinks, such as hot beverages, alcoholic beverages, and
other carbonates such as Coca-Cola and Pepsi, compete for the same percentage of the adult
consumer's disposable money.
Figure 6 compares and contrasts the strengths and disadvantages of immediate competitors.
Shloer Doyle emphasises the need of studying direct rivals, also known as the strategic group,
because they all target the same market sectors and have comparable objectives. It's also
crucial to be aware of any unintentional competitors who may be selling items, since they
might represent a serious danger to the brand.
There are many competing items on the market, which may be divided into three categories.
The business
An examination of a company's vision, strategy, and objectives—and if they are being met—
is an excellent place to start. Examining the company's performance through the lens of sales,
market share, and customer retention provides a useful snapshot of whether the business is
meeting its objectives. Additionally, it can assist you in evaluating rivals and market share.
Commodities and services
Analyzing existing products or services, as well as anticipated new releases, is a critical
component of a scenario analysis. Market research is required to ascertain the viability of a
new product or service.
A market analysis done with potential consumers who provide comments or thoughts about
the product, service, or price can give insight on who the target market is and how a
company's products might be improved. Separately examine products and services to
determine which ones best satisfy your clients' demands and which ones require adjustment.
Distribution
Market study identifies a company's target demography and the level of demand for its
products or services. The competition analysis evaluates your firm in comparison to
comparable businesses. Both can provide valuable insight on your company's distribution
routes.
The distribution section of a scenario analysis examines how your products are distributed
and compares it to that of your rivals in order to discover the most effective distribution
methods for your firm.
Opportunities
Market possibilities exist when unmet or underserved demands exist. Understanding how to
get that market share is critical to a business's success. However, before a corporation can
effectively target an untapped market, it must first analyse its own strengths and flaws. A
strength, weakness, opportunity, and threat (SWOT) analysis is an effective method for
determining your business's capacity to capitalise on opportunities.
Analyses of customers
Conducting extensive research is crucial to comprehending your clients. Collect demographic
information on your customers, their locations, their interests, and their issues. Once you
have a firm understanding of your customers, you can identify additional potential customers
as your target market and develop an effective marketing strategy. Knowing your clients
enables you to ascertain the requirements, tastes, and behaviours of your target market in
order to develop the most effective strategy for reaching them.
Competitors
Analyzing your primary rivals will assist you in determining how your firm stacks up.
Identifying and evaluating a company's competitive advantages might assist your
organisation in adapting to compete more successfully.
Conducting competitive research on their products or services, sales, and marketing methods
might assist you in adjusting your company's strategy to gain an advantage. Your competition
study should include information about a rival's market share, as well as its strengths and
flaws. The SBA maintains a database of business statistics that you may use into your
analysis.
Collaborators
Collaborations and partnerships are key components of many corporate processes. They
include raw material suppliers, business partners, and distributors who may handle your
organization's supply chain, production, and vendor connections.
Analyze collaborations to determine their strength and viability. Examining contracts and
determining if items and services have been supplied as promised in the past can provide
insight into a company's relationship's dependability.
The company component of a 5C analysis consists of the firm's vision and goals, as well as
its market position, distribution, opportunities, and goods. Consumers supply critical
information about present customers, the target market, and the prospects that a business
might pursue as part of its marketing strategy.
The rivals' section identifies a company's strengths and areas for improvement based on the
strengths and weaknesses of competitors. Collaborators are the relationships that enable the
creation and dissemination of products. Climate factors in aspects such as government policy
and the economy, as well as election projections for 2020.
Conducting periodic situational analyses can assist you in determining the status of your
business as it changes in order to ensure market success.
Utilize a scenario analysis to create a marketing strategy, uncover market gaps your business
can fill, promote new technologies, and adapt to rival developments. Adapt the report as
necessary to have a deeper understanding of your business's origins—and the path it should
go.
1.2.9 Other methods of Market situation analysis
Correct market definitions are necessary for analysing buyers and competitors and
forecasting future trends.Your situational analysis should begin with market research.
Strategic analysis and planning are ineffective when referring to the market in broad strokes.
For instance, the Colorado market, the European market, or any other geographic area with a
varied population of individuals and businesses. A more precise definition of needs and
desires is required. For a market to exist, there must be individuals with specific needs and
desires for one or more items that can meet those needs and desires.
Additionally, market participants must be willing and able to pay for a product that meets
their requirements and desires. Thus, the idea of product-market simplifies the defining
process. A product market is defined as a single product (or series of related goods) that
satisfies your unique set of requirements and desires for all individuals or organisations
willing and able to acquire the product or service. The term "product" can apply to a tangible
good or an intangible service. This concept assigns a product category to individuals or
organisations that have a common set of requirements and desires.Naturally, depending on
the particular or broad nature of the requirements, the corresponding product category will be
similarly specialised or broad. Analyzing product markets and projecting future trends are
critical components of business and marketing strategy.
Strategic marketing decisions about entering new product markets, how to service current
product markets, and how to exit unappealing product markets are crucial. Marketing
professionals possess the necessary skills, expertise, and methodologies to (1) perform
product marketing analysis, (2) understand the strategic implications of the findings, and (3)
develop product market strategies. Market analysis entails the following activities:Identifying
and defining new product markets that present an opportunity for a business. Conducting an
analysis of current product marketplaces in order to establish strategic goals. Environmental
scanning and predicting of future trends and new product markets. Demand and supply
analysis is a critical component of product marketing analysis. Demand reflects the
purchasing power of the individuals and organisations who compose the market. Supply
refers to the extent to which the corporation supplying the market can meet the available
demand. You may think this is elementary economics, but you'd be amazed how many people
overlook this. A thorough examination of the buyer's demands and requirements is also an
integral aspect of the product marketing analysis process. These customer analysis activities
assist marketers in determining which consumers to approach and how to best satisfy their
demands. Your situational analysis reveals details you may have overlooked previously. As
the leader of Soricon's check reader product in Boulder, CO, I assisted in identifying a
significant gap in the single and multi-lane retail sectors. Retail managers, banks, and
clearinghouses desired to curtail and eventually eradicate check fraud. And thus was created
the check reader. The check reader enabled the POS attendant to scan the check, transferring
MICR data back to the bank to confirm adequate funds were available before completing the
sale. This prevented retail businesses from losing millions of dollars in fraudulent purchases.
Segmentation of the Market Market segmentation finds groups of customers with comparable
wants within a product market. Segmentation enables a company to better match its strengths
to the needs of one or more buyer groups.Your situational analysis reveals new information
about market segments. This may involve a strategy based on accounts. The primary concept
of segmentation is to explore distinctions and needs. Additionally, to identify two or more
categories within the target product market. Each target market consists of customers who
have comparable demands and desires for the product category in which marketers and senior
management are interested. Typically, the segments differ in terms of the buyer's attributes,
the reasons they purchase or use specific items, and their preferences for specific brands of
products. Similarly, segments of industrial product markets can be defined by the kind of
industry, the product's intended purpose, the frequency with which the product is purchased,
and a variety of other variables. A segment's features may differ significantly from the
average characteristics of the total product market. The similarity of people's requirements
within a market segment enables a marketing programme to be more effectively targeted.
Age, income, and lifestyle all influence how people shop for food, financial services, autos,
and other consumer goods. Analyze Your Competition and Your Situation Analyzing rival
tactics, strengths, weaknesses, and goals is a critical component of scenario analysis. It is
critical to identify both current and prospective rivals. Typically, a subset of the industry's
firms constitute the strategic group of a company's primary competitors. The analysis should
highlight the analysis's most significant strengths and limitations. Often, the enterprises that
comprise an industry exhibit great variety. This is demonstrated in Exhibit 1 by the
competing enterprises in the computer service industry in the United States.
The companies exhibit significant variances in terms of their level of connection with clients
and the degree to which their services are customised. Each quadrant of the map depicts
businesses that have common qualities.
The factors or rewards that a buyer considers while making a purchase, as well as their
relative importance.
The degree to which and the manner in which a business is distinct from its competitors.
The constraints of competing items in terms of critical customer needs and desires.
The positioning statement serves as a springboard for developing a strategy. Positioning
reflects how the organisation wishes to be viewed by the target market and its consumers.
Positioning is defined in terms of a reference point, most frequently competition.
The formulation of a plan should begin with a product strategy and then go on to distribution,
pricing, and promotion strategies. Notably, the strategy components form a symbiotic
network of acts that complement and reinforce one another.
The selection of an effective marketing programme plan is hampered by the vast array of
possibilities available to management. Nonetheless, there is frequently a clear logic to how
the components of a marketing campaign should fit together in a specific context.
Product, distribution channel, pricing, advertising, and personal selling decisions must all
contribute to the development of an unified marketing campaign aimed at addressing the
requirements and desires of customers in the company's target market.
Creating a digital marketing campaign integrates the company's marketing skills into a
bundle of activities aimed at positioning the business against its competitors in order to
compete for the clients that comprise its target market.
Marketing management must determine the function and scope of each marketing programme
activity.
These decisions establish the overall amount to be spent on the marketing programme
throughout the planning period, as well as the allocation of resources among the different
programme activities, such as content marketing, SEO, advertising, and direct selling.
The target market strategy identifies the individuals (or organisations) inside the product
market that management desires to serve.
When buyer requirements and desires differ, the market target is frequently a sector of the
product market. Marketing managers must determine whether to target many segments. After
identifying a company's product markets and assessing their relative value to the business,
management must decide on a targeting strategy.
The marketing strategy's focus point is the market segmentation decision; segmentation
serves as the foundation for defining objectives and constructing a positioning strategy. The
target market approach alternatives include focusing on all or the majority of the categories.
The choice to target is based on a revenue cost analysis and an evaluation of the competitive
landscape.
The positioning strategy of a marketing programme is comprised of the product, the channel
of distribution, the price, and promotion strategies. These are chosen by management to
strengthen the company's position against important rivals while also addressing the demands
and desires of the target market. Your situational analysis should assist you in matching your
messaging to your ideal consumer profile. This technique is sometimes referred to as the
marketing mix or marketing programme. This positioning strategy establishes a unifying
notion for the function and strategy of each component of the marketing mix. The positioning
statement expresses the marketing management's desired perception of the company's
marketing mix by the target market. The first stage in designing a positioning strategy is
determining what objectives each target market should have. Marketing objectives are
developed at several levels within the organisation. Corporate objectives define the
company's overall performance goals (e.g., growth, profit, employee development, and other
broad objectives).
Each target market has its own set of objectives. Objectives are arranged in a hierarchy,
ranging from extremely broad corporate goals to the precise goals of a sales representative.
I've provided several marketing objective examples.
The marketing strategy chosen is influenced by the business's status and competitive
environment. Selecting a strategy is facilitated by determining the sort of plan that is
appropriate for the scenario in which a given business finds itself. For instance, a business
creating a plan for entering a new market might benefit from an examination of the strategic
concerns and criteria for new market entrance. Other instances include product lifecycle
strategies, fragmented market strategies, global strategies, and enterprise company strategies.
Analyzing distinct strategic scenarios enables the development of strategic design procedures
that place a premium on the critical strategic variables confronting a business. By evaluating
the many elements impacting strategy selection and developing action recommendations for
viable strategies, management develops strategy selection abilities. Significant strategy
selection criteria (for example, implementation difficulty) can be evaluated to aid in the
strategy selection process.
Overview
In today's highly competitive market, it is no longer sufficient for a business to understand its
consumers. Businesses must keep a careful eye on their rivals. They must regularly
benchmark their goods, pricing, distribution methods, and promotional activities against
those of their direct competitors in order to find areas of competitive advantage and
disadvantage.
Firms must be proactive and identify both present and future rivals, collect information, and
maintain a market intelligence system to track competitor activity and market trends. Often
referred to as "Competitor Myopia," ignoring or underestimating the threat posed by future
rivals in favour of current competitors. Theodore Levitt invented this word to describe
circumstances in which corporations fail to understand the full breadth of their operations.
Competitor Myopia has the potential to force businesses out of business!
Firms must do constant competitor analysis in order to develop successful competitive
strategies.
2. Defined Competitor Analysis
Competitor analysis offers a strategic context for recognising possibilities and risks on both
an offensive and defensive level. The offensive strategy framework enables organisations to
capitalise on opportunities and leverage strengths more rapidly. On the other hand, the
defensive strategy framework enables them to respond more effectively to the danger posed
by competing enterprises looking to exploit the firm's own shortcomings.
Firms do competitor analysis to determine who their important rivals are, create profiles for
each of them, ascertain their aims and tactics, evaluate their strengths and weaknesses,
estimate the danger they offer, and forecast their response to competitive actions. Businesses
that establish a systematic and sophisticated approach to competitor profiling gain a major
competitive edge.
3. Recognize Existing and Prospective Competitors
Firms must employ both an industry and a market strategy when identifying their existing and
prospective rivals. The industry approach will provide insight into the industry's structure and
product offerings from all market participants. On the other side, the market strategy focuses
on the consumer demand and the businesses that are striving to meet those requirements,
providing the firm with a broader picture of existing and future rivals.
Potential competitors include (but are not limited to) firms that compete in a related product
category, use related technologies, already target the same market with unrelated products,
operate in other geographic regions with similar products, and, finally, new start-ups
organised by former company employees and/or managers of existing firms. Firms that have
a common target market and strategy form a strategic group and are the closest competitors
of firms seeking to join that group.
Analysis of the Industry
An "industry" is described as a collection of businesses whose products and services are
highly interchangeable. Industries are categorised mostly on the basis of the number of
vendors and the degree of product differentiation. Additionally, the following elements
contribute to the structure of an industry: entry/exit barriers, cost structure, degree of vertical
integration, and level of globalisation. Industries are frequently categorised as monopolies,
oligopolies, differentiated oligopolies, monopolistic competition, or pure competition based
on the number of sellers and product difference.
Each category is detailed in further detail below.
Monopoly occurs when a single corporation delivers a certain product/service in a particular
country or region. The distribution of electrical electricity to residential and business clients
is a frequent example. Given the absence of alternatives for clients, an unfettered monopoly
striving to maximise profits has a proven motive to charge a higher price, conduct little or no
promotion, and provide rudimentary service. On the other hand, a controlled monopoly is
compelled to charge lower rates and provide additional services in the public interest.
Monopolists may be prepared to invest in service and technology if partial alternatives for
their products or services are available or if impending competition is near. Electric power
generation and distribution are excellent examples of this behaviour, particularly in light of
recent discoveries in alternative energy sources and technical advancements in the utilisation
of electric power.
In the gasoline sector, oligopoly is defined by a small number of enterprises manufacturing
essentially the same product, such as Mobil, Shell, and Sunoco. Any single firm will struggle
to sell gasoline goods over the market rate unless it can distinguish its product range in some
way.
Distinct oligopoly refers to an industry in which a few businesses make goods that are only
somewhat differentiated, such as Sony, Canon, and Nikon in the digital camera sector.
Differentiation is accomplished by the use of distinct product characteristics such as quality,
unique features, style, or services. Typically, rivals will want to be the market leader for a
certain feature, therefore attracting clients who value that attribute and charging a premium
for it.
Monopolistic competition exists when many competing enterprises in a sector are able to
distinguish their offerings entirely or partially. This is the case with grocery chains such as
Wegmans, Tops, and Price Chopper in Upstate New York. In this context, companies often
target market sectors where they can provide a superior level of service to the consumer and
hence fetch a higher price. Pure competition occurs in industries when a large number of
enterprises offer the same product/service. Because there is no distinction between offers,
prices are fixed for all enterprises, as is the case with the majority of agricultural commodities
(e.g. wheat, cabbage, and onions). There is no value to advertising, and the seller's earnings
will be affected solely to the degree that they can reduce manufacturing or distribution
expenses.
Analysis of the Market
From a market viewpoint, rather of focusing just on firms who make the same product, a firm
searches for rivals among those that meet the same consumer demand. To prevent slipping
into Marketing Myopia, and to encompass all present and future rivals, this requirement must
be stated widely.
For instance, in the coffee market, a corporation like Nestle needs evaluate direct competitors
such as Maxwell House and Taster's Choice, as well as indirect competitors. This includes
any firm that sells coffee machines in direct competition with Nespresso, such as Keurig and
Mister Coffee.
Current and future rivals are many. Companies may experience brand rivalry, industry
competition, form competition, or generic competition depending on the degree of product
replacement.
• Brand Competition: the firm evaluates other businesses that offer a comparable
product/service to the same clients at comparable rates. Coca Cola, for instance, would view
Pepsi Cola as its primary competition.
• Industry Competition: the business takes a broader view and considers all enterprises that
manufacture the same product or class of products to be rivals. Coca Cola, for instance,
would see all other soda makers as rivals.
• Product Competition: the firm takes a broader view and views rivals as businesses that
manufacture items that provide the same service. For instance, Coca Cola would see all other
makers of carbonated beverages as rivals.
• Generic Competition: the corporation might take an even broader view of its competitors,
viewing them as firms competing for the same consumer money. Coca Cola, for example,
would view all other beverage manufacturers as rivals.
A)Competitive Strategy Development
Firms can be categorised into four types of positions in an industry: market leader, market
challenger, market follower, or market nicher. By defining its own role and that of its
competitors, a business may get further insights into them and develop more successful
competitive tactics.
1. Market Dominant
It is normal in many sectors for one business to have a disproportionately large market share.
This company leads the market in terms of pricing, new product releases, distribution reach,
and promotional spending. Typically, competitors oppose, mimic, or avoid the leader. Procter
& Gamble, Coca Cola, and McDonald's are all examples of market leaders.
Leaders seek to maintain their position as the market leader in their sector. Their general
strategy is to seek to increase overall market share, defend existing market share, or grow
market share.
2.Market expansion
Market leaders often benefit the most from market expansion. The primary techniques
utilised to increase the market include acquiring new users, discovering new applications for
their product, and/or persuading existing consumers to use their product more frequently.
• To attract new users, a business might target consumers who are unfamiliar with the product
or are hesitant to purchase it due to its price or absence of key features. Johnson & Johnson
expanded the market for its infant shampoo by advertising to other family members.
• To discover new applications, a business may leverage its research and development
resources, new technology, or input from consumers who use the product in novel ways. For
instance, DuPont's nylon was initially used in parachutes, then as a fibre in the manufacture
of women's stockings, subsequently as a major component of garments, and most recently in
the manufacture of tyres and other automotive components.
• To encourage current consumers to purchase more of a product, a business creates ways to
persuade them to purchase the product on additional occasions and in higher quantities each
time.
For instance, Procter & Gamble says in its Head & Shoulders shampoo advertisements that
the shampoo is more effective when applied twice every shampoo occasion.
3.Defending Market Share The greatest method for a leader to defend its market share is to
consistently improve its goods, customer service, distribution system, and cost structure (e.g.
Coke vs. Pepsi, Gillete vs. Bic, McDonalds vs. Burger King, General Motors vs. Ford)
4.Market Share Expansion
In many circumstances, a single market share point is worth hundreds of thousands of dollars,
which means that leaders may greatly boost their profitability by growing their market share.
However, the impact of increased market share on profitability is strategy-dependent, since
the additional cost of acquiring the greater market share may surpass the additional income.
Additionally, some market leaders must exercise caution in order to avoid inciting antitrust
charges, investing more money than their increased market share is worth, or adopting the
incorrect marketing methods.
To plan productive competitive marketing strategies, the company needs to find out about its
competitors. It must compare its products, prices, channels, and promotions against those of
close competitors on a regular basis. The company will be able to identify areas of possible
competitive advantage and disadvantage in this manner. It will be able to launch more
effective marketing campaigns against competitors and will be able to create stronger
defenses against their actions.
Is a tour operator in direct competition with a male outfitter? Is a business school in direct
competition with an insurance firm? Perhaps the answer is yes, if all of them are competing
for a piece of the consumer's wallet.
WHO ARE THE COMPETITORS?
1. WHO DO WE GENERALLY COMPETE WITH?
2. WHO ARE OUR MOST FEROCIOUS RIVALS?
3. WHO IS THE MANUFACTURER OF THE ALTERNATIVE GOODS?
4. WHO MIGHT BE INTERESTED IN COMPETING?
5. IS THERE ANYTHING THAT CAN BE DONE TO DETER THEM?
To have a better knowledge of your competition, look at them from many perspectives, such
as their size, growth, and profitability, their image and positioning plan, and their level of
commitment. By evaluating data relating to main consumer motivation, significant cost
components, mobility constraints, and value chain, it is useful to consider the characteristics
of successful and unsuccessful firms. Market research and a range of other sources, such as
trade journals, trade sources, consumers, and suppliers, can provide information about
competitors.
Fig: 1.3.1 Steps in Analyzing Competitors
It is necessary to take routine competitor analyses throughout the lifecycle of your business to
stay updated with market trends and product offerings. A competitor analysis can reveal
relevant information about market saturation, business opportunities and industry best
practices. It's also crucial to understand how your customers see you in relation to your
competitors. A competition study can help you understand what services are currently
accessible to your target client and which are being overlooked. Both offence and defense
benefit from competitor analysis. When you compare your company to its competitors, you
can see where you can improve as well as where you thrive. It may even assist you in
identifying a new niche in which you may capitalize.
1.3.3 There are three different kinds of competitors:
Direct competitors include: A direct rival provides the same products and services to
the same target market and customer base, with the same profit and market share
growth objectives. This suggests that your direct competitors are aiming for the same
audience as you, selling similar products, and using a similar distribution model."
Indirect competitors: "An indirect competitor is a corporation that provides similar
products and services to direct competitors, but with distinct ultimate goals."
Substitute competitors: "Another company that provides your customers with a
product or service that you also give. It's essential to understand how you stand out
once you've decided on the type of competition you want to be compared against.
Fig: 1.3.2 Competitor Analysis
Any executive will tell you that understanding how rivals will react to your activities is
crucial when making strategic decisions. However, if you ask that same individual how
seriously her firm takes rival reaction, she is likely to roll her eyes. According to a recent
McKinsey & Company poll, two-thirds of strategic planners strongly believe that
organisations should factor anticipated rival reactions into strategic choices. Yet, according to
a poll performed by David B. Montgomery, Marian Chapman Moore, and Joel E. Urbany
(published in 2005 in Marketing Science), less than one in ten managers recalled doing so in
the past and less than one in five anticipated to do so in the future.
This divergence occurs because game theory, the sole formal framework for analysing rivals'
conduct, frequently becomes unmanageable in practise. To begin, most game theory models
presuppose that all participants adhere to fundamental game theory principles—a
presumption that is plainly wrong. Additionally, game theory models become complex when
a competitor has a large number of alternatives, when the strategy is uncertain about the
metrics his adversary will use to assess them, or when there are numerous adversaries, each
of whom may behave differently. However, when strategists rely on ad hoc predictions or
war-gaming exercises, the analysis can devolve into near-complete arbitrariness. The amount
of qualitative factors that enter the prediction process—personal biases and hidden agendas,
for example—risks undermining the conclusions and increasing the likelihood that top
management would reject counterintuitive findings.
Our Investigations
The conclusions in this paper are based on our expertise assisting customers with competitive
forecasting...
Over the last few years, as the leader of McKinsey's efforts to model competitive behaviour,
we've worked with a variety of organisations to forecast the potential reactions to their
strategic initiatives. Through that study, as well as a 2008 poll of top executives, we built a
practical technique to anticipating competitive behaviour that adheres to the theoretical rigour
and precision of game theory while being as easy to deploy as the majority of other methods.
(For additional information on the survey we utilised, see the sidebar "Our Research.") Our
technique entails condensing all conceivable evaluations of a rival's reaction to a certain
strategic move into a sequential examination of three issues:
The payoffs associated with adopting the method we recommend can be substantial—
especially when contrasted to the expense of generating no forecasts at all. We assisted the
major participant in a transaction-processing business in seeing that reorienting its strategy in
a new direction would almost certainly elicit a positive, rather than destructive, response from
its main competitor. The firm adopted the approach, the competition reacted as expected, and
the outcome was a complete reversal of the industry's fortunes. We also stood by while a
telecom business failed to comprehend its competitors and hence overpaid for a new telecom
license—a mistake that cost the company $1 billion and contributed to its bankruptcy within
a few years.
In this post, we will investigate each of the three questions above and expose several
conventions, biases, and patterns that businesses use while analysing their competitors. Please
keep in mind that the data presented in this article represent averages across sectors, regions,
firm sizes, and competitive environments—all of which can have a substantial impact on
these trends. (In genuine client scenarios, we apply client-specific inclinations.) If you have
particular knowledge on how your market segment has behaved or, even better, how an
enemy makes decisions in general, you should use it in place of our averages. However, as
you will see, understanding the tendencies of all companies simplifies the process without
sacrificing accuracy unnecessarily.
Is There Any Reaction from the Competitor?
Even businesses that do competitive analysis frequently overlook the possibility that a rival
would opt not to respond to a strategic move. By excluding that alternative, the strategist
reduces the expected value of his company's move: the greater the perceived chance of
competition counteraction, the smaller the expected return. Additionally, with a lower
expected return on investment, the company is less likely to take bold action.
Why are otherwise conscientious strategists omitting this step? To begin, all managers—
including, somewhat ironically, those who avoid competitive analysis entirely—are schooled
in stories about companies that failed because they ignored their competitors, and they are
fearful that by assuming no reaction, they will become a protagonist in one of those
narratives. They fear that if they consciously forecast no reaction and the competition does,
they will appear even worse. They err on the side of presuming a response to avoid
undesirable eventualities. Second, personnel must portray the rival in firms that conduct war-
gaming exercises. These individuals frequently believe they would appear more intelligent
and involved if they forecast a clever move or countermove by the competition rather than
just reporting to the group, "We've considered it, and we don't believe we should do
anything." Consider how a day-long session on wargaming would begin in this manner. The
organisers are likely to disregard the original conclusion and continue the move-countermove
practise.
Thus, the first step in studying competitor reaction is to consider the possibility of no
reaction. This may be determined by asking four subquestions. If you respond no to any of
these, your odds of receiving a response are slim.
Third, businesses often struggle to construct a response that entails the participation of third
parties who may not share their urgency. In the late 1980s, a small pizza delivery chain in the
United States called Papa John's noticed a shift in consumers' perceptions of the quality of
Pizza Hut and Domino's (the top two chains) and capitalised on the opportunity by
developing a differentiated value proposition dubbed "Better ingredients. Better pizza."
Throughout the 1990s, Papa John's developed swiftly and surpassed the two larger
competitors to become the third biggest pizza company in the US. Incapable of mobilising
their franchisees around quality until the danger became clear, the large chains waited until
2000 to respond with their own improved pizzas.
Even if they were aware of a competitor's strategic action, 17% of our survey respondents
indicated that they did not respond to it.
While all rivals will notice a significant shift, our experience indicates that organisations
overestimate the chance of a medium to minor action being observed by 20% to 30%.
Additionally, 17% of our survey respondents indicated that they made no reaction even
though they were aware. This is surprising, given that respondents were recalling just those
instances in which their organisation identified a danger and rated the action as a "major"
move with the "potential to considerably influence your assessment of your competitive
position in your market category." Thus, the chance of receiving no answer in an average
real-world circumstance may be significantly greater. Taking all of these considerations into
account, it is plausible to expect that businesses do not respond to their competitors' activities
at least one-third of the time—certainly enough to merit an explicit effort on your part to
ascertain if your competitor will. Additionally, merely determining if a competition would
reply simplifies the entire process. If you believe the firm will not react, you can proceed
directly to the next stage.
However, there were notable distinctions between the various possibilities evaluated in the
context of a new product and those considered in the context of price. 43% of price managers
examined what their business unit did the last time it encountered a comparable circumstance,
compared to only 26% of innovation managers. 25% of innovation managers indicated that
they were likely to consider recent activities by other business divisions inside the
organisation, compared to 16% of price managers. In all categories, around 30% of managers
sought guidance from board members and external experts. The second-least probable choice
(20 percent for both groups) was to examine the business unit's past experiences, and the least
likely option (19 percent for both groups) was to consider the executive in charge's prior
experience. The basic line is that you don't have to go back very far to determine which
possibilities your competitors will consider.
Classical game theory (as most strategists are familiar with) takes a convoluted path to that
prediction: It states that a competitor will choose the option that maximises his net present
value after accounting for all sequential moves and countermoves made by all competitors
(each of whom typically has complete knowledge of the others' motives, economics, and
options) until a new equilibrium is reached. Regrettably, no portion of that prescription
remains true in practise.
By combining the spirit of game theory with the real behaviour of businesses, strategists may
simplify and enhance prediction. Our experience teaches us to begin with the following rule:
Among the alternatives carefully considered by your enemy, he will select the most effective
one (as determined by his analytic approach) within the restrictions of his trade-off between
short- and long-term suffering. The rule makes logical and has been validated via our client
work. To put it into practise, strategists must consider the following two subquestions:
A rigorous analysis of competitors’ behavior doesn’t have to involve a lot of math and talk of
Nash equilibria. The key is to focus on understanding how a competitor actually behaves
rather than on the theory of how everyone should behave. By studying your competitor’s past
behavior and preferences, you can estimate the likelihood of his responding at all, identify the
responses he is likely to consider, and evaluate which will have the biggest payoff according
to his criteria. This information can give you an accurate idea of what your competitor is
likely to do. And the competitor you can predict is the one you can learn to outsmart. Isn’t
that what strategy is all about?
Knowing the tactics, aims, and strengths and weaknesses of competitors can assist managers
predict (project) how they will react to the company's strategies. Furthermore, each
competition has its own corporate philosophy, culture, and guiding values, all of which
influence its reaction pattern. Each competitor reacts in a unique way. Some companies might
not react immediately or aggressively to a competitor's move for a variety of reasons: they
may believe their clients are loyal; they may be sluggish to notice the shift; or they may lack
the financial resources to respond. Some competitors only react to particular types of assaults
while others do not. They may always react negatively to price reductions as a way of
signaling that they will never succeed. They may, however, be unresponsive to advertising
increases, considering them to be less dangerous. Other competitors retaliate quickly and
strongly to every attack. Knowing how significant competitors react might provide insight
into the best ways to attack competitors or protect the company's current positions.
The Laid-back Competitor: This competitor does not respond swiftly or forcefully
to any of the opponent's movements or attacks. There could be a variety of reasons
why the laid-back competitors don't react right away, including the fact that they
believe their customers are loyal, that they are doing well in business, that they are
slow to notice the move, that they lack funds to react, that they are too preoccupied
with their own development plan, and that they are confident that rivals cannot harm
their interests in any way.
The Selective Competitor: A competitor that respond only to certain types of attacks
and not to all attacks. For example, it may respond to price decrease, but not to
increased or improved promotional efforts.
The Tiger Competitor: A competitor who reacts quickly and fiercely (like a tiger) to
any attack on its terrain or arena. The tiger competitor wants competitor to know that
it is a tiger and that they should avoid attacking since the defender (the tiger) will/can
fight to finish them.
The Stochastic (Unpredictable) Competitor: A competitor who does not react in a
predictable manner. The stochastic competitor may not react for a variety of reasons.
For example, it may not want to react on a specific occasion; it may not be in a
favorable economic situation; it may want to prepare for a strong future attack; it may
believe that it is better to concentrate on improving its position rather than react;
and/or it may believe that rivals' attacks cannot harm its performance.
1.5 SUMMARY
The marketing plan explains in detail the steps that must be taken in order to carry out
the marketing program, and it takes a lot of time and effort to develop and implement.
Market analysis is a wider term. If want to launch a product we should know the
market situation. Strategic planning is required to reach the goals.
To achieve the goals we should know about the market situation, our competitors. The
process of strategic market planning may be quite complex.
The planning process begins with an in-depth investigation of the organization's
internal and external settings, which is frequently referred to as a situation analysis,
whether at the corporate, business unit, or functional level.
SWOT analysis focuses on the internal (strengths and weaknesses) and external
(opportunities and threats) aspects that provide the firm specific advantages and
disadvantages in serving the needs of its target market, as determined by the situation
analysis.
1.6 KEYWORD
A. Descriptive Questions
Short Questions:
1. What is SWOT analysis?
2. What are types of competitors?
3. Why analysis of competitor’s strategies is important?
4. What is purpose of analyzing market situations?
5. Write the step in analyzing competitors?
Long Questions:
Answers
1-c, 2-c;l, 3-a. 4-d, 5-a
1.9 REFERENCES
References book:
Websites:
https://smallbusiness.chron.com/disadvantages-marketing-analysis-25883.html
https://www.yourarticlelibrary.com/marketing/8-stepped-process-of-analysing-
competitors/48761
https://www.zabanga.us/sales-promotion/estimating-competitors-reaction-
patterns.html
https://www.cleverism.com/ultimate-guide-market-situation-analysis/
UNIT - 2:
STRUCTURE
2.1 Learning Objectives
2.2 Introduction
2.3 Market leaders strategies
2.2.1 Expanding the total Market
2.2.2 Protecting Market Share
2.2.3 Expanding Market Share
2.4 Market Challenger Strategies
2.4.1 Choose and Attach Strategy
2.4.2 Market follower strategy
2.4.3 Market niche strategy
2.5 Summary
2.6 Keywords
2.7 Learning Activity
2.8 Unit End Questions
2.9 References
2.0LEARNING OBJECTIVES
After studying this unit, you will be able to:
2.1INTRODUCTION
It's not easy to be the market leader. Other firms are always challenging the leader's strengths
or attempting to exploit its flaws. In the face of fresh entrants as well as existing rival firms,
the leading firm may become weaker or outdated.
Almost every business model is based on a market leader with the biggest market share. In
most cases, the leader is the one who leads the other companies in terms of new product
creation and price modifications. Promotional event and distribution systems Others, on the
other hand, may not respect the leader. Others, on the other hand, may recognise its power.
Only the leader is followed, challenged, imitated, or avoided by companies.
Obviously, the life of a market leader is not simple. It is necessary to be cautious at all times.
Other companies are continuously looking for methods to exploit a leader's flaws.
The leading brand can adopt one of three actions to maintain its market leadership.
The market leader in the industry has the biggest market share in the relevant product. It
commands a significant share of the market. It clearly outperforms competitors in terms of
new product creation, price changes, distribution coverage, promotional activities, and
innovative experimentation.
Other firms may or may not respect the leader, but they must recognise the leader's power.
The market leader might be challenged, followed, or avoided by other companies. Maruti
Suzuki in cars, Hero Honda in two-wheelers, Hindustan Unilever in consumer packaged
goods, Coca-Cola in soft drinks, McDonald's in fast food, Life Insurance Corporation in life
insurance, and so on are well-known market leaders in India.
The market is monopolised by a few market leaders. To maintain their leadership position,
they must remain awake at all times. Other companies are continually putting pressure on the
CEO's position. A minor blunder can knock the leader down to second or third place. In all
aspects of marketing, it must employ creative approaches. In order to keep the top spot, it
sometimes has to spend a lot of money.Increasing overall demand,Market share should be
protected,Increase your market share.
Market Challenging Techniques are marketing strategies used by companies in the third or
second place in the market to target the market leader or a direct rival with the goal of gaining
a larger market share and generating large profits.
There will be rivalry wherever there is a market. In fact, it wouldn't be inaccurate to suggest
that the term "market" is associated with competition in the corporate world. There will be
competitors up front who have already gained market share if a new business enters a market.
So, what exactly does a new company do? Should it close due to apprehensions about
competition? NO, confronting those competitors would be the best strategy. This will benefit
the firm in two ways:
A company that takes on existing competitors will not only give them a hard time, but it will
also instil dread in newcomers, acting as an entry barrier.The new business will be able to
progressively climb the success ladder with this technique.
In the simplest terms, market challenger tactics are marketing techniques used by a company
to challenge or attack the market leader or immediate competitors in order to generate
revenue and gain market share. That company could be brand new to the market or ranked
second, third, or even last in the competition.
A "market challenger" is a company that takes on other companies. There is an extremely
significant point to be made here. Is it possible for a company in any position to challenge the
market leaders? No, it doesn't work that way, and here is where most businesses go wrong.
If a company is just getting started in a market, its competitors will be low-ranking
companies. A newcomer just cannot compete with the industry's leader or runner-up. If a
company is in fourth or third place in the market, it can go after the industry leaders.
When attempting to extend the entire market size, the leader must also constantly defend its
current business from enemy attacks. Coca-Cola, for example, must always be on the lookout
for Pepsi-Cola. Similarly, in the two-wheeler industry, Hero Honda must continuously guard
against Bajaj, Honda, Suzuki, and TVS. The leader firm must maintain its costs low and its
price commensurate with the value that buyers see in the product under this strategy.
(i) Position defence: This strategy entails pouring all of your resources towards the most
successful companies right now. As a result, rather than the direct attack that the defender
expects, an attacker usually takes an indirect strategy to overcome a position defence. HUL,
for example, upped its marketing expenditure on Clinic Plus and Sun Silk shampoos while
also offering significant price reductions.
(ii) Flanking defence: This strategy protects leading brands' market positions while also
developing some flank market niches that can be used as a defensive corner to shield a weak
front or construct an invasion base for counterattack if necessary. HUL's accomplishment in
nurturing its first Rs.100 crore Indian-made brand Vim in a competitive dishwashing industry
is an excellent example. Through product innovation, appealing public advertising, road
shows, and public relations, it was able to stave off competitor attacks.
(iii) Pre-emptive defence: This defence strategy manoeuvre entails launching an offensive
against an adversary before the adversary launches an offensive. In the early 1990s, Titan, for
example, introduced more brands and sub-brands to control the HMT watch market.
For defence, the attacker must send resources to this zone. When Ceattyres challenged TVS
Srichakra in Tamil Nadu, TVS chose to use novel efforts like road rallies, road shows, and
attractive public campaigns to spread its coverage to Ceattyres' hub in the north and west of
India.
(v) Mobile defence: This approach entails the leader diversifying and stretching its territory
to new market locations. Innovation operates in both of these directions when the leader is in
charge. A five-star hotel, for example, can work as a foreign exchange dealer, an inbound and
outbound trip operator, a flouriest, and so on. Diversification into related fields is one of the
elements of mobile defence tactics.
(vi) Contraction defence: This approach entails retrenchment towards areas of strength, and
it is frequently adopted at the end of a product's life cycle or after the company has been
under significant attack. For example, HUL chose to focus on its core business areas of soaps
and detergents, and as a result, it has emerged as the obvious leader in the toilet market.
Marketing is commonly thought of as a tool for business expansion. It can help a company
launch a product, break into a new market, or acquire market share from existing items in its
current market. However, there is an incumbent that must defend its position for practically
every new product launch, market entry, or industry upstart capturing market share. The
defender loses the base on which to construct its own growth if it can't hold on to what it has.
While much research has been done on marketing as an offensive strategy, there has been
surprisingly little done on how strong incumbents can use marketing to respond to new or
anticipated threats, whether they arise as a result of deregulation, patent expiration, changing
technology, or rivals' shifting competitive advantage. That's unfortunate, because many of the
marketing difficulties that defenders face are distinct. An incumbent, for example, typically
has an installed base of consumers, implying that the company has specific information about
the clients it wants to maintain and how it might keep them. However, a newcomer has the
benefit of cherry-picking prized consumers and looting the most fruitful sectors of the
market, whereas the incumbent must defend its whole customer base.
The first step in defensive marketing is to examine the weapons you have at your disposal to
defend your market position. Your brand identity, or how people perceive you; the mix of
products and services that support that identity, including their pricing; and the means of
communicating your identity, such as advertising, are all examples.
Whether your valuable clients are vulnerable or not, the biggest problem is dealing with
them. The idea is to provide the valuable-vulnerables a cause to stick around without
providing a benefit that isn't required to secure their loyalty. Telstra needed to work out how
to price its services in a way that would protect the valuable-vulnerables from Optus' attempts
to entice them away without lowering the rates of the valuable–not vulnerables, customers
who were perfectly content with their present services at their current costs.
Markets are expanded by increasing utilisation, new uses, or users. Leaders can protect
market share by keeping an eye on their position and quickly correcting any flaws. The
greatest strategy to protect market share is to keep on innovating.
When attempting to extend the entire market size, the leader must also continuously defend
its current business from enemy attacks. The leader firm must maintain its costs low and its
price commensurate with the value that buyers see in the product under this strategy.
Like Tide laundry detergent with cleaning, Crest toothpaste with cavity prevention, and
Pampers diapers with dryness, position defence entails dominating the most desirable market
area in the minds of consumers, making the brand practically invincible.
2 Preventive defence
Attacking before the enemy launches an offensive is a more aggressive strategy. There are
various ways for a firm to begin a preemptive defence. It can either aim to accomplish Grand
market envelopment or wage guerilla action across the market, hitting one competitor here,
another there, and keeping everyone off balance. Local and regional banks now face stiff
competition from Bank of America's 13,000 ATMs and 4,500 branches around the country. It
has the ability to send out market signals to deter competitors from striking. It can roll out a
steady stream of new items while ensuring that they are preceded by pre-announcements and
planned messaging about future actions. Competitors may perceive preannouncements as a
hint that they will have to struggle for market share.
3 Counter-offensive defences
Most market leaders will counterattack if they are assaulted. Counterattacks come in a variety
of shapes and sizes. In a counteroffensive, the leader can confront the enemy, strike its flank,
or use a pincer movement. Invading the attacker's main territory is an effective counterattack
because it forces the attacker to retreat in order to defend the territory. FedEx invested
extensively in ground delivery service through a series of acquisitions after watching UPS
effectively invade its aerial delivery system. The goal was to attack UPS on its home turf.
The use of economic or political clout is another common method of counteroffensive. The
leader may attempt to crush a competitor by subsidising lower prices for the vulnerable
product with revenue from more profitable products; or the leader may prematurely announce
the availability of a product upgrade to prevent customers from purchasing the competitor's
product; or the leader may lobby legislators to take political action to stifle competition.
4 Contraction is a safeguard
Large corporations occasionally realise that they can no longer defend their entire region. The
optimal course of action appears to be deliberate contraction (also known as strategic retreat),
in which weaker territories are abandoned and resources are reassigned to stronger regions. In
2001, Diageo bought the majority of Seagram's brands and spun off Pillsbury and Burger
King so it could focus on alcoholic beverage powerhouses like Smirnoff vodka, J&B scotch,
and Tanqueray gin.
"That share of the market commanded by a firm's product (or brand)," for example, is a
simple definition of market share. However, because this is a tautology rather than a
definition, it does not assist us grasp market shares. The fundamental difficulty is the
vagueness of the term market.
A market leader's profitability can be improved by increasing market share. Market share
profitability is raised, and market leaders who wish to keep their position and extend the
overall market defend the current market area.
Example- According to a survey released by Strategy Analytics on May 7th, 2020, Apple
Watch maintained its lead in the global wristwatch industry with a share of 55 percent in the
first quarter of the year. Market leaders such as HUL, Procter & Gamble, McDonald's, and
Titan can boost their profitability by growing their market share. To summarise, market
leaders who remain at the top have mastered the skill of extending the overall market,
protecting their current area, and growing market share and profitability.
All newcomers have a tough struggle in competing with highly aggressive market giants.
Consider the tea or coffee industries. No entrants dare to enter the market since Tata, HUL,
and Nestle have effectively guarded their market share.
When the overall market expands, market leaders typically gain the most. The focus of total
market expansion is determined by where the product is in its life cycle. When a product has
reached maturity, this method can be implemented. For example, the Japanese boosted
vehicle production in order to expand into new markets.
Market leaders such as HUL, Procter & Gamble, McDonald's, and Titan can boost their
profitability by growing their market share. To summarise, market leaders who remain at the
top have mastered the skill of extending the overall market, protecting their current area, and
growing market share and profitability.
All newcomers have a tough struggle in competing with highly aggressive market giants.
Consider the tea or coffee industries. No entrants dare to enter the market since Tata, HUL,
and Nestle have effectively guarded their market share.
Stage 1 : Analysis
1. Model Parameter Estimation: The next stage is to estimate the parameters of the models
once the relevant models have been picked. This step will employ statistical techniques such
as log-linear regression analysis and maximum-likelihood estimation. Even if the model
specification remains the same, it may be required to re-estimate parameters on a regular
basis. This is desirable not just for the purpose of adjusting parameter values to changing
situations, but also for enhancing estimate accuracy. 2. Decision-Related Factors Conversion:
The structure and occurrences in the market and competition are provided by the model
parameters themselves, which provide little information to the analyst or manager. Market
share responsiveness to marketing operations of own firm and competitors, as described by
market simulators, may be more immediately helpful information from the perspective of a
decision maker. It could also be a visual representation (map) of competing products/brands'
relative market positions. It takes a certain amount of inventiveness to create a presentation
that is easily comprehended by non-quantitatively minded management.
The planning stage can be broken down into two parts: 1.Strategy Formulation: The
information gathered during the analysis stage is used to formulate marketing strategies in
this step. 4It is envisaged that descriptive, rather than predictive, methods of analysis will
provide concrete formulation ideas to the analyst and manager(s).
1.marketing tactics: For example, the visual summary may indicate more effective marketing
methods.
2. Forecasting and Planning: A marketing plan will be used to forecast future market shares
and sales volumes. It's pointless to talk about forecasts unless there's a clear plan in place.
Explicit assumptions regarding competitive activities, for example, are required by market
simulations. As a result, they generate conditional forecasts (i.e., condi-tional on these
assumptions). A strategy can be tested against a variety of competitive scenarios.
Furthermore, while searching for an ideal (i.e. profit-maximizing) plan is theoretically
possible, it is not necessarily realistic.
Stage 3: Follow Up
After marketing plans are implemented, it is crucial that the analyst evaluates the
performance of the firm's product/brand. A thorough examination of one's intentions and
actual performance would improve not only future planning but also market-share analysis
approaches. In order to do a follow-up, it is not sufficient to examine if market shares were
correctly projected. For three main causes, market shares and, as a result, actual salesvolume
differ from predicted numbers. 1. Industry sales volume forecasts were incorrect. 2. Market
share forecasts were incorrect. 3. Marketing initiatives did not go according to plan. If actual
performance differs from what was expected, it is critical for the analyst to pinpoint the cause
of the discrepancy through meticulous investigation. The so-called variance analysis5 could
be effective in this situation.
The benefit emerges as a result of the an rise in a company's market share might enable it to
operate on a larger scale and earn more money. It also assists the organisation in gaining a
cost advantage over its competitors.
2. A rise in sales
Increased market share can also enhance a company's overall sales. When consumers observe
that a majority of their peers are loyal to a particular brand, the remaining consumers are
compelled to buy that product.
An rise in market share also aids in the expansion of a company's consumer base. When the
majority of a customer base is loyal to a single brand or product, the rest may follow suit.
4. Popularity
An rise in market share can benefit a company's reputation. A positive reputation, in turn,
aids in increasing sales and expanding the consumer base.
A company's influence over the industry it operates in grows as its market share grows.
A corporation begins to dominate an industry as its market share grows. A firm can exercise
some powers, such as more bargaining power, with increased influence over the industry. The
corporation gains an edge and can bargain with suppliers and members of the distribution
channel to its benefit.
1. Creativity
Increased market share can be achieved through innovation. Product innovation, production
process innovation, or simply delivering new technologies to the market that competitors
have yet to provide are all examples of innovation. A corporation can get an advantage over
its competitors and dominate the industry through innovating.
2. Price Reductions
Lowering pricing can also help a company gain market share. Lowering prices will attract
more customers, allowing the company to expand its client base and increase revenues, so
growing its market share.
4. Advertising
Increasing market share through advertising is an expensive but effective strategy. With such
fierce rivalry in the market, advertising is a wonderful strategy to acquire a competitive
advantage.
Customers are becoming increasingly concerned about a product's quality as well as its
pricing. A company's market share can be increased by assuring greater quality standards.
6. Purchasing.
A market challenger is a corporation that aggressively floods the market with its products at
competitive rates in order to increase its market share. It is a company with a strong presence
that is just below the market leader (Picon, 2015). A market challenger is a company or a
firm that ranks second or third in its industry. The primary goal of a market challenger is to
increase market share and become the industry leader by offering a new product line or
increasing customer service. Companies having a low market share, according to Ferrell and
Hartline (2011), frequently strive to improve their market share by using this method. By
implementing these methods, they can take on the market leader or other competitors. It is
not required for the market leader to be a competition when a brand enters a market. Even
companies in second or fourth place may become competitors if they cut into market share.
Frontal attack, flank attack, encirclement attack, bypass attack, and guerilla marketing are all
strategies that a brand can employ to combat these threats. According to Urban (2004), a
market challenger can launch a full-frontal assault by introducing items that are similar to the
market leader's in terms of quality, competitive pricing, aggressive advertising, and
distribution. To acquire market share, the ideal method is to create differentiated items that
will aid in the creation of their own brand name and aggressively push that product into the
market through various distribution channels. Any technique a company uses to gain market
share or knock down the market leader necessitates a significant financial investment (Parkin,
2009). It is a costly process to become a market challenger, and businesses should be aware
of this.
Challengers to the market Smaller companies can use one of two approaches. They can take
an aggressive posture and fight other firms, including the market leader, in an attempt to
obtain market share and perhaps dominance (market challengers), or they might take a less
aggressive stance to protect the status quo (market maintainers).
Market challengers fight other companies, including the market leader, in an attempt to gain
market share and gain leadership, or they take a significantly less aggressive strategy and
accept the status quo ( market followers). Several variables must be considered when
choosing between the two, the most important of which are the costs of attacking other firms,
the likelihood of success, the final probable profits, and management's desire to engage in
what will almost always be a costly fi ght. Fruhan (1972, p. 100) has commented on the
question of returns, highlighting the consequences of spending irresponsibly, noting that,
particularly in mature markets, management can all too readily fall into the trap of chasing
market share that turns out to be ineffective.
This idea was followed up by Dolan (1981), who claimed that industries with stagnating
demand, high fixed costs, and high inventory costs experience the most severe competitive
competition. While there may be a need to gain market share in order to benefit from higher
economies of scale, the costs of doing so are significant, and the possibility of the pyrrhic
victory mentioned before grows dramatically. As a result of this, the strategist should have a
better understanding of the most cost-effective course of action.
A frontal attack occurs when a rival fights another based on the opponent's strengths, as seen
most prominently in the smartphone industry now, or more regularly in the Pepsi vs Coca-
Cola war since the centuries.
When Coke develops Diet Coke, Pepsi introduces Diet Pepsi as an example. Both companies
have a diversified product range and a strong product expansion strategy. Pepsi launches a
product in response to its market opponent in a direct frontal attack.
Pepsi and Coca-Cola, for example, are two brands that are extremely powerful in the FMCG
sector and have no direct competitors. As a result, they attack from the front. What if a little
player is pitted against a colossus? The player then employs a flank assault, attacking the
competition's weaknesses. For example, many technology companies, such as AMD vs Intel,
Apple vs Microsoft, and others, employ a flank attack strategy.
This type of market challenger strategy is used when a rival assaults another on the basis of
both strengths and weaknesses, leaving no stone unturned in the process of destroying the
competition.
The current E-commerce scenario is the best example of an encirclement attack, in which E-
commerce corporations are willing to go negative in margins in order to outperform a
competitor on a turnover basis. By all means necessary, they aim to rise to the top and gain
the greatest number of clients.
5) Guerrilla marketing
Guerrilla marketing is a type of marketing that uses unconventional methods to reach out to
people.
Guerrilla marketing is all about making modest but impactful changes that keep your brand in
the spotlight and help it grow into a household name. A small company that wishes to
compete with larger brands will first establish itself in a local market, then offer price and
trade concessions.
Slowly but steadily, the little player's name will become known, and it will then engage in
branding as well as ATL and BTL marketing. The tiny player has grown into a successful
large player over time and has become a thorn in the side of all of the market's larger players.
Isn't this the storey of any little business that has grown into a major corporation?
For instance, consider the AJE group. They have been in the market for numerous years with
their signature product, "Big Cola." It gradually grew in popularity to the point where the
brand can now be found in a number of nations.
3.The time it takes for a product to reach the market is much shorter.
1.Customers are always comparing market challengers to market leaders. As a result, the
challengers will have to be at their best all of the time.
Because competitors aren't the first option of clients, it's tough for them to establish an
irreplaceable position in the market. They are acceptable as long as they can deliver the same
or better quality at a lower cost.
2.Customers will not identify the challenger as good enough to compete with the industry
leaders if it fails to produce the goods it claims.
3.To stay in the competition, challengers may have to take financial losses or reduce their
profit margins. It will be difficult to restore to more lucrative rates if a brand seeks to entice
customers and overthrow competition by dramatically decreasing prices.
4.A challenger strategy (such as the guerilla attack plan) might go awry if a brand hurts the
sensibilities of its clients.
Due to the large number of merchants selling comparable goods or services, the business
market is currently saturated.
As a result, you will become a market challenger in any market you choose to enter. You
must instil fear in potential market entrants in order to minimise the number of competitors.
Most businesses make the frequent error of focusing just on outperforming the industry's
leading competitor. They are oblivious to the fact that brands that come in second or third
place may pose a threat to them.
We've compiled a list of the top five market challenger methods you should be aware of in
order to safeguard your company:
1.Line of Defense
Customers are usually attacked by providing them a lower price, a higher-quality product,
aggressive advertising, or better service. This is a hazardous attack because if you lose, your
sales, customers, and public image will all be for naught.
Frontal attack with a limited number of targets: concentrated on a small number of clients.
Frontal assault based on research and development Create a product to take on the market
leader head-on.
In marketing, attack strategies are required. You are up against competition on all sides,
regardless of the type of goods or service you sell. You could be the market leader or you
could be in the middle of the pack. Understanding your current position and how to best
tackle the competition can help you gain a larger part of the market while also improving
your visibility, client loyalty, and revenue. To make the appropriate move, two of the most
prevalent types of attack methods necessitate a significant emphasis on your competitors'
strengths and weaknesses.
In marketing, a frontal attack approach involves a challenger going head-to-head with the
market leader. This entails focusing on the qualities of your competitors and matching your
own pricing, products, marketing, and promotions to the top brand. The winner is generally
chosen by who has the most endurance to last the longest, similar to a frontal attack in
warfare. Frontal assaults are hazardous because they pit your finest against the best of your
opponent. If you don't match up, you'll suffer losses in sales, customers, and public
perception. Let's face it: it's much easier to zero in on your competition's weak places and
outperform them than it is to take on the colossus head-on and risk losing. Pure frontal, which
is a head-to-head marketing battle; limited frontal, which is focused on specific markets; and
research and development, which entails developing a product to compete directly with the
market leader, are all examples of frontal attacks.
RCA, Xerox, and Univac, for example, attempted to take on IBM's mainframe industry but
failed due to a lack of competitive advantage. The Pepsi-Coke battles, which began in the
early 1900s, are an example of frontal attack methods. McDonald's Mccafes, or coffee shops,
are considered as a direct challenge to Starbucks.
2. Defensive flanking
This entails going after the weak aspects of the competition. Based on geographic location, a
market competitor can identify weak points.
This implies that challengers identify areas where competitors are underperforming and
devise marketing strategies to address those issues.
Aside from that, they can use segmentation to challenge their rivals. This is where a
challenger finds a market gap that competitors have overlooked and develops a product to fill
it.
If executed correctly, this technique has the potential to improve your market position and
produce excellent outcomes.
A flanking assault approach in marketing, on the other hand, is aimed to induce competitors
to focus on attacking and surmounting their competitors' weaknesses. Customer segments
that are not reached or geographic areas that are disregarded by the market leader are
examples of weaknesses that generate opportunities for challenger brands. Because they
focus on slipping silently into an uncontested sector of the market, flank strategies are less
dangerous for competitors. The most difficult situation arises when a market leader detects a
competitor's entry into a market with a new product or service and then devotes all of its
resources to surpassing the opponent.
Attacking the opponent from the side is known as flanking. Because the enemy's might is
usually concentrated in the front, it's effective. By attacking from the side, you increase your
chances of hitting a weaker, less guarded position, giving you an edge.
It's a successful sales strategy that's been around for a long time. In sales, flanking causes the
prospect's selection criteria to move to requirements that favour your offering. Flanking has
never been more important than it is right now.
Flanking refers to attacking an opponent from the side. It's successful since the enemy's force
is usually focused in the front. Attacking from the side gives you a better chance of reaching
a weaker, less guarded location, giving you an advantage.
It's a tried-and-true sales method that's worked for a long time. When it comes to sales,
flanking causes the prospect's selection criteria to shift toward those that favour your product.
The importance of flanking has never been greater than it is now.
Basics of Flanking Strategy: Companies that utilise flanking marketing must avoid coming
into direct contact with their competitors' brands. Managers must ensure that a move is made
in an uncontested market area. It's also important to keep in mind that the manoeuvre should
be subtle and quick.
This marketing technique tries to establish a market presence before the competition does.
Firms must conduct in such a way that the competition believes the firm isn't a threat until it's
too late.
Flanking Strategies:
In this sort of marketing, the marketer employs this strategy in order to save costs by cutting
prices. The company has drastically reduced its price. As a result, the competitor has a
difficult time selling its product. This is due to the fact that the company sells equivalent
products at a lesser price.
There are a range of products under this model for which the marketers benefit from a high
pricing. For several reasons, the higher price is preferable. On the one hand, the product is
more expensive, but it is of superior quality and has more features. On the other side,
charging a premium price allows the company to make more money.
3. Flanking Distribution
When creating a new distribution channel, this is used. A flanking marketing approach might
be used by the company to provide assistance.
3. Dollar Shave Club Flanking Strategy - Low Prices and Direct Delivery
4. Hanes Flanking Strategy - Hanes flanked its competition by selling pantyhose through a
different distribution system, marketing its L'eggs brand hosiery in supermarkets while
competitors only sold in apparel stores.
3. Attack by Encirclement
Defination: The Encirclement Attack is a challenger firm's war tactic that aims to attack the
competition on all important fronts. In this technique, the challenging firm evaluates both the
opponent's strengths and weaknesses before launching an attack at the same time.
The encirclement attack is thought to be limited to corporations that are 10 times stronger or
more powerful than the opponent. The assaulting firm's resources must be sufficient; only
then will it be able to undertake a multi-front grand offensive.
Product and Market Encirclement are two techniques that can be utilised in an encirclement
attack. When a challenger firm engages in product encirclement, it may introduce a variety of
items with varying features and quality, and price them differently based on their utility.
In the case of market encirclement, the company may develop a product for a market segment
that has been left unexplored by competitors and hence has a large market share.
Another example is the fashion industry, where corporations routinely produce multiple
varieties of products, each priced differently, in order to generate a large sales turnover and
outperform competitors.
The Encirclement Attack is a challenger firm's war tactic that aims to attack the competition
on all important fronts. In this technique, the challenging firm evaluates both the opponent's
strengths and weaknesses before launching an attack at the same time.
The encirclement attack is thought to be limited to corporations that are 10 times stronger or
more powerful than the opponent. The assaulting firm's resources must be sufficient; only
then will it be able to undertake a multi-front grand offensive.
Product and Market Encirclement are two techniques that can be utilised in an encirclement
attack. When a challenger firm engages in product encirclement, it may introduce a variety of
items with varying features and quality, and price them differently based on their utility.
In the case of market encirclement, the company may develop a product for a market segment
that has been left unexplored by competitors and hence has a large market share.
The e-commerce business is the clearest illustration of an encirclement attack, in which
companies are willing to go to any length for high profits, even selling things at a loss.
Another example is the fashion industry, where corporations routinely produce multiple
varieties of products, each priced differently, in order to generate a large sales turnover and
outperform competitors.
This type of market challenger strategy is used when a rival assaults another on the basis of
both strengths and vulnerabilities, leaving no stone unturned in the process of overthrowing
the competition.
The current E-commerce scenario is the best example of an encirclement attack, with E-
commerce corporations willing to go negative in margins in order to outperform a competitor
on a turnover basis. They aim to be on top and attract as many consumers as possible by any
means necessary.
4. Violation of Bypass
This is an indirect attack in which a market challenger attacks a less competitive market to
expand its resource base. This can be accomplished in a number of different ways.
Develop new products, diversify into unrelated products, or extend into new geographic
markets with existing products are examples of such strategies.
This technique is used to gain long-term dominance in the market you're in, and it's
particularly effective if the industry you're in is very competitive.
Defintion: The Bypass Attack is the most indirect marketing approach used by a challenging
corporation to overtake a competitor by attacking their simpler markets. The goal of this
approach is to increase the firm's resources by capturing a competitor's market share.
Before launching the bypass attack, the company can choose one of three approaches:
diversify into unrelated products, expand into new geographic markets, or leapfrog into new
technology. Any of the approaches can be used as long as the company has sufficient
resources and is more powerful than the competition.
The term "leapfrogging" in new technology refers to a company conducting extensive study
before releasing the next generation technology in order to attract more customers and shift
the battleground to its own area.
This method is quite common in the mobile industry, as businesses release new technology
one after the other in order to outperform their competition. The bypass attack is followed by
well-known businesses such as Apple and Samsung.
Another example of this strategy is the rivalry between Coke and Pepsi. Pepsi utilised a
bypass attack on Coke by establishing the Aquafina mineral water brand before Coke's
Dasani brand.
A corporation that employs a bypass attack technique simply outperforms its rival. That
example, a company does not identify its competitor's weak spots or conduct counterattacks.
Rather, the company develops a new product and establishes its own market sector. However,
there are also options for fully bypassing the competition, such as expanding into previously
untouched markets. Diversifying your product portfolio with unrelated items.
Pepsi Co's mineral water brand Aquafina is an excellent example of a bypass attack tactic.
Coca-Cola followed suit with its own mineral water brand when the business fully engaged in
a new market. Apart from that, the Apple iPod absolutely outperformed the Sony Walkman.
Bypass strategy, also known as a Leap Frog strategy, is a means to outperform or overturn
superior competitors in the corporate world by taking one massive, determined, merciless,
brilliant leap of intellect that leads to amazing growth, profit, and managerial position.
This technique entails a challenger completely bypassing its competition and grabbing all of
the competitor's customers in one fell stroke. It's a game-changing approach that completely
changes the rules of the game. By developing new technology or developing new trade
models, a rival has the highest opportunity of "leapfrogging." For example, the introduction
of the iPod fully overtook the compact disc industry, and mobile phones are rapidly
displacing landlines in Africa and India.
This method is effective if it can be implemented. However, not all contenders will be able to
leapfrog. To win, the challenger must possess unique, distinctive, and game-changing
knowledge and technology that is superior and better in every manner to that of all traditional
competitors. The challenger must also have the ability to create and grow engineering
capabilities to turn that technology into a compelling solution.
This technique entails a challenger completely bypassing its competition and grabbing all of
the competitor's customers in one fell stroke. It's a game-changing approach that completely
changes the rules of the game. By developing new technology or developing new trade
models, a rival has the highest opportunity of "leapfrogging." For example, the introduction
of the iPod fully overtook the compact disc industry, and mobile phones are rapidly
displacing landlines in Africa and India.
This method is effective if it can be implemented. However, not all contenders will be able to
leapfrog. To win, the challenger must possess unique, distinctive, and game-changing
knowledge and technology that is superior and better in every manner to that of all traditional
competitors. The challenger must also have the ability to create and grow engineering
capabilities to turn that technology into a compelling solution.
5. Guerrilla Marketing
Guerrilla marketing entails achieving tiny victories that add up to a significant increase in
market share over time.
Typically, a small business will pursue this technique after proving its viability in the local
market. The pricing and trade reductions are frequently announced after that.
This is due to the fact that every major participant in the market started small. Furthermore,
this method has been shown to demoralise competitors, allowing you to solidify your position
in the sector.
As a result, market challengers must be aware of the macro-environment and do everything
possible to improve their market position. As a result, they have a number of market
challenger methods to select from.
Stand out from the crowd of paid adverts and establish a distinct position in the thoughts of
your clients.
Attract media attention, as news organisations and media outlets frequently cover and
publicise guerilla marketing campaigns.
Ambient Marketing:
Ambient Marketing is a type of marketing that takes place in. It refers to the marketing of
goods and services via the use of natural elements, creative concepts, and unconventional
places. As a result, they make good use of the surroundings.
Frontline, a company that makes flea and tick protection for dogs, put up this clever image of
a dog-insect illusion to appeal to people's emotions by making it tough not to look at it twice!
In Japan, BIC's lawn mowing razor promotion created a big impression on people, prompting
them to wonder if the seemingly impossible task of shearing a lawn with a razor was actually
not so difficult with BIC's razor!
Ambush Advertising:
Ambush refers to a surprise attack carried out by someone hiding in plain sight. Ambush
marketing is when a marketer utilises the word 'ambush' to gain an advantage over its
competitors by snatching the spotlight from them. It is one of the most important tactics in
brand wars since it allows a company to obtain greater exposure and capitalise on an
audience at the expense of competitors.
Nike employed surprise marketing to defeat Adidas during the 2010 FIFA World Cup. The
game's official sponsor was Adidas, although Nike promoted their wares through television
ads and celebrity football players.
Coca-cola was the main marketing sponsor of the 2014 FIFA World Cup, while Pepsi
ambushed its marketing efforts by signing 19 well-known players.
Stealth or undercover marketing:
Undercover marketing refers to marketing that is discreet and 'hidden,' such that it does not
appear to consumers to be a marketing tactic. The concept is to sell things in a non-obtrusive
manner, as in the term "flying beneath the radar."
A person eating an ice cream bar, for example, would not expect the wooden stick to turn out
to be Colgate's doppelganger toothbrush.
Tiger Woods PGA Tour 08 was released by EA Games with an unusual shot known as the
Jesus shot, in which Tiger Woods would dive into the water to play the shot. It was intended
to emphasise that in the game, players were able to hit shots while standing on water hazards.
This was eventually found to be done in order to generate excitement for the game.
Grassroots Marketing is a type of marketing that takes place at the grassroots level.
Grassroots marketing refers to marketing tactics that aim to reach out to a small group of
people in order to spread a brand message to a bigger audience and increase its awareness in
the marketplace.
The ALS bucket challenge, in which people were encouraged to pour a bucket of ice water
over their heads and then urge others to do the same, is an example of how grassroots
marketing helped promote awareness about the condition and drove people to donate money
to the cause. The goal was to motivate individuals to become involved and support the cause
from the ground up.
The use of unorthodox marketing methods to promote a brand in streets and other public
locations is known as street marketing. The main goal is to leave a lasting impact on the
public by utilising a variety of new ideas. Customizing street components, organising flash
mobs, creatively distributing items or brochures, and organising roadshows or human
animations are all examples of activities.
McDonald's french fry street crossing is a great example of street marketing.
Marketers have been known to take dirt and filth from a street or wall and stencil it to create
reverse graffiti. They leave an all-natural stamp on the audience and make a lasting memory.
The objective is to use the city as a "canvas" on which to spread their message.
Consumers are engaged through experiential or engagement marketing tactics, which involve
them in the brand's marketing initiatives. They serve to raise brand recognition and create a
bond between the brand and its customers. They are frequently event-driven.
For example, Coca-Day Cola's Valentine's happiness vending machine, which only appeared
when couples went by, was a brilliant technique that helped the brand capture people's hearts!
Guerrilla marketing methods are unique and innovative, and they help a business stand out.
They include an element of surprise and out-of-the-box thinking.
Cost-effectiveness– They demand fewer cost inputs because the idea, not the quantity of
money invested, is the most important aspect.
Authenticity– To make an impression on the target audience, the techniques should be one-
of-a-kind and genuine.
Interactivity– Guerrilla marketing tactics allow firms to interact with their target audience and
better understand their needs.
Cost-effective– Guerrilla marketing methods are incredibly low-cost to use and do not burn a
hole in the brand's purse. They necessitate less expenditure and greater inventiveness.
Interaction with the audience: These methods enable brands to establish a more personal
relationship with their customers.
Guerrilla marketing tactics rely primarily on word of mouth, which is one of the most potent
weapons in any marketer's armoury. To get people to talk about your products and services,
that is.
Impact creation: Because guerilla marketing tactics are unique, they leave a lasting imprint on
people's minds.
Publicity may snowball: These tactics can help a company expand its reach and reach a wider
audience. They aid in the creation of market awareness and buzz for the company's products.
Potential backlash: Audiences may object to the marketing technique, and the brand may be
forced to suffer the brunt of their hatred. As a result, brands should be mindful that if the
campaign is a failure, the brand image may suffer a boomerang effect.
Strategic risks: Because originality is in the eye of the beholder, guerilla marketing strategies
may be misconstrued. They may be biassed against the brand due to a lack of clarity and an
openness to interpretations. There may also be instances where word of mouth backfires due
to factors beyond the brand's control.
Uncertainty: Because these techniques are shrouded in mystery, brands cannot be certain if
they will have a good impact. They'll have to take a chance and see if it pays off for them.
Legal risks: Brands should exercise caution while implementing these techniques, as well as
their product placements, locations, and other considerations, in order to avoid any legal
issues.
Unforeseen obstacles: There may be instances where the guerilla marketing campaign is
jeopardised due to inconvenient timing or terrible weather.
The market follower strategy involves copying the market leader's products, services, and
strategies. The cost of inventing a new product, bringing in technology, breaking down
barriers to entry, and educating the market is borne by the innovator or leader. Another
company, on the other hand, could come along and imitate or improve the new product.
Although it is unlikely to overtake the leader, the follower can make a lot of money because it
did not have to pay for the innovation. Many businesses would rather follow the market
leader than challenge it. Many of the runner-up firms do not take on the market leader. When
you are a market leader, there will undoubtedly be market followers, according to the law of
business. Many businesses adopt a market follower strategy. In fact, all organisations'
competencies are so high in today's world that invention is swiftly duplicated or imitated in
many formats.
For example, (1)Apple pioneered multi-touch smart phones, but Samsung now dominates the
market in terms of overall revenue. In today's corporate climate, there are numerous market
follower tactics in use.
(2) We frequently find fragrances and deodorants on the market that seem and smell quite
similar to the original brand, but when examined attentively, they may change in terms of
appearance, colour, or spelling of the brand name.
A number of these tactics are also applied in the apparel industry. Similar apparel and
emblems are used, but they are significantly less expensive and differ slightly from the
leader's offerings.
In a mature market, market followers are unavoidable. Because online marketing has reduced
entry barriers and bigger rewards, it attracts a larger number of market followers. As a result,
companies like Snapdeal, Flipkart, Amazon, and Jabongg have all started one after the other
in online commerce. Of course, Ebay and Amazon were the market leaders. However, they
are now up against fierce competition.
A market follower is a corporation that mimics the actions of the industry leader. A market
follower, on the other hand, is the polar opposite of a maverick. Instead, it sits back and
watches what its competitors, particularly the market leader, do. It only follows the leader's
effective strategies after that.
"A corporation that is not the market leader but decides to maintain its position rather than
compete aggressively to grow its market share."
In a given industry, a market follower may be second to the market leader. It does not want to
lose market share by upsetting the established order.
This style of business never puts the leader in a position of weakness. It may, however,
usually sustain market share at a lower cost of investment than the market leader.
Because the market leader paid for the majority of the groundwork, the follower's investment
is lower.
For one or a combination of factors, it does not challenge the leader. Perhaps it believes that
the leader would win in a fight because it has more resources.
A market follower is a corporation that enters a product market after a competitor has
established a considerable market share.
The company that enters the market after the major one has a much lesser market share to
begin with. However, as a newbie, it has a significant advantage.
It reaps the benefits of the front-marketing runner's efforts. Consumers were educated as a
result of this marketing. To put it another way, the front-runner has already articulated why
customers should buy the product.
The front-runner has already invested money on getting the consumer to comprehend and
want the product.
Assume, for example, that Bicycles A Inc. is the first company to sell bicycles in the globe. It
has spent the last five years not just selling bicycles but also heavily advertising them.
Consumers were educated on the advantages of owning and riding a bicycle as part of the
advertising effort. Consumer education takes time and might be expensive.
Bicycles B Ltd. has now entered the market. Bicycles B does not require the same level of
promotion as Bicycles A.
Bicycles B does not need to invest money on consumer education because Bicycles A has
done so already.
As a result, Bicycles B has a significant advantage: cheaper costs. It has no desire to compete
with the market leader.
All Bicycles B cares about is gaining and maintaining a specified market share. It is content
to let the market leader maintain his position.
The first is one that tries to copy the market leader in as many markets as possible. It never
blocks the leader, though, because it prefers to avoid conflict.
Second, a corporation that tracks you from afar. In comparison to the leader, this company
retains a pricing, distribution, and quality advantage.
Third, a firm that selectively follows. This market follower is unable to duplicate all of the
market leader's operations. As a result, it only participates in some activities with the leader.
The best example of counterfeiting is piracy, which involves selling the originals.
Counterfeiting involves thievery and is a black market business technique, whereas cloning
involves production of marginally altered products. Pirated DVDs and CDs of movies and
music are the best example.
These are the four most common market follower tactics in use today. The adaptor and
potentially the imitator have a chance to overtake the market leader in these four categories.
Cloners and counterfeiters, on the other hand, will never be able to overcome the market
leader since they do not have their own manufactured products or brand equity.
Market leaders, on the other hand, are well aware that they will be followed and that market
followers will remain indefinitely. What strategy the market follower employs, whether white
or black, is entirely reliant on the market follower's perspective.
1)Adapter
Adapter is a market follower approach for white collar workers. The adaptation variant of
market follower strategy is used by automobiles. Cars such as the Maruti 800, Alto, Zen, brio,
and others are all adapters, taking the finest attributes from one another while changing the
appearance of the vehicle. Similarly, technological adapters such as the Dell laptop and Sony
Vaio laptop are available. These market laggards offer identical goods, but they aim to learn
from their direct competitors. Adapters can quickly get to the top because they can adapt,
learn, and produce a better product than the competitors.
Adapter is a white-collar approach to market follower methods. This is a common tactic used
by many businesses. In this situation, the follower companies' reproduced items are superior,
enhanced versions of the original products that are already on the market.
Adapters are capable of becoming leaders because of their ability to learn, adapt, and adjust.
Automobile businesses employ an adaptation type of market follower strategy.
2) Plagiarism
The best form of flattery is imitation. If you're a goods maker, however, such flattery can eat
into your profit margins. Imitators take advantage of your hard-won brand equity and produce
a product with the same features as yours, but at a lower cost.
The difference could be that the new product is constructed of inferior materials or lacks the
service or guarantee that your brand can provide. Nonetheless, there is a sizable market for
imitation, as many people cannot pay the higher price.
Imitation jewellery is the best and most well-known example of imitation as a market
following technique. The second example is Tata Sky's imitation, where Tata Sky was the
market leader and pioneered the digital television revolution in India, but Videocon, Airtel,
Reliance, and others quickly followed suit.
Imitators take for granted a company's hard-won brand equity. They plagiarise unique
products, give them the same characteristics, and then offer them for less. Imitated products
may not be of high quality or may not provide clients with the same level of service as the
original brand.
Because most people cannot buy the original goods, the market for imitators and their low-
cost imitations grows.
Imitation jewellery, for example, is the best and most common example of imitation as a
marketing approach.
3) The Cloner
Between an imitator and a cloner, there is a silver lining. While an imitator may imitate some
of your product's characteristics, it also keeps its own. Timesjobs.com, for example, is a
knockoff of naukri.com, however timesjobs has its own distinct product features.
However, if you get Rado watches or Gucci bags with Rado spelled as RADA and Gucci
typed as GUCCA, that's copying. Cloning entails creating a product that is identical to yours
but with minor differences. Cloning takes use of well-known brands and produces products
that are nearly identical.
Try to buy Samsung phone clones the next time you're in Bangkok. The similarities between
the original and the clone will astound you.
A clone is an exact replica of an original product with a different branding. Along with the
products, even the product's name and brand design or packaging are reproduced with minor
differences.
When counterfeiting Rado watches or Gucci bags, for example, Rado is spelled RADA while
Gucci is spelled GUCCA.
The best example of counterfeiting is piracy, which involves selling the originals.
Counterfeiting involves thievery and is a black market business technique, whereas cloning
involves production of marginally altered products. Pirated DVDs and CDs of movies and
music are the best example.
These are the four most common market follower tactics in use today. The adaptor and
potentially the imitator have a chance to overtake the market leader in these four categories.
Cloners and counterfeiters, on the other hand, will never be able to overcome the market
leader since they do not have their own manufactured products or brand equity.
Market leaders, on the other hand, are well aware that they will be followed and that market
followers will remain indefinitely. What strategy the market follower employs, whether white
or black, is entirely reliant on the market follower's perspective.
A market nicher approach is defined as a small set of clients seeking specific items or
services. They have well-defined wants for which they are willing to spend a higher price for
a specific product (service) or its quality in order to be satisfied.
A niche marketing strategy is one that focuses on selling or advertising a particular product or
service to a small yet productive target group. It only appeals to customers who can relate to
the product or service in question. With this limited group of clients, the corporation aims to
establish a long-term relationship. Some people mistakenly believe that the number of
potential clients targeted determines profitability and success.
A nicher market strategy includes a significant number of potential purchasers who are
diverse, geographically dispersed, and varied in terms of wealth, social standing, and
educational accomplishments. Naturally, many businesses create items or services that appeal
to a broad audience or are intended to gratify a huge number of people, and this is referred to
as mass marketing.
Many people believe that targeting the mass market in any product category has the
advantage of being large, and that achieving three to five percent of the market share would
be enough to run a profitable firm. However, given the enormous market size, there may be
so many companies, each with their own strengths and weaknesses, that cornering even a
small portion of it may be difficult. Even if the market is broad and diverse, a large ad may be
required to stand out in a crowded market.
Nicher Technique's Importance: This strategy is especially beneficial for small businesses
with limited resources and specialised products. However, even huge corporations with mass-
market products can employ this method to target niche markets. Customers are targeted by
businesses based on demographics, interests, occupations, or social causes. Because niche
products are typically high-involvement, it's critical to have a solid marketing and growth
strategy in place.
You've opted to target a certain audience that isn't the general public. The next step is to
determine the age group, geographic region, needs that the product will address, social status,
and other relevant factors. According to Linda Falkenstein, "we have to be really specific
here." And we shouldn't use terms like "teenagers," "young ladies," "young men," "kids," "the
American fast-food market," or "wealthy businesspeople searching for real estate
investments" in our statements.
IT marketing organizations, the financial services industry, and the automotive industry all
look to be too generic to be categorised as niche markets in the B2B world. Companies that
sell low-cost electric automobiles in China could be a smart approach to establish specialised
market benefits. Similarly, teenage girls in India's metro cities wearing premium jeans with
low waist characteristics in the 13-16 age group are a more realistic representation of the
target market than teenage females preferring western-style clothes.
Many individuals jump into domains they've never heard of, and the only reason they do is
because it's exhibiting tremendous income and return on investment growth. Trends change
quickly, and by the time the new company established itself, the niche industry's positive
trend may have shifted.
Furthermore, due to a lack of industry knowledge and competence, a successful trader who
hops on the IT or software bandwagon just because it's hot may burn his fingers. Such a
person would be completely reliant on someone else to operate the firm from the beginning,
making them more likely to lead in the incorrect way or to be duped.
Entrepreneurs should construct a checklist of their core abilities before entering into
something new, according to Falkenstein. They must highlight their strengths, preferred
work, knowledge areas, accomplishments, and life lessons acquired. A new venture's success
is dependent on interest and experience.
A well-known business model for success is to find a need and fill it. The majority of
business success stories stem from a sharp sense of identifying a problem and providing a
solution. It applies to the software business, where anti-virus software was developed to
address the requirement to remove viruses or Trojans that corrupt files or cause a computer to
malfunction.
Market surveys, informal conversations with potential customers, and secondary data are all
methods for determining consumer demands. There are research firms that produce market
surveys on niche market strategy sectors, and this could be a fantastic place to start when
determining who your target market is. Direct communication with clients is sometimes the
most effective technique.
Initially, just photocopiers were available, but as businesses sought a single device that could
perform all office activities, multi-function electronic devices including the fax, copier,
printer, and scanner were developed.
In India, today's popular toothpaste started out as a powder, but the need for a convenient
paste version in sealed tubes sparked a new market that has now eclipsed tooth powders and
other forms of teeth cleaning products.
4. Look for consumers who have been overlooked (nicher market benefits)
There may be some target audiences that aren't being served by established mass marketers,
and niche marketing can fill that gap. Provided no vendor or grocer is delivering fruits and
vegetables or prepared food in a particular area, for example, there is a strong possibility to
supply such services if the people who reside there have a true demand. The demand for
home delivery of daily usage food and groceries may be higher if it is made up of older
individuals living in high-rise residential units. Similarly, most health and fitness centres
cater to the young; if a certain neighbourhood has a higher number of senior individuals
seeking exercise and fitness, a wellness centre geared on the elderly would do well.
Many real estate professionals may overlook first-time buyers seeking economical but
comfortable housing. If there are no such service providers in a location, the company's
concentration may be on this small segment, where it can capture more than 80% of the
market share, despite the fact that the wider real estate market catering to all categories may
appear more enticing.
According to Falkenstein, once the entrepreneur has identified the target audience, the
attributes, and the need it serves for the client, they must still synthesise the qualities of the
new product or business.
It should adhere to the entrepreneur's long-term vision, there should be a genuine need for the
product, the strategy should be well-thought out, the product or service should be unique in
the market, and there should be the possibility of developing new products around it while
maintaining the core niche market strategy already identified to start a business.
7. Test marketing (nicher market benefits) Before moving ahead with full manufacturing of a
product or service launch, many large corporations debut a new product in certain areas to
evaluate audience response and feedback from sellers. A chosen set of clients is given the
opportunity to acquire and utilise the product in test marketing. To measure consumer
response, big corporations frequently give away free samples or participate in trade shows.
Alternatively, they may arrange mini-seminars to present a product and solicit feedback from
a restricted group of users. After receiving input, it must be assessed and any necessary
changes made.
8. Implementing the idea in the market (nicher market benefits) The actual introduction of the
product into the market is the final stage in the niche market strategy entry procedure. If the
product is a beauty product offered through pharma retail stores, adequate quantities must be
created, orders must be collected from retailers, or the product must be introduced in
collaboration with distributors. This is the most critical step of specialty marketing, according
to Falkenstein. He claims that if enough research has been done, launching the product is just
a calculated risk.
Nicher marketing provides various advantages over mass marketing, particularly for small
enterprises with limited funds. If there are many competitors, a niche market player is more
like a big fish in a small pond, whereas a corporate entity in a broad market is more likely to
be a tiny fish in a big pond.
Because the nicher market strategy is targeted to the needs of the tiny group it is targeting, the
product could have a significant impact on the market because there is a compelling motive
for individuals to purchase. A strong niche market position aids a corporation in defending its
position and entering a new nicher market. On the other hand, the mass market will draw in
new participants as competition heats up, leaving existing firms with a reduced slice of the
pie.
In the nicher market, organic growth is conceivable because customers will spread the word
about the product's benefits and recommend it to others.
A defined market position that targets nicher market benefits, according to marketing experts,
is a definite formula for success that provides short-term prospects, cash flow, and the
potential for long-term business maturation beyond the initial nicher position.
Finance, tourism, information technology, beauty and fitness, health, agro-processing, food
processing, manufacturing, electronics, electrical engineering, and other industries can all
benefit from nicher market benefits.
Johnson & Johnson, for example, is a company that only makes infant-care items.
Nobel Hygiene Adult Diaper, for example, launched the adult diaper brand 'Friends.'
It is the market's undisputed leader. This product's target market is quite precise.
3. Geographical expert
(iii) Decathlon, a French firm, is the world's largest athletic goods retailer, with over 1,500
locations in 57 countries.
5. A job-shop expert
6. Price-quality expert
The firm meets the high quality and low price ends of the market. Future Group's Foodhall,
an Indian luxury food supermarket, offers high-quality products at premium rates.
8. Product Feature Specialist The firm's specialty is the offering of a specific type of product
or product feature.
Example: (i) GoPro, for example, is a company that makes action cameras.
(ii) Marshall Amplification is a British firm that designs and manufactures amplifiers.
It deals with music amplifiers, speaker cabinets, and headphones and earbuds from various
companies. The Marshall guitar amplifiers are well-known all over the world.
2.5 KEYWORDS
Flank Defense: Flank Defense is a marketing approach in which a market leader not
only provides Position Defense but also establishes an outpost to protect a weak front
or serve as a counter-invasion base. For example, has set a high price per minute,
despite the fact that it is still in its early stages of development, and has spent that
money heavily on advertising, which has helped the company turn around its
fortunes.
Ambient Marketing: Ambient Marketing is a type of marketing that takes place in.
It refers to the marketing of goods and services via the use of natural elements,
creative concepts, and unconventional places. As a result, they make good use of the
surroundings.
2.5 SUMMARY
Companies that are market leaders profit the most as the market grows. The location
of the product in its lifetime determines the focus of expansion in total markets.
Markets can be enlarged by increasing usage, adding new uses, or adding new people.
By keeping an eye on their position and rapidly rectifying any errors, leaders can
protect market share. The best way to keep your market share is to continuously
innovating.
Increased market share can boost a market leader's profitability. Market leaders who
want to preserve their position and expand the entire market defend the current market
area as market share profitability rises.
A niche market approach involves a large number of potential buyers who are diverse,
geographically separated, and diverse in terms of wealth, social status, and
educational achievements. Naturally, many firms offer products or services that
appeal to a wide audience or are intended to satisfy a large number of people, which is
known as mass marketing.
Niche – A place, employment, status, or activity for which a person or thing is best
fitted.
2.6 LEARNING ACTIVITY
___________________________________________________________________________
___________________________________________________________________________
A. Descriptive Questions
Short Questions:
Long Questions:
1. In terms of competitive positioning, a company that is not the market leader but is
competing hard in its industry to gain market share is categorised as . Choose the
appropriate option.
a. market leader
b. market follower
c. target market
d. market disruptor
2. The corporation with the biggest market share in its industry is classed as
______________, based on competitive positioning. Which of the following is the right
answer?
a. market challenger
b. market leader
c. market follower
d. target market .
d. a full-frontal assault
4 The type of advertising approach adopted by the corporation to attain its goals is classified
as . Which of the following is the best choice?
d. commercial messages
5 When a market challenger attacks the market leader, it is referred to as a market takeover.
a) High-risk plan
b) No-risk strategy
c) Low-risk strategy
Answers
2.8REFERENCES
References book
Textbook references
Permission Marketing By Seth Godin.
Misbehaving : The making of Behavioral Economics by Richard Thaler
Marketing Challenges : Cases and Excercises By Christopher H.Lovelock Charles
B.Weinberg
eMarketing : The essential Guide To Marketing In a Digital World By Rob Stroke and
the creative minds of Red & Yellow. (Edition Six)
Website
https://www.marketingtutor.net/market-challenger-strategies/
https://freecourses.net/marketing/market-leader-strategies/
https://www.yourarticlelibrary.com/marketing/market-leadership-strategies-
explained/43538
https://nscpolteksby.ac.id/ebook/files/Ebook/Business%20Administration/Strategic
%20Marketing%20Planning%20(2009)/13.%20Chapter%2012%20-%20The
%20Formulation%20of%20Strategy%203-Strategies%20for%20Leaders-Followers-
Challengers%20and%20Nichers.pdf
https://www.ipay88.com/5-best-market-challenger-strategies-that-you-need-to-know/
UNIT – 3 : COMPETITIVE MARKET CUSTOMER &
COMPETITOR ORIENTATIONS, INDUSTRY
SEGMENTATION AND COMPETITIVE ADVANTAGE
STRUCTURE
3.0Learning Objectives
3.1Introduction
3.2 Competative Market Customer And Competitior Orientation
3.2.1 Competitive Market Characterstics
3.2.2 What is the goal of a competitive market ?
3.2.3 Essential elements of a customer-centric strategy
3.2.4 Methos to improve your customer service oriented skills
3.2.5 The Marketing Orientation
3.2.6 ways to get customers from your competitors
3.3 Industry Segmentation And Competative Advantage
3.3.1 What is industry segmentation?
3.3.2 Two stage of industry market segmentation (Wind and Cardozo Model)
3.3.3 Two stage of industry market segmentation (Model based on th wind and
Cardozo)
3.3.4 Industry Market segmentation’s
3.3.5 What is the best way to get started with industry segmentation
3.3.6 What is competitive advantage
3.3.7 How to create Competitive advantage
3.3.8 Four methods of competitive advantage
3.4 Summary
3.5 Keywords
3.6 Learning Activity
3.7 Unit End Questions
3.8 References
3.0LEARNING OBJECTIVES
After studying this unit, you will be able to:
3.1INTRODUCTION
Practitioners and academics are paying more attention to market orientation, innovation,
and new product success. Although developing new goods is crucial to a company's
long-term profitability and survival, it is a costly and dangerous endeavour due to poor
success rates. The study that this paper is based on looked into major factors of new
product success from the perspective of new product development team members. The
findings of 217 respondents back up the hypothesis that collaboration between research
and development and marketing is the key to new product success. Customer and
competitor orientations were also discovered to have a mediating effect on the link
between R&D and marketing collaboration and new product success. The research adds
to the corpus of knowledge in the fields of new product success, marketing, and
management. Managers involved in the creation and marketing of new products can use
the findings to assist ensure their success. Both their organisations and the community as
a whole will profit from this.
The market conditions under which spending resources in various market strategies leads
to improved performance are revealed in this study of hotels representing 37 brands from
56 countries.
For the first time in an international context, the authors identified the circumstances in
which customer orientation (acquisition, satisfaction, and retention of customers) alone
has a higher payoff versus simply investing resources in competitor orientation
(monitoring, managing, and outflanking competitors). An further intriguing surprise, not
previously revealed to the rivals, reduces performance. Similarly, in a market where a
competitor-based strategy pays off better, a customer-centric strategy degrades
performance.
According to the authors' expertise, in circumstances when a customer-based strategy has
a greater payout, focused on adopting a market orientation, a corporation commits itself
to long-term satisfaction of its customers' requirements. Although profitability, market
share, return on investment, and other performance metrics ultimately define a strategy's
success, a market orientation aims to achieve these objectives by consistently providing
superior value to customers.
Those who are familiar with the concept understand that adopting a market orientation is
more than just a marketing department initiative; it also entails establishing an
organization-wide culture that, when properly established, provides a firm with norms
and beliefs that shape an integrated organisational strategy for sensing changing
customer demand, competitive challenges, and future market conditions.
Customer orientation is a business strategy that prioritises the customer's requirements
over the company's. Customer-focused businesses recognise that they can't succeed until
they consistently increase their customer focus. It's a mode of thinking that matches your
company's objectives with those of your consumers.
Customer-orientation encompasses more than just customer service; it also necessitates
that support staff master important customer service capabilities.
Are you a customer-focused individual? Here are a few characteristics of customer-
focused teams:
Empathy
Agility: The ability to comprehend and act on customer data. Companies that are focused
on their customers swiftly adapt to their needs.
Communication that works
Listening attentively
Skills in problem-solving.
Nordstrom is an example of customer orientation.
The retail behemoth is well-known for providing excellent customer service.
"Use excellent judgement in all instances," their one-rule employment handbook says.
(While there are additional rules, this still demonstrates Nordstrom's commitment to its
customers.)
Here's how Nordstrom goes above and above for its consumers.
Customer-centricity
There are three sorts of competitors to consider when identifying them: direct, indirect,
and replacement. Businesses who supply a similar product or service in the same
category as you are considered direct competitors. (These are the competitors you're
most likely to consider.)
1 involving or influenced by competition. sports that are competitive 2 be sufficiently
inexpensive in price or high in quality to outperform commercial competitors 3 having to
do with or being characterised by a desire to compete.
Despite being suboptimal for profit-maximizing organisations, competitor orientation, or
the focus on beating the competitors rather than maximising profits, appears to survive in
business contexts.
1. Profit
There is interest if there is money to be made. When a company has the possibility to
profit, it is more likely to enter the market.
If the firm can make substantial profits by entering a market, it invests in that market.
When a company's revenue matches or exceeds its costs, it is said to be profitable.
Companies enter the market in order to sell a product or service and make money. A
start-up company enters the competitive market if it determines that the market is willing
to pay for its goods and that there are numerous potential clients. This action may
encourage other start-ups to provide comparable products in order to compete with the
original vendor and make a profit.
For example, if a corporation is considering creating bubblegum and discovers that they
can profit from it, they will take advantage of the financial incentive to enter the
competitive market and begin producing bubblegum.
For instance, Reliance Industries initially focused solely on telecommunications. Later, it
was discovered that the Consumer Electronics market has high earnings. As a result,
Reliance Digital shops were born.
2. Disappearance
Simply said, as more things are purchased, the number of available supplies decreases.
The price will climb as the number of stocks decreases.
Supply declines over time as corporations make things and consumers purchase them.
This allows a corporation to raise prices as a result of fewer inventory or as a motivator
to expand production.
When things are acquired, their stock drops or lessens, which is known as
diminishability. If a customer buys a phone, for example, there is now one less phone
available for other customers to buy. As the stock of commodities decreases, producers
anticipate an increase in the price of the goods.
For instance, if one person purchases a red automobile, there will be less red cars
available for other customers to purchase. As a result, the manufacturer may increase the
price of the red automobiles because they know that other customers will be prepared to
pay more to have one of the last red cars available.
For instance, several huge corporations are attempting to enter the energy industry.
Every litre of petrol I buy reduces the amount of petrol available on the planet by one
litre.
3. Enmity
To be called a competitive market, there must be consumer rivalry existing.
Consumers are forced to compete in a competitive market. This means that a consumer
competes with another for a product or service, particularly when stock is low.
For example, having a high-end laptop these days is regarded a status symbol among the
youth. As a result, many work hard to afford the most up-to-date and expensive model
available.
3.The principle of excludability- It is critical that consumers are barred from gaining any
benefit or profit from the product's sale.
For example, if movies are offered for free, consumers will not purchase them, and the
film industry will lose money.
4. Ability to refuse- In a competitive market, customers have the right to reject a product
they don't desire.
For instance, no salesperson has the authority to compel a customer to purchase a
product.
To survive in increasingly competitive markets, a company must develop long-term
action plans. Competitive strategies are the names given to these action plans. To counter
the efforts of its competitors, the corporation must build a competitive advantage.
Profitable margins and the capacity to charge a premium
Businesses profit when the cost of producing a product is less than the price at which it is
sold. In a competitive market, a company can use techniques like outsourcing production
or consolidating shipping and handling costs to achieve optimal profits.
The power to charge refers to a company's ability to establish prices at the point of
consumption, allowing customers the choice of whether or not to acquire a product. Take
a trip to an amusement park, for example. A family spending the day at the park will
come across a variety of price points for products such as souvenirs and snacks. The
buyer finally determines whether or not they are willing to spend more for these things,
even though the costs are much higher within the park.
5.For the customer's benefit-
Consumers have the knowledge they need to make purchasing decisions in a competitive
market. The consumer is aware of the product's benefits, is aware of the expenses, and is
willing to enter into a purchase agreement with the vendor. Businesses strive to deliver
those determining aspects because consumers make purchasing decisions based on
product satisfaction, function, or cost. A customer might, for example, go to the same
coffee shop every day and pay for a cup since, in their opinion, the coffee is delicious
and worth the price.
6.There are fewer time delays-
When a customer buys a product and immediately benefits from it, the company benefits.
The buyer's happiness may inspire them to refer friends to the company or to share their
experiences. Today, online buying offers a delayed benefit because the product is in the
process of being delivered rather than being immediately available. Companies take this
into account when attempting to shorten the period between purchase and reward.
For example, they could change the customer's motivation to buy from the lowest price
to the quickest delivery option.
External influences are lessened:
External factors can have both positive and bad financial consequences. These could be
in response to consumer behaviour or demand, or they could be related to the activities
of surrounding businesses. Two examples of external impacts are given below:
Example of a positive external influence: A pizza restaurant opens near the local movie
theatre, with the theatre sign facing the customers so they can see what movies are
playing as they dine. Hungry moviegoers eat pizza at the nearby pizza parlour. For cross-
promotion, the firms may collaborate to offer coupons or discounts.
Example of a negative external influence: According to a recent study, movie theatre
popcorn butter isn't very healthful, and it's best to avoid it. By adding healthier snack
options and modifying its butter formulation, the movie theatre responds to this negative
expense and converts it into a positive.
Property rights protection:
Property rights safeguard a company's assets against theft or damage. When property
rights are not available, boundaries become less defined. A tiny firm, for example,
collects mushrooms from the forest and sells them at a farmer's market. The harvester
has no constraints on how many mushrooms they can gather because the forest has no
property rights and the mushrooms are exchangeable. If a competitor enters the
mushroom harvesting industry, they may claim a piece of the forest as their own.
Enhanced entrepreneurial potential:
Entrepreneurs are enticed to enter the market by competitive markets, which encourage
them to take measured risks. Based on market conditions and new product acceptability,
they may launch a competitor product or service. Entrepreneurs join the market when
they are confident that their product fits certain criteria, such as those listed below:
Consumer pays the price set by the company at the point of consumption, and the
company makes a profit. Profit is made by the company.
A competitive market's goal is to establish ideal conditions in which both the buyer and the
vendor profit from the sale of products or services. In comparison to the whole market size,
competitive markets regulate a relatively limited number of consumers and sellers, therefore
neither has a direct impact over the entire market. Furthermore, competitive markets help to:
It's critical to remember that customer orientation is vital for all teams. To achieve the
best results, the entire firm must become more customer-centric.
Here are a few ideas for incorporating client focus into everything you do:
1.Make excellent customer service a priority in your mission. Work to bring your entire
company together by emphasising customer-centric ideals.
2.Customer data and stories should be shared throughout the company. Assist everyone
in seeing your organisation through the perspective of your customers.
3.Personalize the customer experience for your workers. One way to accomplish this is
for everyone to spend some time working in customer service, even if it is only for a
week or two.
4.Encourage teamwork between customer service and other divisions above everything
else.
Nobody knows more about the customer experience than those who spend the most time
with them. They can assist teams across your organisation in keeping the customer's
needs at the forefront.
Customers will have a consistently better experience when you make customer
orientation a company-wide focus, making them more willing to do business with you —
and to tell others to do the same.
It's hard to blame industrial marketers for thinking segmentation is a challenging task. Not
only has little been published on the topic as it pertains to industrial markets, but such
analysis is also more difficult than that of consumer markets. The issue is determining the
most effective variables for segmenting industrial markets. The authors suggest a "nested"
strategy to segmenting industrial markets. The layers are designed to begin with
demographics as the easiest to examine, separated by the degree of inquiry required to find
and evaluate distinct criteria. Then there are more complicated criteria, such as company
variables, situational considerations, and personal traits. However, the authors caution that a
nested strategy cannot be adopted in a cookbook-style manner, but must be tailored to
specific scenarios and circumstances.
The following three criteria are recommended for segmentation variables, which are defined
as "consumer attributes that relate to some important variation in customer response to
marketing activity."
According to Webster, if the system is not measurable, "it will not be operational." While this
would be great, in some markets, implementing it would be very difficult. The first is that it
frequently demands expensive and time-consuming field research. Second, accurate strategic
data on a big number of clients is impossible to obtain. Third, once the data has been
acquired, analysing it might be a difficult undertaking. In order to compensate for the gap in
reliable data measurement, most organisations employ more qualitative and intuitive
approaches in measuring customer data and more persuasive methods in marketing.
Every industrial market segmentation scheme aims to discover the most significant
distinctions among present and potential clients that will influence their purchase decisions or
buying behaviour while keeping the scheme as basic as possible.
Targeting the right market with the right message is critical when trying to reach customers
with a marketing message or ad campaign — if you aim too broadly, your message may
reach a few people who end up becoming customers, but it will also reach a lot of people who
aren't interested in your products or services. You'll wind up wasting a lot of advertising cash
if your messaging isn't suited for your target demographic.
Market segmentation can assist you in focusing your marketing efforts on the people who are
most likely to become loyal customers or enthusiastic content consumers. You divide a
market into groups with comparable qualities to segment it. One or more attributes can be
used to build a section. This method of segmenting an audience enables for more exact
targeting and personalization of marketing and content.
Market segmentation can assist you in better defining and comprehending your target
audiences and ideal clients. If you're a marketer, this allows you to better target your
marketing by identifying the correct market for your items. Publishers can utilise market
segmentation to provide more accurately targeted advertising options and to tailor their
content to different audience segments.
Let's say you're a marketing trying to promote a new dog food brand. You could separate a
group of people based on whether or not they own a dog. You could then segment that
audience further based on the type of dog they own, and display them adverts for food
specifically designed for their breed. This same information may be used by a publisher to
display dog-related content to those who own or enjoy dogs.
Instead of blasting your whole audience with a generic message, market segmentation allows
you to target the appropriate people with the right material at the right time. This increases
the likelihood of individuals connecting with your ad or content, leading in more effective
campaigns and higher ROI (ROI).
1.Segmentation by location:
Geographic segmentation is the process of dividing clients into groups based on their
location.Potential customers' demands and interests differ depending on their geographic
area, climate, and region, and knowing this allows you to decide where to sell and advertise a
brand, as well as build a firm.
Geographic segmentation, which divides your market into groups depending on their
location, is a simple but effective segmentation approach. The location of a customer can help
you better understand their demands and send out location-specific marketing. Geographic
segmentation can take many forms. The most fundamental is identifying users based on their
geographic locations, such as their nation, state, county, and zip code. Consumers can also be
identified based on the characteristics of their locality, such as climate, population density,
and whether the region is urban, suburban, or rural. Because one county may contain rural,
suburban, and urban areas, identifying features may necessitate more specificity.
If you need to target an ad to people in a certain area, such as if you're advertising a small
local business, segmenting a market by location is crucial. It's especially important if you're
targeting a large area because it allows you to adjust your messaging to regional variances in
language, interests, norms, and other characteristics, as well as people's various demands.
Depending on the region you're targeting, you may need to adjust the language of your
marketing. People from different countries may have a variety of hobbies. Baseball, for
example, is extremely popular in the United States, whereas cricket is more popular in India.
If you're selling sports equipment or writing articles about sports, you'll want to consider
these distinct preferences.
Businesses can also take into account the needs of diverse locations. For example, a clothing
manufacturer will show adverts for warmer apparel to those who live in cooler locations and
the converse to people who live in warmer climes.
2.Segmentation by demographics:
Because it is based on knowing how customers use your products and services and how much
they are prepared to pay for them, this is one of the most extensively used forms of market
segmentation.
People with comparable features are assumed to have similar living patterns, tastes, and
interests, which will impact their shopping habits. To build target populations with the
highest possibility of buying their products, demographics are frequently combined with
other segmentation tactics.
(a) Age Group : Because consumers' preferences and demands fluctuate greatly
depending on their age group, age is one of the most important variables utilised in
demographic segmentation. Digital marketing efforts that appeal to young adults or
teenagers may prove to be the most effective when a business wishes to target this age
group. Traditional marketing strategies, such as television and magazine commercials,
are often preferred by older folks.
(b) By Earnings : Consumer purchase decisions are heavily influenced by income levels.
High-end and luxury products may be preferred by those with higher income levels.
Individuals with lower income levels, on the other hand, may like to get the greatest
deal and are more likely to purchase low-cost products/services.
Organizations that cater to the masses or produce commonplace things will place a
premium on affordability. Luxury-goods companies, on the other hand, will focus on high-
income clientele who can buy their products.When it comes to pricing tactics, manufacturers
frequently consider their demographic section.
(c) By Religion, Race, and Ethnicity: Religious, racial, and ethnic preferences may
represent disparities in attitudes. This will have an impact on the types of marketing
initiatives that customers will respond to. Furthermore, religion can have a huge
impact on customer choices, therefore it's critical to understand your target market's
religious categorization.
(d) Gender-based: Individuals may identify with different parts of the gender spectrum,
such as feminine or masculine, and this will influence their shopping decisions and
preferences. You can adjust your marketing activities to better fulfil the needs of your
customers if you know which gender your product or service appeals to.
Luxury firms such as Dior and Gucci frequently sell their items through high-end lifestyle
magazines aimed at high-income consumers. Magazines like Marie Claire and Vogue are
examples of this.
Gender Segmentation: Because sanitary napkins are mostly purchased by women, marketing
strategies for these items are targeted to appeal to this demographic.
3.Segmentation by psychographics :
Psychographic segmentation is the process of dividing a target audience into groups based on
their actions, lifestyles, attitudes, and interests.
Market research approaches like as focus groups, surveys, interviews, and case studies can be
useful in accumulating this type of conclusion to understand the target population.
Psychographic segmentation is similar to demographic segmentation, but it focuses on mental
and emotional traits. These characteristics may not be as visible as demographics, but they
can provide vital insight into the motivations, preferences, and demands of your target
audience. Understanding these qualities of your audience will help you develop more
effective content for them. Personality traits, interests, beliefs, values, attitudes, and lifestyles
are examples of psychographic qualities.
If you see that members of a demographic segment react to your material differently, you
might wish to include some psychographic data. While demographics provide basic
information about your target audience, psychographics provide insight into why people
choose to buy or not buy your product, click on or ignore your ad, and interact with you in
other ways.
Assume you're a furniture and home décor company with a target market of newlyweds in
their twenties and thirties with a household income of more than $60,000. Some of the people
in this group are converting, while others aren't. When you factor in psychographic data, you
can discover that consumers who buy your items value community and friendships, as well as
being ecologically responsible. You may use this information to build ads that show people
entertaining guests in their homes while emphasising your brand's ecologically friendly
characteristics.
This information can be gathered in many of the same methods as demographic information.
You can use surveys to ask your current consumers for this information. You can also look at
how visitors interact with your website and what types of material they engage with to get a
better understanding of their interests and preferences. You can also use second-party and
third-party data to enhance your first-party data.
4.Behavioral segmentation :
Consumer behaviours, patterns, and the way customers go through their decision-making and
purchase processes are the subject of behavioural segmentation.
Behavioral segmentation refers to how people feel about your brand, how they use it, and
how conscious they are of it. This type of data is collected in the same way as psychographic
data is collected. This enables marketers to create a more targeted strategy.
You can also categorise your market based on the habits of your customers, particularly when
it comes to your goods. You can design messaging that caters to such behaviours by
segmenting your audience depending on their behaviours. Many of the behaviours you might
examine have to do with how people connect with your product, website, app, or brand.
• Website actions: You may track user actions on your online properties to learn more about
how they interact with them. You could track how long people spend on your site, whether
they read articles all the way through, what types of information they click on, and more.
• Pursued benefits: This refers to the need that a client is attempting to satisfy by acquiring a
product.
• Usage rate: Users can be categorised depending on their usage rate. Depending on whether
someone is a heavy user, a medium user, a light user, or a non-user of your product, your
messaging will be different.
• Loyalty: Customers often acquire brand loyalty after using a product for a period of time.
Customers can be classified based on how loyal they are to your brand, and your marketing
can be tailored accordingly.
Behavioral data is valuable since it directly connects to how people interact with your brand
or products. As a result, you may be able to promote to them more successfully.
A Generic Principle :
One of the recommended segmentation ways is for a company to select whether it wants to
provide a limited number of items to a large number of segments or many products to a small
number of segments. Some people advise businesses against selling many product lines to
multiple segments since it can dilute their focus and spread their efforts too thinly. Figure 1
shows the situation.
1st Figure
The benefit of trying the aforementioned strategy is that, while it may not always succeed, it
is a push for as much concentrate as possible. In theory, the one-to-many strategy ensures that
a company maintains its focus and takes advantage of supply-chain economies of scale. It
"kills a lot of birds with a single stone."
Coca-Cola and certain of General Electric's businesses are two examples. The disadvantage is
that the company risks losing customers if a weakness in its supply chain or marketing causes
it to leave the market. Coca-attempt Cola's to market Dasani bottled water in the United
Kingdom was a flop, owing to the company's attempt to put this "purified tap water"
alongside other brands' mineral water. A media-reported pollution crisis was the catalyst.
The many-to-one paradigm offers both advantages and disadvantages. The issue is that a
company's resources would be stretched too thin if it just served one or a few markets. If the
company's reputation is tarnished in its target market, it could be disastrous. Many
businesses, on the other hand, have narrowed their focus to a single market niche, such as
healthcare. Flowserve is a US-based manufacturer of a wide range of pumps, valves, seals,
and other fluid-movement and control components. (see figure 2)
Figure 2 :
The many-to-many model is the most popular of the above models. Companies have no
choice but to enter new markets with existing products, bring new products into existing
markets, or even develop new products and launch them into new markets as they continually
try to balance their risk in various technologies and industries.
The many-to-many strategy has the disadvantage of spreading a company's resources too
thinly and softening its focus. One of the reasons for General Motors' current financial woes
is that it has tried to be everything to everyone, launching model after model with no defined
segmentation, targeting, or branding plan.
3.3.2 Two Stages Of Industry Market segmentation (Wind & Cardozo model)
Industrial market segmentation was proposed by Yoram Wind and Richard Cardozo (1974)
based on broad two-step macro-segmentation and micro-segmentation classifications. This
model is one of the most widely used in today's industrial markets. Multi-step and three- and
four-dimensional models are sometimes added to make more sophisticated models.
Size of the company or organisation: one of the most practical and easily recognised factors,
it may also serve as a rough predictor of a company's future business. To create a realistic
picture, however, it must be paired with other components.
Company size and geographic location are both viable options. It reveals a lot about a
company's culture and communication needs. When dealing with an Asian customer, for
example, a corporation might use a different bidding approach than when dealing with an
American customer. Culture, language, and business views are all influenced by geographic
location. Middle Eastern, European, North American, South American, and Asian businesses,
for example, will all have their own set of corporate norms and communication requirements.
The US-based SIC code (standard industrial classification) might be a suitable signal for
application-based segmentation. However, it is limited to relatively simple businesses and
product or service classifications such as sheet metal fabrication, spring manufacturing,
construction machines, legal services, cinemas, and so on. Many industries that use a variety
of technologies or have unique goods are labelled as 'other,' which isn't helpful if these
industries make up the majority of the client base. Access control equipment, thermal spray
coatings, and uninterruptible power supply systems are examples of items that have not been
classified according to the SIC.
Situation of purchase, such as new task, modified re-buy, or direct re-buy. This is yet another
theoretical and rarely used criterion in actual life. Companies tend to specialise on a small
number of markets, get to know the market well, and create long-term relationships with
clients as a result of growing rivalry and globalisation in most established industries. The
widespread consensus is that keeping an existing client is less expensive than finding a new
one. When this happens, the purchasing criteria shift to relationships, trust, technology, and
overall cost of purchase, diluting the value of this criterion.
Stage of decision-making. Only newbies are eligible for this criterion. In the case of a long-
term relationship, which is typically the goal of most industrial enterprises, the qualified
supplier is usually aware of the purchase demand, and they always participate in the bidding
process from the start. "With increased turmoil in the marketplace, it is evident that
enterprises must move away from transaction-oriented marketing techniques and toward
relationship-oriented marketing for enhanced performance," Sheth and Sharma are cited as
saying. Freytag and Clarke (Freytag & Clarke, 2001)
Benefit segmentation: In some businesses, one of the more useful factors is the product's
economic value to the client (Hutt & Speh, 2001). It "understands that customers purchase
the same products for a variety of reasons and place various values on different product
attributes." (According to Webster, 1991) The access control sector, for example, sells the
same products for two different price points: Banks, factories, and airports use them for
security purposes, i.e. to safeguard their assets. Sports stadiums, concert arenas, and the
London Underground, on the other hand, use similar technology to increase revenue and/or
save costs by eliminating manual ticketing.
Banks, for example, would want stylish furniture for their customers, whilst government
institutions would be satisfied with utilitarian and durable pieces. When purchasing office
equipment, hospitals would have more hygiene requirements than utilities. Airport terminals,
on the other hand, would require a different level of access control and security monitoring
than shopping malls.
The sort of buying institution and the decision-making stage, on the other hand, can only be
done on paper. Institutional purchasers are being compelled to restrict the number of
suppliers with whom they form long-term relationships as they minimise procurement
expenses. As a result, the purchasing institution has a lot of experience, and suppliers are
usually included right at the start of the decision-making process. This removes the necessity
for these two items to be used as segmentation criteria.
Customers' commercial potential, given that supply can be guaranteed and that prices are
acceptable to a specific portion of the market. For example, 'global accounts' buy large
quantities and are willing to sign long-term agreements; 'key accounts' are medium-sized
regional customers who can account for up to 30% of a company's revenue if a competitive
offering is in place for them; and 'direct accounts' are tens of thousands of small businesses
that buy primarily on price but are willing to forego service in exchange.
Purchasing techniques, such as global vs. local decision-making structures, purchasing
officers' decision-making power vs. engineers or technical specifiers, and so on.
Position in the Supply Chain: The location and method of purchase are influenced by a
customer's business model. If he adopts a cost-cutting strategy, the company will be more
inclined to commit to high-volume manufacturing, which will necessitate high-volume
purchasing. This means constant pricing pressure and accurate delivery for the supplier, but
relatively long-term company security, for example in the commodities markets. If, on the
other hand, the company pursues a differentiation strategy, it is obligated to provide
customised products and services to its clients. This would entail specialised high-quality
items from the provider, which are frequently acquired in small quantities, obviating price
competition, emphasising functionality, and necessitating a relationship-based marketing
mix.
The problem of the many-to-many method is that it spreads a company's resources too thinly
and softens its focus. One of the causes for GM's current financial difficulties is that the
company has tried to be everything to everyone, launching model after model with no clear
segmentation, targeting, or branding strategy.
3.3.3 Two stages of Industry Market Segmentation (Model based on the wind and
Cardozo)
Yoram Wind and Richard Cardozo (1974) developed industrial market segmentation based
on broad two-step macro-segmentation and micro-segmentation classifications. In today's
industrial markets, this approach is one of the most extensively employed. To construct more
advanced models, multi-step and three- and four-dimensional models are sometimes added.
The qualities of the buying organisation [as whole corporations or institutions] are the focus
of macro-segmentation, which divides the market into:
The size of the company or organisation is one of the most practical and immediately
recognised criteria, and it may also be used as an approximate predictor of future business.
However, it must be combined with other elements to make a realistic image.
Both the size of the company and its location are feasible alternatives. It exposes a lot about
the culture and communication needs of an organisation. A company might utilise a different
bidding method when dealing with an Asian consumer than when dealing with an American
customer, for example. Geographic location has an impact on culture, language, and business
perspectives. For example, organisations in the Middle East, Europe, North America, South
America, and Asia will all have their own set of corporate conventions and communication
requirements.
The SIC code (standard industrial classification) used in the United States could be a good
indication for application-based segmentation. It is, however, confined to very simple
enterprises and product or service classifications such as sheet metal fabrication, spring
production, construction machinery, legal services, and theatres, among others. Many sectors
that use a range of technologies or produce unique goods are labelled as "other," which is
inconvenient if these industries account for the majority of the client base. Items that have not
been classified according to the SIC include access control equipment, thermal spray
coatings, and uninterruptible power supply systems.
Purchase situation, such as a new task, a modified re-buy, or a direct re-buy. This is yet
another theoretical criterion that is rarely applied in real life. As a result of increased rivalry
and globalisation in most established industries, companies seek to specialise on a small
number of areas, get to know the market well, and build long-term relationships with clients.
Keeping an existing client is generally thought to be less expensive than getting a new one.
When this occurs, the purchasing criteria move to connections, trust, technology, and overall
purchase cost, weakening the significance of this criterion.
The stage at which a choice is made. This criterion is only applicable to novices. The
qualified supplier is usually aware of the purchase requirement in the case of a long-term
relationship, which is typically the goal of most industrial firms, and they always engage in
the bidding process from the outset. "With rising market turbulence, it is clear that businesses
must shift away from transaction-oriented marketing strategies and toward relationship-
oriented marketing for improved performance," Sheth and Sharma are quoted as saying.
Clarke and Freytag (Freytag & Clarke, 2001)
Segmentation of benefits: One of the more useful variables in various businesses is the
product's economic value to the client (Hutt & Speh, 2001). It "understands that customers
buy the same products for different reasons and place varied values on different product
qualities," according to the company. (1991, according to Webster) For example, in the
access control industry, the identical items are sold at two distinct price points: They are used
by banks, companies, and airports for security reasons, i.e. to protect their assets. By
eliminating manual ticketing, sports stadiums, concert halls, and the London Underground,
on the other hand, use similar technology to enhance income and/or save money.
Banks, for example, would prefer beautiful furniture for their clients, whilst government
agencies would be content with functional and long-lasting pieces. Hospitals would have
additional hygiene requirements than utilities when purchasing office equipment. In contrast
to retail malls, airport terminals would require a distinct level of access control and security
surveillance.
On the other hand, the type of buying institution and the decision-making stage can only be
done on paper. In order to reduce procurement costs, institutional buyers are being forced to
limit the number of suppliers with whom they build long-term relationships. As a result, the
purchasing institution has a lot of knowledge, and suppliers are frequently included into the
decision-making process immediately away. This eliminates the need to utilise these two
items as segmentation criteria.
Customers' commercial potential, if supply can be ensured and prices are acceptable to a
certain segment of the market. 'Global accounts,' for example, buy large quantities and are
willing to sign long-term agreements; 'key accounts,' on the other hand, are medium-sized
regional customers who can account for up to 30% of a company's revenue if a competitive
offering is in place; and 'direct accounts,' tens of thousands of small businesses who buy
primarily on price but are willing to forego service in exchange.
Purchasing tactics include things like global vs. local decision-making frameworks,
purchasing officers' decision-making power vs. engineers or technical specifiers, and so forth.
In the supply chain, your position is as follows: The business model of a client influences the
location and method of purchase. If he pursues a cost-cutting approach, the company is more
likely to commit to high-volume manufacturing, which necessitates high-volume purchasing.
In the commodities markets, for example, this entails ongoing pricing pressure and accurate
delivery for the supplier, but relatively long-term business security. If the corporation pursues
a differentiation strategy, on the other hand, it is compelled to give tailored products and
services to its customers. This would require the provider producing specialised high-quality
things that are frequently purchased in tiny amounts, eliminating price competition,
emphasising usefulness, and needing a relationship-based marketing mix.
A bottom-up strategy is used (Kotler model)": Assessing the client base quantitatively and
categorising them – i.e. building up – the categories based on purchase attitude," Kotler says
(Kotler, 2001). Instead of perceiving clients as identical at the start of the segmentation
process, the build-up technique starts by recognising them as distinct, then moves on to
identifying possible similarities. "A build-up technique is more suitable than a breakdown
method in a volatility market (which is pretty much all markets today)."
Positioning and targeting : Making targeting and product positioning decisions is one of the
most important uses of industrial market segmentation strategies. Companies opted to focus
on particular areas while ignoring or avoiding others in order to increase their competitive
edge and chances of success.
Segmentation of Suppliers :
Industrial market segmentation refers to the demand side of the market in marketing, with the
purpose of corporations segmenting groups of potential clients with comparable wants and
expectations who might respond to a specific marketing mix. When businesses operate with a
variety of suppliers, segmenting the supply side of the market can be extremely beneficial.
To put this technique into practise, Parasuraman (1980) presented a step-by-step procedure:
Step 1: Determine the key characteristics of consumer segments, Step 2: Determine the most
important supplier features, Step 3: Choose the necessary variables for supplier segmentation,
and Step 4: Identify the categories of suppliers.
1 More powerful marketing messages: You don't have to be generic or vague any longer; you
can talk directly to a specific set of individuals in ways that they understand since you know
their characteristics, wants, and requirements.
2 Targeted digital advertising: Market segmentation aids in the understanding and definition
of your target audience's characteristics, allowing you to target your marketing efforts to
specific ages, localities, buying behaviours, and interests.
3 Creating effective marketing strategies: Knowing your target audience provides you an
advantage in determining which methods, tactics, and solutions they will respond to best.
4 Higher response rates and lower acquisition costs will result from leveraging your
segmentation to create your marketing messages, including ad wording and enhanced
targeting on digital platforms like Facebook and Google.
5 Attracting the correct customers: Market segmentation aids in the creation of targeted,
clear, and direct messaging that appeals to the people who want to buy from you.
6 Increasing brand loyalty: Customers are more likely to continue with your business if they
feel understood, well-served, and trusted.
7 Differentiating your brand from the competition: Your brand will stand out if you use more
personalised, personal message.
8 Finding niche markets: segmentation can reveal not only underserved areas, but also new
methods to serve existing consumers - opportunities that can help your brand develop.
10 Encourage clients to buy from you again or upgrade from a lower-priced product or
service to drive growth.
11 Increased profits: Customers' disposable incomes vary, so pricing can be set based on how
much they're willing to spend. Knowing this will help you avoid overselling (or underselling)
yourself.
12 Product creation : You'll be able to design with your consumers' wants in mind, and create
multiple items to cater to different regions of your customer base.
3.3.5 What is the best way to get started with Industry Segmentation?
1 Define your target audience: Is there a demand for your services and products? Is it a big or
small market? What position does your brand hold in the present market?
2 Segment your customer base: Decide which of the five factors you want to utilise to
segment your market (demographic/firmographic, psychographic, geography, or behaviour).
You don't have to stick to just one - most companies employ a combination – so try them all
and see what works best for you.
4 Create customer segments as follows: Analyze the results of your survey to determine
which consumer segments are most important to your business.
5 Put your marketing strategy to the test: Once you've interpreted your responses, put them to
the test with your target market, tracking conversions to see how effective they are. Also,
continue to test. If your segmentation or research methods aren't working, rethink your
strategy.
When you've identified the challenges and possibilities in a new market, for example, you
may use your customer segment expertise to figure out how target customers will react to
new ideas, goods, or services.
2 Targeting and segmentation : If you've segmented your whole market into multiple client
segments based on predefined criteria like demographics, needs, priorities, similar hobbies, or
behaviour preferences, you've done your job. With this knowledge, you can tailor your
products and services to specific market niches, creating marketing messages and collateral
that are relevant to their needs.
3 Customer research is important : When you know a lot about your clients, you can see
where your company is interacting well with them and where improvements may be made.
Customer requirements research (also known as habits and practises research) can use market
segmentation to give information about customer wants, preferences, and product or service
usage. This assists you in identifying and comprehending gaps in your offers, which can then
be planned for development or follow-up.
4 development of a product : If the product or service you've created doesn't answer an issue
for your target audience or isn't beneficial, it'll have a hard time selling. It's easy to know
what matters to each of your market segments and how they live their lives when you know
what products will enrich or enhance their daily lives. Use market segmentation to gain a
comprehensive understanding of your customers so you can spend less time and money
producing products and services that they will want to buy.
After you've decided on your segments, double-check that they'll be useful. The following
tests should be passed by a good segmentation analysis:
Measurable: When a segmentation variable is directly tied to a product purchase, it is said to
be measurable. You should be able to calculate or estimate the amount of money your target
market will spend on your goods. One of your groups, for example, may be people who are
more likely to shop during a promotion or sale.
Understanding and being able to reach out to your customers are two distinct things. The
features and behaviour of your segments should aid you in determining the best strategy to
meet them. For example, you might discover that one of your core segments is resistive to
technology and prefers to learn about store specials through newspaper or radio commercials,
while another prefers to be reached through your mobile app. A male retiree who is less
likely to use a mobile app or read email but responds favourably to printed ads could be one
of your groups.
Significant: The market segment must be able to purchase. If you're a high-end retailer, for
example, your store visitors may desire to buy your products but can't afford them. Make sure
the sector you've found isn't simply interested in you; they may also be anticipated to buy
from you. Environmentalists who are prepared to pay a premium for eco-friendly products,
lazy retirees who can afford your goods, and successful businesspeople who want to flaunt
their money could all be part of your target market in this case.
Actionable: When exposed to the market offering, the market segment must produce a
differential response. This implies that each of your portions must be distinct from the others.
Let's imagine your segmentation reveals that folks who care about the environment and those
who adore their pets have similar purchase tendencies. Rather than having two separate
segments, try combining them into a single segment.
Market segmentation isn't a science in the strictest sense. As you progress through the
process, you may notice that segmenting based on behaviours does not yield actionable
segments, but segmenting based on behaviour does. It's important to keep iterating on your
findings to ensure you've identified the ideal fit for your marketing, sales, and product teams.
A competitive advantage is a set of characteristics that offer a company an advantage over its
competitors. It enables firms to provide a higher-value product or service to their target
market than industry competitors. In the long run, this strengthens the company's position in
the industry and results in more sales than competitors. Competitive advantage can take many
Networks of distribution,
A combination of these factors can make your product or service more appealing to your
target market. It's also crucial that the variables that provide a company a competitive
advantage are long-term. The more dependable a company's competitive advantage is, the
more likely it is that it will be able to maintain profit levels and avoid being overtaken by
competitors.
Any successful firm seeks to gain a competitive advantage. You may position yourself as a
market leader if your company can build and retain a competitive edge. As a result, there
will be more sales and possibly larger profit margins.
1 Distinctiveness :
To set yourself apart from the competition, your company's product or service must offer
unrivalled value to your target market. You'll need a strong understanding of your ideal
customer to execute this properly. You must determine what they desire or require, as well
as how your goods might improve their lives. Many businesses do this by implementing the
following strategies:
Because the elements that make a product or service valuable are dynamic and ever-
changing, the differentiation strategy is tough to implement. A company must remain ahead
of industry trends and alter its offers on a regular basis to meet the needs of a changing
market. This is the only way for businesses to constantly stand out from the competition and
stay relevant to customers.
2 Affordability :
Focusing on cost leadership is another way to obtain a competitive edge. This strategy is
based on the principle of giving the consumer the most value for the least amount of money.
Many businesses do this by implementing the following strategies:
Low-cost materials for the creation of their product or service are negotiated.
In general, organisations that are the first in their field to successfully strike the balance
between providing great value at the lowest cost gain market share quickly, lowering the cost
of their product or service even further. The first corporation to use this technique has a
better chance of gaining a competitive advantage.
3 Advantage of Concentration :
The focus advantage strategy focuses on a business' target audience being narrowed to the
exclusion of other industry sectors in order to acquire a competitive advantage. Businesses
can simply deliver the maximum value by tailoring a product or service to meet the needs of
a certain market. The focus advantage is usually achieved by applying a cost or
differentiation approach to a well chosen target market.
Choosing the right target market is the most difficult part of using the focus advantage
technique. The optimal market segment for focusing on should have unmet anomalous
demands. While it is possible to identify these markets and provide them with custom
solutions, it is challenging to give value at a cost that is equivalent to or lower than industry
alternatives.
It's crucial to understand how other companies have achieved competitive advantage in order
to better grasp how your company might do the same. Here are some examples of how
today's most successful businesses have outperformed their competitors. All of the
businesses featured below not only have a competitive advantage in their field, but have also
maintained it throughout time.
The Competitive Advantage of Tesla (TSLA): As a luxury automotive and technology firm,
Tesla Inc Report is a fascinating case study in competitive advantage. They currently have
no direct competition in some ways. Tesla, on the other hand, has positioned itself so well
that it will be able to sustain its competitive advantage even if direct competition emerge.
Tesla devotes the majority of its funds to research & development. They are always thinking
about how personal mobility will evolve in the future. They're always looking for innovative
ways to deal with the eventual decline of oil as the world's principal energy source, as well
as preparing their products for the rise of automation. Their high-eco-friendly brand also sets
them apart from competitors, and will continue to do so for the foreseeable future.
The basic goal of business strategy is to find a way to get a long-term competitive edge over
other competing products and companies in a market.
Porter proposed four "universal" business tactics that may be used to acquire a competitive
edge. The strategies are concerned with the extent to which a company's operations are
limited vs wide, as well as the degree to which it strives to differentiate its products.
The tactics outlined by Porter for gaining a competitive advantage are summarised in the
diagram below:
Differentiation and cost leadership techniques are used to gain a competitive edge in a
variety of market or industry categories.
The differentiation emphasis and cost focus strategies, on the other hand, are used in a
certain market or industry.
What is the significance of cost leadership? Many (perhaps all) market sectors in the
industry are supplied with a cost-cutting mindset. If the obtained selling price is at least
equal to (or close to) the market average, the lowest-cost producer will (theoretically) make
the most money. This technique is typically linked with large-scale enterprises that supply
"standard" items with little difference that are widely accepted by the majority of customers.
A low-cost leader may occasionally discount its goods to encourage sales, especially if it has
a large cost advantage over the competition and can expand market share by doing so.
Bargaining power is used to obtain the best possible prices for production inputs,
A differentiation focus approach tries to differentiate a company inside just one or a few
target market categories. Because of the segment's unique client needs, there are chances to
offer items that are obviously distinct from those offered by competitors that are targeting a
broader audience.
The most crucial consideration for any company pursuing this strategy is to guarantee that
clients have distinct needs and desires - in other words, that there is a valid basis for
differentiation - and that existing competitor products do not match those desires.
The classic niche marketing strategy is to focus on differentiation. Using this method, many
small enterprises can establish themselves in a niche market area, commanding higher
pricing than undifferentiated products due to specialised skills or other ways to create value
for clients.
There are numerous examples of differentiation focus that have been successful. Tyrrells
Crisps, for example, focuses on the smaller hand-fried premium portion of the crisps market.
With differentiated leadership, a company may target far wider markets and gain a
competitive edge across an entire sector.
This strategy entails identifying one or more buyer criteria in a market and then positioning
the company to match those criteria in a distinctive way. This method is frequently related
with charging a greater price for the product, to reflect higher production costs and
additional value-added features supplied to the customer.
Differentiation entails charging a higher price that more than covers the extra production
expenses, as well as providing buyers with compelling reasons to choose the product over
less distinct alternatives.
There are various ways to accomplish this, albeit it is not simple and involves significant and
long-term marketing commitment. The following are some of the methods:
Distribution across all main channels across the industry (i.e. the product or brand is an
essential item to be stocked by retailers)
Global companies like Nike and Mercedes are excellent instances of differentiation
leadership. These brands obtain huge economies of scale, yet they do not compete on the
basis of price. Customers are persuaded to become brand loyal and pay a premium for their
products, which is how their businesses and brands are formed.
There are many various ways to achieve a competitive advantage in the industry, and many
organisations will focus on a few tried and true approaches. These strategies can be divided
into four categories, which serve as a foundation for understanding how organisations
compete.
Cost leadership, differentiation, defensive techniques, and strategic partnerships are the four
main ways to acquire a competitive edge.
The first competitive advantage that many organisations strive for is cost leadership. When a
company can offer the same quality product as its competitors at a cheaper price, it has a
cost leadership advantage. To implement this strategy, a corporation must identify ways to
create items at a cheaper cost through improving production methods or utilising resources
more efficiently than competitors.
This type of advantage can also be influenced by other factors, such as exclusive technology.
Cost leadership is an aggressive strategy in which companies try to force competitors out of
the market by continually employing price techniques meant to win over customers.
Different Products With Different Attributes: Differentiation is a second approach that firms
frequently employ to differentiate themselves from competition. Low cost is just one of
many aspects that can help a company stand out from the competition in a differentiation
plan. Businesses that want to stand out from the competition usually look for one or more
marketable characteristics. They then identify the market segment that values those traits and
market to them.
Businesses can also use the technique to establish which aspects of a product or feature are
most essential to customers, and then develop a niche market for those items or features.
Hold Your Positions With Defense Strategies: Using a defensive strategy is another
approach for a company to obtain a competitive advantage. This type of approach has the
advantage of allowing the company to further distinguish itself from its competitors by
keeping a competitive edge it has achieved. As a result, this strategy is linked to
differentiation and cost leadership because it is a tactic employed by companies to maintain
their competitive advantages once they have been achieved.
Unlike the other two methods, which are more offensive in character, this one becomes a
true benefit as it becomes increasingly difficult for so-called opponents to offer any real
competition to the company.
Businesses that seek strategic partnerships with other businesses in related industries or
within the same industry can achieve competitive benefits. Businesses must be careful not to
blur the line between collaboration and collusion. Collusion happens when businesses in the
same industry band together to manipulate prices artificially. Strategic alliances, on the other
hand, are similar to joint ventures in that they allow corporations to pool resources and gain
visibility at the expense of other competitors who are not part of the alliance.
3.4 SUMMARY
3.5 KEYWORD
Webster, Fredrick (1991) „Industrial Marketing Strategy“, Third Edition, John Wiley & Sons
Kaufman, A., Wood, C.H. and Theyel, G., 2000. Collaboration and technology linkages: a
strategic supplier typology. Strategic Management Journal, 21, 649-663
Hallikas, J., Puumalainen, K., Vesterinen, T. and Virolainen, V.M., 2005. Risk-based classification
of supplier relationships. Journal of Purchasing & Supply Management, 11, 72–82.
Dyer, J.H., Cho, D.S. and Chu, W., 1998. Strategic supplier segmentation: the next ‘best practice’
Websites
https://en.wikipedia.org/wiki/Industrial_market_segmentation
https://www.amuratech.com/blog/industrial-market-segmentation
https://www.lotame.com/what-is-market-segmentation/#types
https://citeseerx.ist.psu.edu/viewdoc/download?
doi=10.1.1.734.7632&rep=rep1&type=pdf
5.1 INTRODUCTION
History of Competitive advertising.
According to some studies (Swayne & Stevenson, 1987), comparative advertising was
practised in the United Kingdom as early as the seventeenth century. Nonetheless,
comparative advertising was more adequately recognised in the early twentieth century. The
majority of advertisements during this era were negative in nature. rather than creating
comparisons. One of the earliest comparative studies Advertising campaigns are believed to
have been published in the United States in the early 1930s. The Advertisement aims to
persuade potential buyers to "Look at All Three" (advertisement's title). campaign) before to
making a buying decision on a vehicle (Harris, 1967). J. Stirling Getchell designed the print
advertisement specifically (Appendix 1). He snapped a photograph of the CEO using his
automobile (personification approach), and in the copy, he emphasised the exceptional
Plymouth's functions Additionally, without mentioning any products, Getchell is as smart as
ever. alluded to Ford and Chevrolet, but then stated that Plymouth was the greatest. all. Prior
to the 1960s, competitive brands were referred to as "Brand X" or "leading". trademarks,
"common brands," or "other generic brands" (Barry 1993, 19 & Beard 2013b). Not until the
1970s, when the FTC restricted the use of comparison advertising, Comparisons to "brand X"
become irrelevant. Advertisers are bound by the policy and endorsement. were given
permission to use a variety of competing methods to market their products or services. This
move was consistent with the objectives of promoting the useful and necessary information
for market participants, particularly consumers (1975, Wilkie& Farris et al., 8). Although
professionals initially had a prejudice towards implementation of comparison advertising,
they later confessed it as an error in the 1990s. In marketing, the standard mode of
communication is (Ronald & Moon 1995, 108). Comparative commercials, particularly
explicit ones, were largely acceptable on a national scale. from the 1990s to the present,
despite being viewed as disparagement.
Fig. 2.2.1
Fig 2.2.3.1
Finally, but certainly not least, the benefits go to lesser-known firms who are suffering from a
substantial decline in total surplus. While brand warfare may initially eliminate price rivalry,
as product differentiation rises, prices tend to rise higher than prior firms, whereas large
corporations can afford to do so.
2 Contrary to popular belief, comparative advertising has a number of downsides.
While comparative advertising has several good effects on both consumers and companies,
advertisers should consider certain negative consequences while undertaking comparison
campaigns.
The most often cited downsides of comparison advertising were summarised in the same
study conducted by Thomas Barry (1993). As seen in Figure 3, many individuals argued that
comparison advertising should not be employed since it resulted in the "boomerang" effect.
This occurrence occurred amid the long-running conflict between Coca-Cola and Pepsi.
The second most frequently mentioned argument is that comparison advertising may be
ineffective due to the overproduction of information. As a result, a segment of the audience
will be perplexed and believe the information is unimportant. Following those two factors is
the issue of credibility. Nine research found that comparable advertising may actually detract
from the sponsoring brand's credibility. Inconsistent persuasive effects of comparison
advertising are a result of a lack of trustworthiness (Gotlieb&Sarel 2001, 38). Eight research
concluded that comparative advertisements may be judged deceptive due to insufficient
comparisons. Consumers may misidentify the sponsored brand in certain circumstances. They
may get enraged and distrustful at times. It leads to the conclusion that comparison
advertising is unethical — and also bears some of the blame for ruthless competition.
23
Fig 2.2.3.1
Finally, but certainly not least, the benefits go to lesser-known firms who are suffering from a
substantial decline in total surplus. While brand warfare may initially eliminate price rivalry,
as product differentiation rises, prices tend to rise higher than prior firms, whereas large
corporations can afford to do so.
2.2.4 Comparative Advertising and Affective Function
Attitude is the conclusion of the cognitive step's information processing function.
Attitudes regarding advertisements
Attitude toward the advertisement (Aad) and Attitude toward the brand comprise the affective
function (Abr)Attitude toward the advertisement (Aad) and Attitude toward Swinyard 1981)
serve as the affective function. Similarly to how individuals disregard the content in
comparison commercials owing to their lack of credibility, buyers of comparing companies
almost always perceive comparative marketing initiatives as attack advertisements. They
maintained that comparative advertising forms denigrate and misrepresent their chosen brand,
as well as contribute to extremely contentious arguments concerning the message's origin and
content (Wilkie& Farris 1975; Belch 1981; Swinyard 1981; Grewal et al. 1997, 4).
A second rationale is based on the tone of speech. Dröge (1989) discovered that comparison
commercials are more aggressive, nasty, and untrustworthy, which leads people to perceive
them for unfavourable brand-attacking advertisements (Abr).
expertise/informativeness (message).
- Affective: This term refers to the condition of "emotional" or "feeling". This role tries to
improve consumers' attitudes and perceptions about the sponsoring brand and the
advertisements (liking and preference).
- Conative: It refers to "the "striving" condition, which is associated with the proclivity to
view items as either positive or negative objectives." This is a critical phase since it
establishes the consumer's beliefs, actions, and choices. The objective of the creative
component is to persuade and develop customer desire for the sponsoring brand or their
products/services. of endorsing businesses, products, or services, and also, offering crucial.
Advertorial comparisons and cognitive function
To summarise the description above, cognitive function gives beneficial data to targeted
audiences, therefore transitioning people from ignorance to knowledge about the sponsored
brand. The cognitive outcomes will be examined through the use of dependent variables such
as attention, awareness, information processing, and credibility.
Arrangement.
Marketing items through appropriate distribution channels may contribute to the brand's
strength. Customers must be contacted and informed about various offerings. Additionally, it
contributes to the company's culture and
aids in the company's survival and growth. All of the efforts made to boost sales and
distribution build a business and increase overall pleasure and contentment.
3.Awareness
Consumers are considered to be aware of marketed brands if they are capable of recognising
the brand's name and demonstrating their knowledge of the content conveyed in an
advertisement. In comparison to conventional advertisements, the more attention comparative
advertisements receive, the more brands and messages consumers recall (Wilkie& Farris,
1975). Additionally, Wilkie& Farris hypothesised in their research that competitive
advertising enhances consumers' knowledge of rival products in addition to drawing their
attention. Indeed, while attention is necessary for raising consumers' awareness of brands and
messages, it is insufficient without the participation of the retrieval process. This is one of
two components of the recognition memory model, which is the result of interevent
integration (Horton & Mills 1984, 369). Individuals recall memories more readily in
conditions of increased spreading activation and relational processing (Muehling et al. 1990,
43). In contrary to Wilkie& Farris's perspective, comparison advertising clearly boost
consumers' awareness of the sponsoring brand and message by providing more information
about the advertised brands than non-comparison commercials do.
Because the additional knowledge may provide various retrieval signals and bolster their
memory abilities (Grewal et al. 1997, 3).
4. Believability
Credibility relates to the user's view of the advertisement's correctness and authenticity, as
well as the message contained inside. Credibility is composed on two elements: source
There are several divergent views on the legitimacy of comparison advertising. Wilkie&
Farris (1975) believed that comparison advertisements should provide moreWilkie& Farris's
viewpoints. Comparative advertisements, in their opinion, produce less belief than non-
comparative advertisements (Prasad 1976; Levine 1976; Shimp and Dyer 1978). Contrary to
popular belief, Golden (1979, 526) said that there is no difference in terms of claim
believability between these two ad forms. As can be shown, despite the seeming tension
between belief and credibility, the majority of research indicate that comparison advertising
lacks credibility. The impacts of comparison advertising are believed to be inconsistent and
insufficiently compelling, as a result of the claims' diminished credibility (Swinyard 1981;
Belch 1981; Gotlieb&Sarel 1991, 40). Additionally, comparative advertising has been shown
to elicit a greater number of counterarguments than conventional advertising. For example,
customers of comparative brands may develop an aversion to the sponsored brand. Because
the message conveyed by the brand may conflict with their views. Typically, people maintain
their scepticism and reply to the comparison advertising by providing counterarguments to
the message's claims, disparaging the message's source, or making critical remarks about the
message (Wright 1973).
More credible than the conventional. However, a few years later, several studies questioned
this.
According to the American Marketing Association, "those marketing operations, other than
personal selling, promotion, and publicity, that promote consumer and dealer purchasing."
effectiveness, such as presentations, shows, and exhibits, as well as demonstrations and other
non-recurring events.
According to W.J. Stanton, "sales promotion is described as "devices that stimulate demand
in order to increase sales."
iv) Calculate the promotional expenditure required to obtain the desired number of exposures.
Attention:
The phrase "attention" refers to the mental condition of being focused on something.
Marketers are required to take measures to differentiate their campaign and make it more
appealing.consumer focus. Comprehend / Comprehend: To comprehend or to receive
knowledge that has been presented. When the purpose is attained Consumers understand the
message in the way that the advertiser intended. Consumers frequently fall short of when
promotional communications are poorly prepared or just unable to stimulate interest.
Attitude Modification:
Coupons
A coupon is a voucher that entitles purchasers to a discount when they purchase a
certain product from the seller. Coupons are typically included with the purchase of a
goods. You may use them either to save money on certain products or to get money
back in your bank account.
Coupons are intended to introduce a new product to the public.
the purpose of promoting the sale of a well-known product
to provide a thing in vast quantities for sale
to persuade customers to switch brands; and to encourage customers to make
recurrent purchases.
Coupons are utilised for consumer convenience items such as snacks and beverages.
They can be distributed door to door, through the mail, or incorporated inside parcels
of various sizes. Coupons may be included in magazine or newspaper adverts from
time to time.
Demonstration / Presentation of a concept
The need for demonstration is necessary when the product is sophisticated and of a
technological nature.
Customers are instructed on how to utilise the product in the most effective manner.
Customers are more likely to purchase things if they are demonstrated to them.
Demonstrations are offered at no cost to attendees.
Contests
Contests are promotional events that provide people the opportunity to win something
of value, such as cash, vacations, or merchandise. Competitions are held in order to
attract new clients. As part of the introduction of a new product, they ask prospects to
describe their motivations for purchasing the product.
Buyer purchases merchandise and sends proof of purchase together with entry form to
be entered in contest. Buyers complete all required fields on entry forms. The best are
chosen by a team of judges, and the consumers who purchase them are awarded
rewards.
Offer of a cash refund
Cash refund offers are reductions in the price of the goods that are permitted. The
manufacturer makes an offer to reimburse a portion of the purchase price of a product
to consumers who turn in evidence of purchase to the company making the offer.
Furthermore, if the consumer is dissatisfied with the goods, he or she will be entitled
to a refund of the entire purchase price or a portion of it. The promise of a cash refund
is clearly indicated on the package.
Premium Premium refers to things that are given out for free or at a reduced cost as an
inducement to purchase a product. A premium may be included in the product, placed
outside of it, or sent to the recipient through mail. The reusable box itself acts as a
bonus item for the customer.
Premiums are frequently provided for consumer goods such as soap, toothpaste, and
other such items. Premiums are available in a variety of forms, including direct
premiums, reusable container free in mail premiums, self-liquidating premiums,
trading stamps, and so on.
Direct premiums can be found both within and outside of the package. After the
product has been re-used, the reusable container can be re-used again. A free in-mail
premium indicates that a premium item will be provided to the recipient via the mail.
A self-liquidating premium is the extra amount that is supplied at the standard price in
addition to the base price. A trading stamp is a piece of paper that is handed to
customers by the vendor. These can be redeemed at any of the stamp redemption
locations.
'Price reduction' offer
During the slump season, goods are sold at a discount. The reduction of pricing
encourages the selling of products.
Sweepstakes for the general public
Consumers are invited to enter a sweepstakes by submitting their names for
consideration in a drawing. The names of customers are included in a list of contest
winners who received prizes. The winners are chosen from a hat, and they are
awarded rewards.
Allowances for buybacks
Acknowledgements are given to buyers based on the amount of money they have
spent before. This means that purchase allowances are paid for subsequent purchases
based on the number of products purchased in the prior transaction.
Promotional actions directed towards trade partners or channel members such as
distributors, wholesalers, or retailers are referred to as trade promotion. 5.
Promotional activities directed at consumers are referred to as consumer promotion.
Basic to trade promotion is the creation of "push" in the channels so that they may sell
the producers' items with a high level of excitement and motivation. It is done out by
the manufacturers through the provision of different incentives to trade partners in
order to motivate them to contribute to the development of their own brands.
Methods of promoting international trade
The following is a quick description of the trade promotion method:
Dealer premiums: A dealer premium is one of the strategies used to promote a product
or service. Certain rewards are sometimes provided to shops in exchange for their
business. Certain units of the items are provided free of charge to merchants in
exchange for their maintaining huge inventories of goods. Besides dealer premiums,
additional sales promotion activities such as contests and giveaways may also be
implemented.
Advertising material: The marketing of items via advertising also aids in the
promotion of commerce. Many manufacturers of goods give advertising material to
their dealers, such as sign boards, banners, and other materials, which may be seen
largely for Pepsi, Coca-Cola, and other similar products.
Store demonstrations: Store demonstrations are also beneficial in the promotion of
commerce. Sales representatives from the manufacturer do a customised presentation
of their goods for the benefit of dealers and consumers under this programme.
In this case, both dealers and consumers are implicated. Rapid expansion of trading
activity is made possible as a result of this factor.
Special displays: Special displays regarding the items may also aid in the promotion
of trade operations by drawing attention to them. Special displays and exhibits of the
company's products may be staged during trade shows or exhibitions in order to raise
awareness of the items.
Special discounts on items: Special discounts on products assist to promote the
trading system by encouraging people to buy more of them. In order to encourage
retailers to participate in the campaign, a manufacturer may give special discounts on
products purchased by the merchants.
Special discounts boost the profit margin of the dealer, who is so compelled to raise
the number of units sold of the product.
Push money: Push money is also useful in the advertising of a company's products or
services. Dealers may be compensated a specified amount of money in order to
increase the number of sales of the manufacturer's products. When there is fierce
rivalry in the market, a monetary reward is offered to those who successfully promote
the product to purchasers.
6. When to Run Sales Promotions: Sales promotions are a wonderful approach for
your company to incentivise potential clients to make a purchase. You run the danger
of losing more clients than you gain if you opt to invest in a sales campaign without
properly comprehending the factors that influence its effectiveness. This article will
discuss the five important characteristics of a successful sales campaign, as well as
how you may use these factors to alter your company.
When done right, sales promotions have the potential to completely revolutionise a
company. Consider the following example of digital coupons: An online poll
conducted by Mobile Commerce Daily found that over ninety-six percent of mobile
device users will use their smart devices to seek for digital coupons in 2015. Online
coupons also have a redemption rate that is ten times higher than that of conventional
coupons.
Through the use of digital coupons, users may take advantage of discounts and special
offers without having to deal with the overabundance of traditional paper mailers.
Consumers can simply search and redeem offers from hundreds of websites on an as-
needed basis, reducing the need for large 'coupon folders' or wallets and purses loaded
with coupons and other promotional materials. As an example of sales promotions
that create a high return for a small expenditure, digital coupons are a wonderful
choice. By 2016, 44.5 percent of firms are predicted to invest in digital coupons for
marketing objectives.
Marketing Constraints
Sales marketing strategies that make use of digital coupons are typically considered to
be successful for a variety of reasons. As described by the American Marketing
Association, a sales promotion is "marketing pressure exerted for a predefined, short
length of time using media and non-media to stimulate trial, boost customer demand,
or enhance product quality." While this description encompasses the basic features of
sales promotion, the reality is that sales promotion encompasses all of these specifics
and much more.
Consumers who provide evidence of purchase to the manufacturer are referred to as
proof of purchase consumers.
A self-liquidating premium is the extra amount that is supplied at the standard price in
addition to the base price. A trading stamp is a piece of paper that is handed to customers by
the vendor. These can be redeemed at any of the stamp redemption locations.
'Price reduction' offer
During the slump season, goods are sold at a discount. The reduction of pricing encourages
the selling of products.
Sweepstakes for the general public
Consumers are invited to enter a sweepstakes by submitting their names for consideration in a
drawing. The names of customers are included in a list of contest winners who received
prizes. The winners are chosen from a hat, and they are awarded rewards.
Allowances for buybacks
Acknowledgements are given to buyers based on the amount of money they have spent
before. This means that purchase allowances are paid for subsequent purchases based on the
number of products purchased in the prior transaction.
5. Promotion through channels / trade promotion:
Trade promotion is defined as promotional efforts that are directed towards trade partners or
channel members, such as distributors, wholesalers, or retailers, and that are intended to
increase sales. Basic to trade promotion is the creation of "push" in the channels so that they
may sell the producers' items with a high level of excitement and motivation. It is done out by
the manufacturers through the provision of different incentives to trade partners in order to
motivate them to contribute to the development of their own brands.
Methods of promoting international trade
The following is a quick description of the trade promotion method:
Dealer commissions:
Dealer premiums are one of the ways of trade promotion that are available. Certain rewards
are sometimes provided to shops in exchange for their business. Certain units of the items are
provided free of charge to merchants in exchange for their maintaining huge inventories of
goods. Besides dealer premiums, additional sales promotion activities such as contests and
giveaways may also be implemented.
Material for advertising purposes:
The advertising of items also contributes to the growth of the commerce industry. Many
manufacturers of goods give advertising material to their dealers, such as sign boards,
banners, and other materials, which may be seen largely for Pepsi, Coca-Cola, and other
similar products.
Store demonstrations: Store demonstrations are also beneficial in the promotion of
commerce. Sales representatives from the manufacturer do a customised presentation of their
goods for the benefit of dealers and consumers under this programme.
In this case, both dealers and consumers are implicated. Rapid expansion of trading activity is
made possible as a result of this factor.
Special displays: Special displays regarding the items may also aid in the promotion of trade
operations by drawing attention to them. Special displays and demonstrations of the
company's products are displayed during trade shows or exhibits. Special discounts on items:
Special discounts on products assist to promote the trading system by encouraging people to
buy more of them. In order to encourage retailers to participate in the campaign, a
manufacturer may give special discounts on products purchased by the merchants.
Special discounts boost the profit margin of the dealer, who is so compelled to raise the
number of units sold of the product.
Push money: Push money is also useful in the advertising of a company's products or
services. Dealers may be compensated a specified amount of money in order to increase the
number of sales of the manufacturer's products. When there is fierce rivalry in the market, a
monetary reward is offered to those who successfully promote the product to purchasers.
6. When to Run Sales Promotions: Sales promotions are a wonderful approach for your
company to incentivise potential clients to make a purchase. You run the danger of losing
more clients than you gain if you opt to invest in a sales campaign without properly
comprehending the factors that influence its effectiveness. This article will discuss the five
important characteristics of a successful sales campaign, as well as how you may use these
factors to alter your company.
When done right, sales promotions have the potential to completely revolutionise a company.
Consider the following example of digital coupons: An online poll conducted by Mobile
Commerce Daily found that over ninety-six percent of mobile device users will use their
smart devices to seek for digital coupons in 2015. Online coupons also have a redemption
rate that is ten times higher than that of conventional coupons.
Through the use of digital coupons, users may take advantage of discounts and special offers
without having to deal with the overabundance of traditional paper mailers. Consumers can
simply search and redeem offers from hundreds of websites on an as-needed basis, reducing
the need for large 'coupon folders' or wallets and purses loaded with coupons and other
promotional materials. As an example of sales promotions that create a high return for a small
expenditure, digital coupons are a wonderful choice. By 2016, 44.5 percent of firms are
predicted to invest in digital coupons for marketing objectives.
Marketing Constraints
Sales marketing strategies that make use of digital coupons are typically considered to be
successful for a variety of reasons. As described by the American Marketing Association, a
sales promotion is "marketing pressure exerted for a predefined, short length of time using
media and non-media to stimulate trial, boost customer demand, or enhance product quality."
While this description encompasses the basic aspects of sales promotion, the reality is that
sales promotion is all about offering incentives to customers. Sales promotion, in its most
basic form, provides potential consumers with an additional incentive (or reasons) to consider
doing business with you and your organisation.
The idea behind this is that if customers are willing to take that first step of faith and try your
product—whether through limited trial periods, discounts, special offers, free shipping,
branded gifts, loyalty programmes, or the aforementioned digital coupons—they will be
satisfied enough with the results to be willing to invest even more money in the future. Sales
promotions enable businesses of different shapes and sizes to get their foot in the door, with
the common objective of increasing both short- and long-term sales statistics in the process.
What is it that makes sales promotions successful?
Having said that, not every sales promotion is a success. There are a variety of reasons why
certain marketing campaigns fail to pique the interest of prospective customers. The failure of
a campaign can sometimes be linked to a poor product or service, but more often than not the
campaign itself is to blame for the failure. Your sales promotion plan should comprise the
following five components in order to successfully persuade clients to conduct business with
your organisation: 1.
A Targeted Audience is someone who has been identified.
Customer loyalty may result in spending upwards of ten times the amount of money spent by
normal consumers over the course of a lifetime. It is always tough to find individuals who
will eventually become brand supporters, which is why marketing campaigns are so difficult
to execute. The majority of marketers feel that, by casting a wide enough net, they would be
able to discover such folks just by using percentages as a guiding principle.
Indeed, if sufficient prospects are engaged, a proportion of those prospects will almost
certainly go through the sales funnel and become paying customers, with a lesser proportion
of those paying customers becoming loyal customers.
The problem with this way of thinking is that it is incredibly inefficient, with only a small
proportion of prospects and leads "paying off" enough to offset the original investment in the
business. Businesses may make better use of their limited marketing resources if they know
who they're marketing to in advance of time. Businesses may use this technique to target
people who are most likely to become loyal clients while avoiding spending resources on
those who will not become loyal.
A similar statement may be made about sales promotion campaigns. In order to choose the
most appropriate target audience for your campaign, you must first have a better
understanding of the clients you currently have on hand. Customer demographic data may be
collected with a simple survey or questionnaire (or by having one incorporated directly into
your website). In order to persuade clients to take the time to provide personal information,
provide them with an incentive up front.
Once you have a better understanding of the types of individuals who will be using your
product or service, you can narrow down the types of problems that your product or service is
intended to answer. With these two considerations in mind, you should direct your sales
promotion efforts on individuals who are most likely to be truly interested in your product or
service.
Measurable Objectives
There is no doubting the significance of creating objectives for oneself. Those who set and
documented explicit goals, according to a research conducted by the Harvard MBA school,
earned on average ten times more than those who did not set and record clear goals. When
creating a sales promotion campaign, your objectives must be more precise than just "raising
revenue."
So, what is your plan of action? Consider what the most essential goal of your promotion
should be, and then write it down. Are you attempting to attract new clients, or are you more
concerned about maintaining existing customers? You could be interested in increasing the
frequency with which your consumers make purchases, or you might be interested in
increasing the average amount they spend on each purchase. Are you aiming to improve the
amount of business that your firm receives during slower seasons or periods of economic
uncertainty?
Publicizing certain things through web adverts, seasonal catalogues, sales flyers, magazines,
and/or other print media, whether or not the item is discounted.
Providing targeted clients with special price discounts for a short period of time is another
option.
Promotion of specific targeted products to specific targeted consumers for a predetermined
duration, with or without discounting the item. Providing discounted price on a specific
targeted item for a specific targeted client for a short timeframe.
The efficacy of these efforts can be difficult to assess, particularly if your system is unable to
identify which promotion the item was purchased under at the time of purchase.
Any small or middle-market firm can benefit from the following five techniques: 1.
Consider the following: 1. Compare the sales and gross margins of the advertised item or
client before the promotional period, during the promotional period, and after the promotional
period. The most accurate approach to achieve this is to determine the average number of
sales each day for each of the time periods under consideration. Did you see an increase in
your average daily sales throughout the promotional period? Are sales per day previous to the
promotional period and sales per day following the promotional period comparable? Does it
appear that the campaign just dragged in future sales that would have otherwise been
obtained at regular margins as a result of the promotional period?
Or did the promotion result in a genuine "lift" in sales and profit margins?
2. Contrast the total average order size and the number of lines per order during promotional
periods with the same metrics during non-promotional periods to see which is superior. Did
the campaign result in an increase in your average order size or an increase in the number of
lines per order? These metrics should be compared to the ones you used in your 3. Compare
the total sales per day of all goods during promotional times (including the items that were
not advertised) to the total sales per day of all items during non-promotional periods. Does it
seem as though your overall sales were affected by the promotions, perhaps as a result of the
additional buzz that the promotional activity generated in the marketplace? (Keep in mind to
take seasonality into account if relevant.)
In step four, you'll compare the outcomes of the numerous promotions against one another.
Rank the campaigns that resulted in the greatest increase in sales and gross profit for your
firm. Compare this year's results to those from previous years to see whether the trends are
positive or whether some promotional initiatives are becoming stale. Promotions that are
becoming less successful should be pulled or redesigned.
5 Whenever feasible, compare the increased gross margins achieved by each promotion to the
underlying additional cost of each promotion in order to calculate the overall net profit
generated by each programme. Was there a net beneficial impact on earnings as a result of
the promotion?
The evaluations listed above are straightforward, yet they are highly useful indicators of the
efficiency of your advertising actions. Many small and medium market organisations, on the
other hand, do not conduct such analyses because of the time-consuming effort required to
gather and assemble the data. Today's business intelligence solutions can make the
underlying data required to perform such an evaluation more readily available to those who
are doing it. In Grand Metrics BI, for example, these evaluations have been pre-built and are
ready to use, making the entire procedure as simple as a single click of the mouse.
Consider evaluating the success of your company's sales promotion efforts – you might be
surprised by the results! The regular fine-tuning of such actions will almost certainly increase
the profitability of your firm.
8.Development of a Sales Promotion Budget:
The allocation of monetary resources to sales promotion is dictated by the promotional
strategy used by the company in question.
In the majority of situations, first the overall amount of money to be spent on promotion is
established, and then the amount of money to be allocated for various activities. Before
selecting how much money should be spent on sales promotion, management should consider
a variety of important elements, including the type of product, its stage in the PLC, the
market environment, the amount of competition activity, and so on. All of these elements,
used alone or in combination, have the potential to have a considerable impact on the
promotional expenditure. In order to distribute cash for sales promotion, there are five main
approaches that are usually employed.
The percentage of sales made using a particular method
The approach of allocating funding based on a proportion of sales is arguably the most often
used by businesses. In this strategy, the budget is calculated by taking a fixed percentage of
sales and dividing it by the number of employees. The sales figure used might be from the
previous year or it could be an average of several prior years' worth of sales. It is also
possible that this proportion is dependent on the anticipated sales for the year under
consideration.
Method of calculating the unit of sale
This strategy is widely utilised by organisations that deal in high-priced products, mainly
consumer durable goods such as automobile makers, refrigerators, washing machines,
microwave ovens, entertainment gadgets, and many more items accessible in the sector. Do
they have a favourable comparison? Instead of the rupee worth of sales, as was the case with
the prior technique, the physical volume of either past or predicted sales is used as the
foundation. Following that, the number of units is multiplied by a predetermined amount of
money to arrive at the budget amount. In the case of sales promotion, the manufacturer could
set out Rs. 2000/- per unit as a budgetary allocation.
The competitive parity approach is a type of competitive parity.
Many marketers match or base their sales promotion budget on the budgets of their biggest
rivals, which is a common practise. According to the rationale attributed to this strategy, the
collective brains of the firms in the industry most likely create promotion budgets that are
near to ideal, and any deviation from industry standards may result in a promotion war
amongst the companies involved.
Method based on what you can afford
When utilising this technique to budget allocation, the amount that remains after all other
appropriate allocations have been made is set aside for sales promotion activities. When
releasing a new product, this strategy is typically adopted by small businesses or by other
businesses of various sizes. It is essentially a budget that is based on availability and is
therefore extremely basic. There appears to be little recognition of the fact that, in a
competitive market environment, sales marketing is critical to mainframe sales in a variety of
ways.
The goal and the technique of accomplishing the objective
As previously said, the entire promotional strategy determines the amount of money that will
be spent on promotions. The technique that is driven by strategy is known as the objective
end task method approach. This is also the most often used approach for determining the
budget for sales marketing. The promotion manager begins by doing an in-depth analysis of
the market, the product, the competition, and consumer behaviour in order to establish
acceptable promotion objectives for the organisation. These objectives may be related to
raising short-term sales, launching a new product, stimulating trial, improving distribution,
and so on, all within a set time frame. The following step is to calculate the amount of money
that would be required to complete each work involved in reaching the desired results. If the
expenditures exceed the funds available, either the marketing objectives must be changed or
extra funds must be made available from the contingency reserve or by cutting the budgets of
other promotional activities to cover the difference.
5.5 SUMMARY
What is Competitive advertising and how it effects the organisation internally as well as
externally.
While comparative advertising has several good effects on both consumers and
companies, advertisers should consider certain negative consequences while
undertaking comparison campaigns.
The efficacy of these efforts can be difficult to assess, particularly if your system is
unable to identify which promotion the item was purchased under at the time of
purchase.
The 'where are we now' situation analysis or audit is a method for a corporation to
determine its own strengths and weaknesses in relation to external opportunities and
dangers. As a result, it is a method of assisting management in choosing a position in
that environment based on existing facts.
Consumer Sales Promotion: Sales promotion that is directed at customers is referred
to as 'consumer sales promotion.' Its goal is to entice people to purchase more
products. Samples, discounts, demonstrations, sweepstakes, cash return offers,
premiums, and other consumer promotion methods are the most common.
5.6 KEYWORDS
Competitive - Competition is something that people who are competitive like doing
– finding out who knows the most, who runs the quickest, who can eat the most hot
dogs, and so on. Some people are fiercely competitive in all aspects of their lives.
You'll recognize them by their continual comparisons with others and their attempts
to learn about what others have and accomplish - all in the name of ensuring that they
remain "ahead of the game." Competitive can be used to describe any type of contest,
such as a competitive sandcastle-building competition.
___________________________________________________________________________
___________________________________________________________________________
A. Descriptive Questions
Short Questions:
Long Questions:
6. the line of action that can be done in the case that a product makes misleading
representations about itself
7. How the phrase 'honesty is the best policy' applies to comparative advertising
8. Give The best explanation of comparative advertising
9. Objectives of sales promotion.
10. Competitive market and sales promotion.
13. Violations that ethical advertisers strive to avoid comprise which of the following?
5.The sales promotion strategy which concentrates on the middlemen and consumers is
known as______________
a) Pull Strategy
b) Combination strategy
d) Push Strategy
Answers
5.9 REFERENCES
References book
Website
https://www.quora.com/What-is-the-most-useful-promotional-tool-in-marketing-
publicity-sales-promotion-advertising-or-all-of-the-above
https://www.vocabulary.com/dictionary/competitive
https://www.sarpublisher.com/advertising-mcq-questions-and-answers-part-3/