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Summary Marketing 2 IBS
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Summary of chapters 8, 9, 10, 11, 12, 13, 14, 15, 16, 17 & 18 of the book: Principles of Marketing
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Summary Marketing book Principles of Marketing, IBS quarter 3, year 1
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Samenvatting Principles of Marketing, ISBN: 9781292269566 Marketing
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Marketing 2Figure 1 Steps in analyzing competitors (18.1)...............................................................................2
Figure 2 Competitive market positions and roles (18.2)..................................................................5
Figure 3 Strategies for market leaders, challengers, followers and niches (Table 18.1).................5
Figure 4 Evolving company orientations (18.3)..............................................................................6
Figure 5 Individual product decisions (f. 8.2)................................................................................10
Figure 6 Four service characteristics (f. 8.3).................................................................................13
Figure 7 Three types of services marketing (f. 8.4).......................................................................14
Figure 8 Major brand strategy decisions (f. 8.5)............................................................................15
Figure 9 Brand development strategies (f. 8.6)..............................................................................16
Figure 10 Major stages in new product development (f. 9.1)........................................................18
Figure 11 Sales and profits over the product's life from inception to decline (f. 9.2)...................20
Figure 12 Styles, fashions and fads (f. 9.3)....................................................................................20
Figure 13 Summary of product life-cycle characteristics, objectives and strategies (f. 9.2).........21
Figure 14 Product mix pricing (t. 11.1 p. 326)..............................................................................26
Figure 15 Price Adjustments (t 11.2 p. 328)..................................................................................27
Figure 16 Responding to competitor price changes (f 11.1 p. 337)...............................................28
Figure 17 Public policy issues in pricing (f 11.2 p. 339)...............................................................28
Figure 18 How a distributor reduces the number of channel transactions (f. 12.1).......................30
Figure 19 Comparison of conventional distribution channel with vertical marketing system (f.
12.3)...............................................................................................................................................32
Figure 20 Multi-channel distribution system (f. 12.4)...................................................................32
Figure 21 Supply chain management (f. 12.5)...............................................................................35
Figure 22 Major store retailer types (t. 13.1).................................................................................37
Figure 23 Major types of retail organisations (t. 13.2)..................................................................38
Figure 24 Retailer marketing strategies (f. 13.1)...........................................................................38
Figure 25 Wholesaler marketing strategies (f. 13.2)......................................................................41
Figure 26 Integrated marketing communications (f. 14.1)............................................................43
Figure 27 Elements in the communication process (f. 14.2).........................................................43
Figure 28 Push versus pull promotion strategy (f. 14.4)................................................................45
Figure 29 Possible advertising objectives (t. 15.1)........................................................................47
Figure 30 Profiles of major media types (t. 15.2)..........................................................................49
Chapter 18: Creating competitive advantage
Previous chapters: aim of marketing is to engage customers and to create value for them in order
to capture value from them in return.
This chapter: how can companies go about outperforming competitors to win, keep and grow
customers?
Competitive advantage
Competitor analysis
Competitive marketing strategies
Step 1: competitor analysis
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, To plan effective marketing strategies, a company needs to find out all it can about its
competitors. It must constantly compare its marketing strategies, products, prices, channels and
promotions with those of close competitors. This way, the company can find areas of
potential competitive advantage and disadvantage.
Identifying the Assessing competitors’ Selecting which
company’s objectives, strategies, competitors to
competitors strengths and weaknesses, attack or avoid
and reaction patterns
Figure 1 Steps in analyzing competitors (18.1)
Step 1: Identify competitors
Avoid competitor myopia.
Identify competitors from an industry point of view and a market point of view.
A company must understand the competitive patterns in its industry if it hopes to be an effective
player in that industry.
Within a market, they define competitors as companies that are trying to satisfy the same
customer need or build relationships with the same customer group.
Identify in various ways:
- Need/budget competition: competing for the same euros.
- Generic competition: making products that supply the same service.
- Product competition: same product or class of products.
- Brand competition: offering similar products/services to the same customers at similar
prices.
Step 2: Assessing competitors
Determining competitors’ objectives: the company wants to know the relative importance
that a competitor places on current profitability, market share growth, cash flow, technological
leadership, service leadership and other goals.
Identifying competitors’ strategies: the company needs to look at all the dimensions that
identify strategic groups within the industry. It must understand how each competitor delivers
value to its customers. It needs to know each competitor’s product quality, features and mix;
customer services; pricing policy, distribution coverage, etc. And it must study the details of
each competitor’s research and development, manufacturing, purchasing, financial and other
strategies.
Assessing competitors’ strengths and weaknesses: marketers need to carefully assess each
competitor’s strengths and weaknesses to answer a critical question: “What can our competitors
do?”
Estimating competitors’ reactions: the company wants to know: “What will our competitors
do?” how will each react to actions that the company might take?
Function of a competitor analysis:
- How to differentiate and position yourself?
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, - Assess competitive advantage, similarity and disadvantage
- Create competitive advantage
- Discovering best practices
- Formulating market strategy (4 P’s)
- Improve performance
Step 3: selecting competitors to attack and avoid
Management must now decide which competitors to compete against most vigorously.
Strong or weak competitors.
Competing against weaker competitors requires fewer resources and less time.
But in the process, the firm may gain little. Competing with strong competitors
can sharpen its abilities.
A useful tool for assessing competitor strengths and weaknesses is customer value
analysis.
Good or bad competitors (fair/unfair).
Good competitors play by the rules of the industry. Bad competitors break the
rules. Bad competitors: try to buy share rather than earn it, take large risks and
play by their own rules.
Finding uncontested market spaces.
Many companies seek out unoccupied positions in uncontested market spaces
(instead of competing head-to-head with established competitors). They try to
create products and services for which there are no direct competitors. The goal is
to make competition irrelevant.
Step 4: designing a competitive intelligence system
All the information above must be collected, interpreted, distributed and used. Gathering
competitive intelligence can cost much money and time, so the company must design a cost-
effective competitive intelligence system.
First identifies the vital types of competitive information needed and the best sources of this
information. Then the system continuously collects information from the field and published
data. Next the system checks the information for validity and reliability, interprets it, and
organizes it in an appropriate way. Finally, it sends relevant information to decision makers and
responds to inquiries from managers about competitors.
Having identified and evaluated its major competitors, a company now must design broad
marketing strategies by which it can gain competitive advantage.
Approaches to marketing strategy
Each company must determine what makes the most sense given its position in the industry and
its objectives, opportunities and resources.
Companies also differ in how they approach the strategy-planning process. They often pass
through three stages.
1. Entrepreneurial marketing. Most companies are started by individuals who live by their wits.
They visualize an opportunity, construct flexible strategies on the backs of envelopes, and knock
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, on every door to gain attention. Proactive identification and exploitation of opportunities for
acquiring and retaining profitable customers through innovative approaches to risk management,
resource leveraging and value creation.
2. Formulated marketing. As small companies achieve success, they inevitably move toward
more-formulated marketing. They develop formal marketing strategies and adhere to them
closely.
3. Intrapreneurial marketing. Many large and mature companies get stuck in formulated
marketing. They now need to build more marketing initiative and ‘intrapreneurship’ –
encouraging employees to be more entrepreneurial within the larger corporation – recapturing
some of the spirit and action that made them successful in the first place.
The bottom line is that there are many approaches to developing effective competitive marketing
strategies. There will be a constant tension between the formulated side of marketing and the
creative side.
Basic competitive strategies
Overall cost leadership. Here the company works hard to achieve the lowest production
and distribution costs. Low costs let the company price lower than its competitors and
win a large market share.
Differentiation. Here the company concentrates on creating a highly differentiated
product line and marketing programme so that it comes across as the class leader in the
industry. Most customers would prefer to own this brand if its price is not too high.
Focus. Here the company focuses its effort on serving a few market segments well rather
than going after the whole market.
Companies that pursue a clear strategy will likely perform well.
Michael Treacy and Fred Wiersema suggest that companies gain leadership positions by
delivering superior value to their customers (value disciplines):
Operational excellence. The company provides superior value by leading its industry in
price and convenience. It works to reduce costs and create a lean and efficient value
delivery system. It serves customers who want reliable, good-quality products or services
but want them cheaply and easily.
Customer intimacy. The company provides superior value by precisely segmenting its
markets and tailoring its products or services to exactly match the needs of targeted
customers. It specializes in satisfying unique customer needs through a close relationship
with and intimate knowledge of the customer. It empowers people to respond quickly
customer needs. Customer-intimate companies serve customers who are willing to pay a
premium to get precisely what they want. They will do almost anything to build long-
term customer loyalty and to capture customer lifetime value.
Product leadership. The company provides superior value by offering a continuous
stream of leading-edge products or services. It aims to make its own and competing
products obsolete. Product leaders are open to new idea, relentlessly pursue new
solutions, and work to get new products to market quickly. They serve customers who
want state-of-art products and services regardless of the costs in terms of price or
inconvenience.
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