Kotler Pom16e Inppt 18

Principles of Marketing
Global Edition
Kotler and Armstrong
Chapter 18:
Creating Competitive
Advantage
Copyright © 2016 Pearson Education, Inc. 18-1

Creating Competitive Advantage

Learning Objectives
• Objective 1: Discuss the need to understand competitors as well as

customers through competitor analysis.
• Objective 2: Explain the fundamentals of competitive marketing

strategies based on creating value for customers.
• Objective 3: Illustrate the need for balancing customer and competitor

orientations in becoming a truly market-centered organization.

Learning Objective 1
• Discuss the need to understand competitors as well as customers through

competitor analysis.
Competitor Analysis

• Competitive advantages require delivering more value and

satisfaction to target consumers than competitors.
• Competitive marketing strategies are how companies analyze their
competitors and develop value-based strategies for profitable
customer relationships.

Competitor Analysis
Competitor analysis is the process of identifying, assessing, and

selecting key competitors.
FIGURE | 18.1

Competitor Analysis
Identifying Competitors
Competitors can include:
• All firms making the same product or class of
products
• All firms making products that supply the
same service
• All firms competing for the same consumer
dollars

Competitor Analysis
Assessing Competitors
Competitors’ objectives Competitors’ strategies
• Profitability • Strategic group offers
• Market share growth the strongest
• Cash flow competition
• Technological
leadership
• Service leadership

Competitor Analysis
Assessing Competitors
Competitors’ Estimating
strengths and competitors’
weaknesses reactions
• What can our • What will our
competitors do? competitors do?
• Benchmarking

Competitor Analysis
Selecting Competitors to Attack and Avoid
Customer value analysis determines the benefits

that target customers’ value and how customers
rate the relative value of various competitors’
offers.
• Identification of major attributes that customers
value and the importance of these values
• Assessment of the company’s and competitors’
performance on the valued attributes

Competitor Analysis
• Close or distant competitors

• Good or bad competitors

Competitor Analysis
Finding Uncontested Market Spaces

Competitor Analysis
Designing a Competitive
Intelligence System
• Identifies competitive information and the best
sources of this information
• Continually collects information
• Checks information for validity and reliability
• Interprets information
• Organizes information
• Sends key information to relevant decision makers
• Responds to inquiries about competitors
18-13
Copyright © 2016 Pearson Education, Inc.
• Discuss the need to understand competitors as well as customers through

competitor analysis.

• Explain the fundamentals of competitive marketing strategies based on

creating value for customers.
Competitive Strategies

Competitor Strategies
Approaches to Marketing
Strategy
Entrepreneurial marketing involves visualizing an
opportunity and constructing and
implementing flexible strategies.
Formulated marketing involves developing formal
marketing strategies and following them
closely.
Intrepreneurial marketing involves the attempt to
reestablish an internal entrepreneurial spirit
and refresh marketing strategies and
approaches.

Basic Competitive Strategies
Michael Porter’s four basic
competitive positioning strategies:
Overall cost
Differentiation
leadership
Middle of the
Focus
road

Overall cost leadership strategy:
A company achieves the lowest production and
distribution costs and allows it to lower its
prices and gain market share.

Differentiation strategy:
A company concentrates on creating a highly
differentiated product line and marketing
program so it comes across as an industry
class leader.
Focus strategy:
A company focuses its effort on serving few
market segments well rather than going after
the whole market.

A company that pursues a clear strategy will

achieve superior performance.
A company without a clear strategy, “a middle-

of-the-roader”, will not succeed.

Michael Treacy and Fred Wiersema suggest
companies can gain leadership positions
by delivering superior value to their
customers in three strategies or “value
disciplines.”
• Operational excellence
• Customer intimacy
• Product leadership

Operational excellence refers to a company providing value by leading
its industry in price and convenience by reducing costs and
creating a lean and efficient value delivery system.

Customer intimacy refers to a company providing superior value by

segmenting markets and tailoring products or services to match
the needs of the targeted customers.

Product leadership refers to a company providing superior value by
offering a continuous stream of leading-edge products or services.
Product leaders are open to new ideas and solutions and bring
them quickly to the market.

Competitive Positions
Market
Market leader
challenger
strategies
strategies
Market
Market nicher
follower
strategies
strategies

Competitive Positions

Market Leader
Strategies
• Expand total demand
• Protect their current market
• Expand market share

Market Leader
Strategies
Expand total demand by developing:

• New users
• New uses
• More usage

Market Leader
Strategies
Protect current market by:
• Fixing or preventing weaknesses that provide
opportunities to competitors
• Maintaining consistent prices that provide value
• Keeping strong customer relationships
• Promoting continuous innovation

Market Leader
Strategies
Expand market share by:
• Increasing profitability with increasing market
share in served markets
• Producing high-quality products
• Creating good service experiences
• Building close relationships

Market Leader
Strategies
Challenge the leader with an
aggressive bid for more
market share.
Second mover advantage:
Challenger observes what
has made the leader
successful and improves
on it.

Market Follower Strategies

• Play along with competitors and not rock the boat
• Copy or improve on leader’s products and programs with less investment
• Bring distinctive advantages
• Keep costs and prices low or quality and services high

Market Nicher Strategies
An ideal market niche is big enough to be
profitable with high growth potential
and has little interest from competitors.
The key to market niching is specialization:
• Market
• Customer
• Product
• Marketing mix

• Explain the fundamentals of competitive marketing strategies based on

creating value for customers.
• Basic Competitive Strategies
• Competitive Positions

• Illustrate the need for balancing customer and competitor orientations in

becoming a truly market-centered organization.
Balancing Customer and Competitor Orientations

• Companies need to continuously adapt strategies to changes in the

competitive environment.
• Competitor-centered company
• Customer-centered company
• Market-centered company

A competitor-centered company spends most of its time tracking

competitors’ moves and market shares and trying to find ways to
counter them.
• An advantage is that the company is a fighter.
• A disadvantage is that the company is reactive.

A customer-centered company spends most of its time focusing on

customer developments in designing strategies.
Provides a better position than competitor-centered company to

identify opportunities and build customer relationships

A market-centered company spends most of its time focusing on both

competitor and customer developments in designing strategies.

FIGURE | 18.3
Evolving Company Orientations

• Illustrate the need for balancing customer and competitor orientations in

becoming a truly market-centered organization.

Kotler Pom16e Inppt 18

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Principles of Marketing

Copyright © 2016 Pearson Education, Inc. 18-1

Copyright © 2016 Pearson Education, Inc. 18-2

• Objective 1: Discuss the need to understand competitors as well as

• Objective 2: Explain the fundamentals of competitive marketing

• Objective 3: Illustrate the need for balancing customer and competitor

Copyright © 2016 Pearson Education, Inc. 18-3

• Discuss the need to understand competitors as well as customers through

Copyright © 2016 Pearson Education, Inc. 18-4

• Competitive advantages require delivering more value and

Copyright © 2016 Pearson Education, Inc. 18-5

Competitor analysis is the process of identifying, assessing, and

Copyright © 2016 Pearson Education, Inc. 18-6

Copyright © 2016 Pearson Education, Inc. 18-7

Copyright © 2016 Pearson Education, Inc. 18-8

Copyright © 2016 Pearson Education, Inc. 18-9

Selecting Competitors to Attack and Avoid

Customer value analysis determines the benefits

Copyright © 2016 Pearson Education, Inc. 18-10

• Close or distant competitors

Copyright © 2016 Pearson Education, Inc. 18-11

Copyright © 2016 Pearson Education, Inc. 18-12

• Discuss the need to understand competitors as well as customers through

Copyright © 2016 Pearson Education, Inc. 18-14

• Explain the fundamentals of competitive marketing strategies based on

Copyright © 2016 Pearson Education, Inc. 18-15

Copyright © 2016 Pearson Education, Inc. 18-16

Copyright © 2016 Pearson Education, Inc. 18-17

Copyright © 2016 Pearson Education, Inc. 18-18

Copyright © 2016 Pearson Education, Inc. 18-19

A company that pursues a clear strategy will

A company without a clear strategy, “a middle-

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Copyright © 2016 Pearson Education, Inc. 18-22

Customer intimacy refers to a company providing superior value by

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Copyright © 2016 Pearson Education, Inc. 18-24

Copyright © 2016 Pearson Education, Inc. 18-25

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• Protect their current market

• Expand market share

Copyright © 2016 Pearson Education, Inc. 18-27

Expand total demand by developing:

Copyright © 2016 Pearson Education, Inc. 18-28

Copyright © 2016 Pearson Education, Inc. 18-29

Copyright © 2016 Pearson Education, Inc. 18-30

Copyright © 2016 Pearson Education, Inc. 18-31

Market Follower Strategies

• Copy or improve on leader’s products and programs with less investment

• Bring distinctive advantages

• Keep costs and prices low or quality and services high

Copyright © 2016 Pearson Education, Inc. 18-32

Copyright © 2016 Pearson Education, Inc. 18-33

• Explain the fundamentals of competitive marketing strategies based on

• Basic Competitive Strategies

Copyright © 2016 Pearson Education, Inc. 18-34

• Illustrate the need for balancing customer and competitor orientations in

Balancing Customer and Competitor Orientations

Copyright © 2016 Pearson Education, Inc. 18-35

• Companies need to continuously adapt strategies to changes in the

Copyright © 2016 Pearson Education, Inc. 18-36

A competitor-centered company spends most of its time tracking

Copyright © 2016 Pearson Education, Inc. 18-37