Monthly Archive January 2015

Marketing And The Dynamics of Competition


Marketing in the 21st century is not like it was in the ‘60s, ‘70s and even the ‘80s. This is because there are enough products to satisfy customer’s needs.  In fact, customers are “very satisfied”!  Companies have segmented the market until it has become almost too small to service profitably. Companies have refined the dynamics of competition so well that customers have a large variety of choice.

A group of people around a laptop discussing marketing

Giant corporations such as Wal-Mart, Costco, Woolworths, and Coles control most of the distribution. There are a lot more brands and fewer producers. Products “life” has been shortened and in most cases it’s cheaper to replace than to repair, complicating the process even further.

Customer or Product?

In marketing, the needs of the customer were always the first principle. However, today many companies are changing and are now focusing on the actual product. These companies are focusing on what category it falls into, and then what sub-category (e.g. ice cream and then what flavours). They concentrate on the product first then focus on who will use the product, and those considered “not using” are deleted from the sequence. Therefore, by following this concept, companies give their competitors a target market.

This system may capture 75% of the “user market” because it has a USP (Unique Selling Position) i.e.; more flavours, more colours, more convenient packaging, longer shelf life, etc, etc.  However, why can’t the other 25% be taken care of instead of leaving to the competitor?

Capturing the other 25% can be achieved by using “Lateral Marketing” and this is where the dynamics of competition are used to the full. . . . . Companies should stop thinking about how to retain the 75% in love with the product (i.e. Vertical Marketing), but think about drawing in the other 25% of the market and make them your customers. This is can be done by thinking out of the square. Although it may be seen as further “dividing” the market-place, in actual fact it’s making it bigger.

Example: Let’s imagine your company sells hand cream. It has captured 75% of the market because of some formulator development that makes the hands feel smooth and uses less product. The other 25% that your competition is trying to take would rather spend less for soap, then use less. Therefore, to capture the other 25% is to start thinking “innovation” and not to produce a different or variant product.

Lateral Marketing

The objective is to use Lateral Marketing to work within the original category of the product complementing it and not competing with it. One could come up with a particular hand cream that has more lanolin, absorbs better into the skin, a nice fragrance or has more natural ingredients. It can be innovated by size, like selling in large economy bottles and/or selling in tubes and without ever changing the formula of the product. This kind of marketing works better for mature markets (i.e. the ones with no growth), after all, what new uses can one come up with, for hand cream. This method can also create markets from start. However, it requires greater resources and may redefine one’s company mission and business focus.

This way of thinking in marketing doesn’t create “new” categories, it always occurs “within” the category where the idea originated.  If the company followed the right procedures, it would have gathered the 25% of customers. These are customers might have gone away to another competitor. It didn’t require a lot of overheads and this company still producing hand cream!